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Maximizing Value in a Transaction

As every business owner knows, there comes a time to sell. Whether it be years after starting your business or months after purchasing it, one of the main outcomes owners hope for is a high-value sale. While this may be a typical desire, many owners fail to put in the due diligence necessary to take their business from A to B when it comes to maximizing the value during a transaction.

With decades of experience in providing clients with transaction advice, our team knows the importance of preparation prior to embarking upon a sale. In order to maximize your return on investment, you should develop an exit strategy well in advance, with these key things in mind:

Who to Sell To

Prospective buyers range from strategic investors, institutional private equity groups otherwise known as financial buyers, management, family, and maybe even friends, etc. That being said, you must decide what your priorities are. While not always the case, selling to someone within your company’s management or family may leave you sacrificing price for the preservation of your legacy and culture.

If you’re more focused on selling for value, you may want to look into strategic and financial buyers. Strategic buyers could be either private or public companies. Most are hoping to grow by diversifying product offerings, expanding customer bases, enlarging geographic reach, and increasing productivity and profitability. Financial buyers, on the other hand, focus on investing in companies with the goal of building value and reselling. Often times, these buyers tend to seek a minority or majority stake and develop a partnership with current owners in order to focus on recapitalization.

Researching prospective buyers prior to making a deal will allow you to identify those individuals who will offer the best value.

Terms to Accept

When it comes to selling a business, owners often get caught up in the initial numbers. While this is obviously an important aspect, overlooking terms, deal structure, and net proceeds after taxes can lead to financial conflicts down the line. By remaining flexible with prospective buyers and weighing the factors of contingent payments, you may be able to increase the total value of the transaction.

It is especially important to take a look at your tax liability since you may be able to minimize or defer your taxes, which could result in significant savings.

Timing of Sale

Choosing the right time to sell can also increase your company’s value. In a strong economy, it is easier for buyers to obtain credit, thus allowing them to take on increased debt thus paying for the company. Other variables that affect a buyer’s ability to pay you what you are looking for include your company’s financial performance, current capital environments, and industry growth.

While a growing industry promotes higher demand for companies in that area, consolidation periods are also beneficial in that larger competitors may be interested in buying your company at a competitive price.

There is a lot to consider when selling your business, especially if you’re looking to maximize your company’s value. It is critical to assemble the right team of professional advisors that have experience and can provide guidance on an array of issues. Our team at Symmetrical will help you evaluate multiple options and get you in the direction of achieving your financial exit goals. #turningequityintoliquidity


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