What Does The Sale Of A Business Really Mean To A Middle-Market Owner?

September 1st, 2005

For most middle-market business owners, the potential sale of their company is the most significant business event they will ever encounter. Needless to say, it can be an incredibly stressful process. Of course, there’s the emotional aspect of transferring ownership of what is probably a long-term psychological and financial investment. For most business owners, there’s also uncertainty about the valuation that their company will achieve. As survivors of the experience can readily attest, proper preparation greatly facilitates the process and reduces the anxiety.

For large public and private transactions (for purposes of this article, values in excess of $100 million), there are multiple information sources available on completed transactions. For smaller, closely-held private enterprises however, these data sources do not readily exist. As such, prospective middle-market sellers often operate under assumptions that can be harmful. The involvement of a veteran, qualified advisory team can help mitigate these issues and greatly facilitate the process.

When should you sell your business?
A moderately aged owner might wish to "smell the roses," spend time with family, travel, etc. An owner of a more advanced age might be well advised, in the absence of a succession plan (family or otherwise), to make his or her personal estate liquid. Just as likely, there may be a strategic rationale to sell one’s business (market developments, competition, etc). Of course, alternatives also exist to remain involved with a business post-sale and are often highly attractive. The potential reasons to sell are varied, and highly dependent upon the owner’s circumstance.

Having an exit strategy allows you to be ready when the time is right. It’s an excellent idea to plan for the inevitable transfer of ownership, regardless of how imminent or potentially far off that sale might be.

How can you enhance your company’s value?
We have witnessed in multiple client engagements the benefit (and conversely, the detriment) of thorough early preparation for a sale of a closely-held business. Proper planning, and the appropriate actions that such planning dictates, clearly enhance not only the sale-ability of a business but the attractiveness of the transaction price and terms.

Providing for a sound infrastructure (management, technology, account base, etc.) will strengthen the core enterprise’s marketability. Engaging a strategic advisor to properly and methodically advise on when to commence a sale process has been demonstrated to greatly enhance the transaction value and the certainty of closing. And also quite important, the ability of an owner to methodically evaluate and consider the potential transaction issues is of considerable aid in not only maximizing value but reducing the stress of the transfer.

Is a valuation necessary in planning for a sale, or is it just an accounting exercise?
While any CPA salivates at the thought of an accounting "exercise," a valuation provides valuable insight into many aspects of a business operation. When performed in a proper fashion, a meaningful review of the corporate opportunities, risk factors, marketing efforts, competitiveness, management team, and various other strategic and operational components, are all performed and analyzed. When combined with the analysis of the operating results, as well as market conditions, these factors assist the valuator in determining the appropriate capitalization rate to apply to the corporate earnings base. In order to enter the market at the right time, with the goal of maximizing deal value and terms, this kind of analysis is essential.

These three topics represent a small sample of key areas we often encounter. There are a multitude of additional issues that potential sellers face. The earliest possible consultation with a strategic advisor will ensure that you will fully benefit from your business’ value.

Comments are closed.


Family Vacations: A Time to Unplug from the Digital World

August 17, 2017

As I approach the half century mark, I find myself appreciating family vacations more than ever before. Last week, we went on an Alaskan cruise in which internet access was not provided unless the passenger paid separately for it. I quickly learned how precious family vacation has become. Were you able to pull yourself away from the internet on your family vacation this year?....

» see this post    » all posts

Large Healthcare Market Participants Continue to Endure

August 15, 2017

As part of our KG Prime market intelligence series, we recently examined and retrieved data from the largest players in the U.S. healthcare market. After doing so, we suggested various takeaways for the ARM and RCM industries based on company-specific and market-wide data. ....

» see this post    » all posts

Earn-outs: A Necessary Evil in Business Transactions or a Valuation Bridge between Buyers and Sellers?

August 10, 2017

Most business owners who are contemplating the sale of their business tell us they are vehemently opposed to a transaction structure that includes an earn-out component. When asked why, the typical answer they give is that earn-outs never materialize. So, why do earn-outs exist?....

» see this post    » all posts


Kaulkin Ginsberg Announces the Acquisition of Remit Corporation by Eastern Revenue

August 17, 2017

Kaulkin Ginsberg Company announced today the acquisition of Remit Corporation, a well-established regional collection agency founded by Harry Strausser III, and based in Bloomsburg, Pennsylvania, by Eastern Revenue, Inc.....

» see more

Mike Ginsberg to Discuss Trending Topics at ARM Events this Fall

August 15, 2017

Join Mike Ginsberg at the Debt Connection Symposium and the Receivables Management Conference this fall as he discusses important issues surrounding the ARM industry.....

» see more

Kaulkin Ginsberg Moves Its Market Intelligence Online

June 8, 2017

Kaulkin Ginsberg is changing the way busy owners, executives, and senior leaders access strategic market intelligence with the launch of KG Prime. KG Prime is a comprehensive and easy to use web-based service that provides users with economic, market segment, and other forms of strategic research.....

» see more