The sale of an owner managed private business can be a difficult activity for
two reasons:
- There is no established market place for this type of business;
- Owner managed businesses have usually developed around the skills and experience of the current owners. As a result it may be difficult for the prospective purchaser to operate the business in isolation or to integrate it with its own activities, leading them to decide against the purchase or to reduce their offer.
In addition business owners often underestimate the time it takes to identify
a purchaser, negotiate terms, facilitate the due diligence process and secure
the sale. The successful sale of this type of business can take a year, sometimes
more, during which time the owners must ensure that the business continues to
operate effectively and that Turnover and Profit are not adversely affected.
In preparing a business for sale its owners should identify the attributes of their business that will be appealing to external investors and those that will be unappealing. They should develop the positive and mitigate the negative attributes so as to develop a business that is attractive to investors, leading to a quicker sale and a higher transaction price. In general the more systemised the business is and the more its operations are codified, the easier it will be for a new owner to operate the business or integrate it with an existing business and the higher the value they will put on it.
In preparing a business for sale its owners should identify the attributes of their business that will be appealing to external investors and those that will be unappealing. They should develop the positive and mitigate the negative attributes so as to develop a business that is attractive to investors, leading to a quicker sale and a higher transaction price. In general the more systemised the business is and the more its operations are codified, the easier it will be for a new owner to operate the business or integrate it with an existing business and the higher the value they will put on it.
If a particular group of strategic investors can be identified it may be possible
to alter the profile of the existing business to resemble the type of business
the target investors are most interested in. The earlier you start the more likely
you are to succeed.
More:
SPS Partners have experience of the sale of private businesses and would be happy to discuss the proposed sale of your business with you.