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Two Stage Buyouts – Reduce Risk and Increase Value

Changes in your life, the economy or now, even a pandemic, can dictate when you sell your business. In this client planning focus, the owner’s family situation dictated the timing of the sale.

We received a call from a client who said, “I have to sell my business now!” We’d heard this from them before, but then he would change his mind. This time, he assured us, was different. 

His wife had finally laid down the law. “Sell your business or I’m leaving you”. She was very serious about it. The owner had discussed his plan with several mid-market business brokers and his family advisory office.

“They all told me how to sell my company, but he felt too young to retire and felt that he still had things to accomplish with the company. We recommended a different approach. The owner, in this case, brought a great deal of value to company. A new buyer must come in and learn the operations, connect with customers, try to fit into or change the culture. Each carries a significant risk. Our plan was simple but unique in the SME market. We recommended the sale of 75% – 80% of the equity & remaining as a minority partner for a few years or longer.

This accomplished a number of extremely advantageous things for the Seller and the Buyer: 

  • The owner got to continue working in the business, focusing on the areas he enjoyed, and removing the frustrating administrative work. He was re-energized and enjoyed the company revitalization and growth.
  • The sellers monetized a large portion of the company’s equity they’d worked so hard to build.
  • The buyer saw a significant risk reduction by having the former owner remain on as an operating equity partner which led to a higher valuation and easier access to financing.
  • Finally, the owner and his wife were provided with a clear exit strategy and a reduced workload.

While there are a lot of buyers in the market. Selling to the right one is the key to success. An acquirer that brings value, beyond just money, to your business will enable you to grow it faster and often your minority stake will sell for more than the majority you sold a few years earlier.

It is equally important to sell your business with the right advisor. Transition Architects offers more creative solutions than a traditional business broker. We take the time to “stage” your business and work with you to determine the “right” buyer and approach. 

Wondering where to sell your business? Choose us. We specialize as a small/mid business advisory firm and offer a one-hour no cost, no obligation consultation.

Written by Alan Crossley