Should I Sell my Company to Private Equity
- Should I sell my company to private equity (P/E)?
- How do I get the valuation that I deserve?
- Can I really exit?
- Are you looking for an EXIT or just Cash in the bank?
Should I sell to a private equity (P/E) firm?
- Should I call a business broker?
- Do I hire a consultant?
- Should I go it alone?
What is your EXIT Strategy? How do I go about selling my company?
Many articles on the internet suggest that you find a business broker or an investment banker.
Some steer you towards a Private Equity (P/E) firm.
- Why are you selling your company?
- Do you just want out maybe because you are ready for retirement?
- Do you have intellectual property and want to sell it?
- Maybe your health is failing and the company needs you to operate?
Some just want to sell part of their company to get some cash and then keep the other part, the remainder so they have something to grow. There are many reasons why people sell believe it or not.
Are you selling because you want an EXIT or not? Annoying and Distracting “buyers”
You likely get email after email every day asking you if you want to sell your company.
Who are these people? Some of these emails even point out specifics to your offering…such as…We have a buyer of solutions just like yours that are cloud-based solutions, etc, etc, etc. Then when you talk to them you realize that they are full of $%#@BS …you know what.
Then there are the companies, that seemingly are large and credible, that offer these ‘very important to you’ seminars in your market. They offer an educational series that is designed to provoke you based on some high valuations that others received selling their company.
When they have too many layers to go through to talk to someone that can actually champion your cause….run. Some have you talk to a telemarketer, then a biz dev guy, then someone else, before you ever talk to a so-called account rep that isn’t even a broker. Just too many layers. Yes, they will sell your company. Kinda reminds us of the auctioneer that comes to your mother’s estate and states “sure, we will sell everything…” Yes, they will, but for pennies on the dollar.
Most business brokers cast a wide net. They take your information and candy coat it a bit, add your financials and then cast it out there for people wanting to buy a business. Most business brokers will advertise your business on a match-making site.
- Are you looking to buy a manufacturing company?
- Are you looking to buy a job, your last job?
- Are you looking for a company that affords recurring revenue?
- The Owner is retiring to Florida and selling his company.
Most business broker sales allow the owner to retire and leave after some transition period. The EXIT. Yes, but for what price?
The Private Equity (P/E) Sale
P/E companies tend to want to build a portfolio of companies. All you have to do is look at their web pages. When you look at their web page, look to see if the previous owner was able to exit or not.
Some even focus on a particular industry such as Retail or Healthcare where they might appreciate your IP. In most cases, the leadership team is kept on board. There are some advantages such as a centralized HR department or centralized marketing services.
P/E firms are like bankers, show them your Balance Sheet and Income Statement and they will offer you something like 5 times Net Income. If you get more than that you’re lucky.
The No-Look Sale
Some don’t even go pursue a buyer, they partner with strategic partners and then just get an offer from their “strategic” out of the blue seemingly.
This happens because the strategic wants one’s Intellectual Property or they want their Sales Revenue or their “potential” Sales Revenue.
Should I go it alone?
No!!! Anyone can sell their company. But how do you get what you deserve? Do not go it alone unless you are just a super salesperson. Not unless you are a poor salesperson and just want to float your financials and get offers. Sure you can sell your own company, but you likely will get less than what you thought your valuation should be.
Shouldn’t you consider creating some competition, and attempt to get a higher valuation? Even Real Estate people have open houses to create a sense of urgency and then to show buyers the competition to raise the valuation.
The Intellectual Property (IP) Sale
If you are fortunate to have an IP you likely will get a higher valuation than others. P/E offers somewhere around 5 times net income. For most, this is barely enough to retire on. With IP that your buyer can use to corner the market, win market share, be more competitive, etc…you will likely get many times net income. But you still need to SELL it.
How do I Raise my Valuation?
- How do I get multiple offers?
- How do I find someone that appreciates my IP?
- How can I get what I deserve?
There are companies and/or consultants that help you do just that:
- Sell your IP
- Identify the Strategic Partners that appreciate the IP
- Package your company up for sale
- Position your company for the Buyers so they understand the value
- Help you build top-line revenue and a sales pipe with marquee accounts
- Put all this into future revenue for the eventual buyer
- Role-play with you so when you get your one chance you don’t blow it
- …and then…aggressively sell your company, and not just the financials
- …and then
Do not just sell your financials…
Get You the Valuation that You Deserve
Have a solid EXIT Strategy
If you have your own Intellectual Property yet your net income could be better maybe you should consider a consulting company that will work with you to get the valuation that you deserve.
XIT Group does just that. We do have an affinity to Supply Chain, Automation, Robotics, Industrial & Factory Automation, but we are happy to talk with you to help you out.