When I was growing up just south of London, the BBC started airing reruns of Lassie and Leave it to Beaver. For years, I believed that this glimpse of idyllic white-middle-class suburbia defined what it meant to live in America. Even as an adult, when I came to the United States to get my MBA, I was a little disappointed at the lack of white picket fences.
I get that kind of surprise every time I enter a new world and realize I’ve been carrying around a bunch of mistaken preconceived notions. The same thing happens to my clients, too, when we begin talking about the possibility of selling their company. They realize they’d made a few erroneous assumptions about what the sale process looks like.
In no particular order, here are the top five myths I encounter about selling your company, and why they’re just not true.
Selling Myth #1: I have to leave the company
The majority of the time, “selling your company” means selling a share of the ownership of the business. Although company owners sometimes want a complete exit, in most cases they stay on and continue to play a vital role in running the business. If you’re selling to a strategic buyer (a bigger player in your industry), they generally want you to stay for at least a couple of years while the companies become integrated. If you’re selling to a financial investor, such as a venture capital firm or private equity group, having a talented management team that’s willing to stay on after the sale is a positive selling point that helps command a premium price. You could also negotiate employment agreements that let you stay on in a consultant role, or bring in some new management so you can focus on the areas that you find most fulfilling.
Selling Myth #2: I have to time the market
You’d like to sell, but your industry is in a slump. You’d better wait until it improves, right? Wrong. Buyers evaluate the attractiveness of your company based on your company’s performance and profitability and the unique synergies that a partnership could bring. Merger and acquisition activity does not track with the economy. Are you a profitable company with proprietary technology that one of the big players would love to have? Do you have a significant domestic footprint that would be ideal for a European company that wants to expand into the U.S.? How about a unique or highly sought-after customer base? Those things are attractive to buyers regardless of the overall state of your industry.
Selling Myth #3: They don’t care about my company
Private equity groups are in the business of investing in companies and seeing a return on that investment. Because of that, they look carefully at the balance sheets and financial statements when deciding whether to buy a company and how much to offer for it. That doesn’t mean they’re a bunch of penny-pinching pocket-protector accountants who aren’t interested in your company’s values or employees. You and your investor have the same goal - for the company to become more profitable and more successful - and they know as well as you do that the most successful businesses have a strong corporate culture and motivated, loyal employees. A quality private equity group cares about your company as much as you do - and they should, because they are about to own a part of it!
Selling Myth #4: They don’t know how to run a business
Many of my clients assume that financial investors are just “the guys with the money.” I don’t want to discount the power of an infusion of growth capital in the life of your company, but the truth is that the right private equity group can offer you much more than just a big fat check. Many of them have a talent pool of professionals that they bring to their portfolio companies. That might mean they bring in a seasoned executive to sit on your board and provide strategic guidance, or an experienced CFO who can bring a new level of sophistication to your finances.
Selling Myth #5: I’ll think about it later
The number one mistake business owners make is not starting succession planning soon enough. Even if you aren’t thinking about selling, you need to insure your company in case of disaster. If you were to get hit by a truck, would your company survive, or would your estate be forced to sell the company at a loss, putting all your employees out of work? Or let’s say you wake up one morning and decide it’s time to move on to other challenges. The companies that get premium prices have positioned themselves with multiple years’ history of audited financial statements and a carefully chosen management team.
The selling process isn’t as black-and-white as a 1950s sitcom. There are plenty of nuances and different ways to structure a deal, so it’s a good idea to keep an open mind about all the ways a sale could benefit you and your company.