In association with Avondale
Selling a business is not just a technical process. Never underestimate the emotional aspects to consider before embarking on a sale.
Mergers and Acquisitions (M&A) is technical, so when it comes to selling a business, the focus has tended to fall purely on the “how”. Yet the most effective business conversations start with the “whys” or the “what ifs” – the personal motivations that drive a sale carry their own value and are not to be downplayed.
While there are wider financial and economic considerations to be made, the lasting impact of a business sale will be on the people involved – not only the owners themselves, but also the employees and their dependents.
With this in mind, there are a number of key questions to ask yourself when on the path to selling a company:
What kind of sale best suits my ambitions?
As an owner, you need to consider the human ramifications of a business sale. Having strong emotional ties to your company and its people means you may be hesitant to divest outright ownership to a rival or larger acquirer who may not regard safeguarding the company’s brand or employees as top priority.
There are a number of alternatives to consider. They include selling a portion of the company to a private equity fund, or even pursuing an Employee Stock Ownership Plan (ESOP) that relinquishes ownership to a firm’s employees over a gradual time frame.
Other deal structures may allow you to retain an interest in the business or to ensure that certain conditions, such as the retention of the existing management team, are met. Again, the answer very much depends on the connection you have to the business and its staff, and your emotional investment in your company’s long-term future.
When is the right time to for me to sell?
Choosing the right exit point can also be an enormous dilemma for many people. You need to weigh up your own post-sale plans and financial needs with those of the business and the people who work for it.
The two don’t always align. Changing market trends and technological developments mean that companies failing to adapt to the shifting demands of the market place risk being left behind by their competitors.
As you near the end of your tenure, it’s worth asking yourself whether you still possess the appetite and drive to get the company to its next phase of growth, or whether it’s time for a new pair of hands to take the reins. You may find yourself relinquishing ownership sooner than you’d originally planned, though a strong negotiator will be able to influence the timing of a deal to meet the needs of all parties.
What should I do next?
Exiting a business is often a significant life transition. For some, it represents the accumulation of a lifetime’s endeavours and the final chapter in a lengthy professional career. For others, it is merely a stepping stone on the path to becoming a serial entrepreneur or angel investor.
The relationship with the company and its employees doesn’t always end with divestment of ownership, and some vendors will choose to stay on in a managerial or advisory capacity to help manage the succession and lead the next phase of growth.
Whatever your ambitions, having a clear idea of what’s to follow can take much of the stress and uncertainty out of the sale and allow you to move forward with the project from a place of confidence. This can significantly strengthen your negotiation position with potential buyers.
With so much at stake on a human level, the sale of a business is ultimately a highly personal process. And, while the technicalities of M&A transactions are important, it’s essential to use specialists that can also guide you through the ‘non-tangibles’ behind the sale and support your understanding of the emotional side of things. A rounded approach that considers the people involved – and not just the numbers – will deliver the best overall outcome for your project.
The views expressed in blogs such as the above are those of the author and do not represent the views of the Institute of Directors.
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