Perhaps the biggest change is in the way prospective buyers now shop for businesses. Traditionally, shoppers have located leads by reading advertisements in trade or general-interest publications, consulting business brokers, or relying on a personal network of lawyers, accountants, or colleagues. The haphazard nature of those searches means that willing buyers and motivated sellers often just don't hook up with one another.
But the Internet has started changing that. "What we've begun seeing is huge," says Kris Karlson, a broker with Bowman/Hanson, in San Francisco. "People are visiting Web sites to find out about the companies brokerage firms have listed there. By the time they call, they are serious, knowledgeable, and motivated to proceed. I think this is going to have major implications for the way we're going to sell companies in the future."
The Inc. 22 have had mixed results with the Internet, perhaps because the trend is so new. The owner of the historic events house tried to sell her company on the Web nearly two years ago and didn't receive a single serious inquiry. On the other hand, that is exactly how the camping retreat found its buyers.
Julie Beeck, who bought the retreat with her husband, reports: "We had always done a lot of camping. We were tired of our corporate jobs and knew that we wanted to make this kind of lifestyle change and specifically wanted to be in Oregon. So we just started exploring the Internet to see if we could find Oregon resorts that were listed for sale."
What at first seemed a lark quickly turned serious when they found a broker's Web site full of promising prospects. "We E-mailed him for more information and loved what we learned about this particular property," says Beeck. Thanks to the Internet, the transaction proceeded at a rapid clip. Beeck and her husband first learned about the resort in April 1997; by July it was theirs, a month before the issue of Inc. in which it appeared hit the stands.
Perhaps the big cash-outs some entrepreneurs have earned by selling their companies to strategic corporate partners, roll-ups, or national consolidators have helped broaden the perspective of other small-company CEOs. Some are recognizing that the size of a company really does matter when it comes to its selling prospects.
Three owners of the Inc. 22 turned down offers and decided to pursue aggressive growth strategies instead, in part because they recognized that larger companies sell more easily and tend to command higher prices. Justin Talerico, the owner of the multimedia-ad-design firm, was one of the three. Despite receiving several solid bids and inquiries from about 150 prospects, he and his team decided to opt for a strategic merger with a software developer.
"We carried out a stock swap, expanded our roll of clients, and positioned our combined company for accelerated growth," he reports. "What we're thinking is that 12 to 18 months from now, we'll be ready to start contemplating a sale again, one that we'll be able to carry out on a much larger scale."
Dissimilar though their companies may be in all other respects, the owner of the rodeo event-marketing company opted for a similar course. His broker, Jim Zipursky of Corporate Finance Associates, in Omaha, calls the company--which had $2.7 million in 1997 sales and a $1-million price tag--a "classic 'tweener." "It's too big and expensive for a guy who's retiring and is just looking for a lifestyle change. But it may be too small to make a deal worthwhile for one of the big entertainment companies. So the owner's plan is, keep growing and signing up more corporate sponsors and TV deals. He's saying, 'If we're too small for the big guys, then let's get bigger."
Then again, as any M&A expert knows, there are some companies that are perfect for sale exactly the way they are. They're profitable--or at least profitable enough to support a deal when the deal is priced right. They've got such a large, loyal, even passionate, customer base that they don't need the Internet to drum up potential buyers. New owners are right there (at least figuratively speaking), waiting on line at the company's cash register.
The nudist resort was one such candidate. It sold to its new owners, Vern and Jill Sorensen, before Inc.'s article even came out, for a figure within 10% of its $525,000 listing price. "We'd stayed here before. We were friends of the owners. It had always been a dream for us to own a place like this," Vern says. A former banker, he and his wife, also a refugee from the corporate world, decided to make their fantasy a reality after she called him one day from her car phone, stuck in yet another (clothed) commuters' traffic nightmare.
So the Sorensens ended up fielding the 40-plus telephone calls that came from Inc. readers ready to shed their own business suits. "People were stunned when they called and realized the company had just been sold," Vern recalls. "They'd ask me, 'Well, would you sell?' And I'd say, 'What would you pay?' because, after all, everybody always sells at the right price."
That was the ex-banker talking. But then the new business owner in him would take over the conversation. "I'd always tell those callers, 'You'd have to pay pretty dearly for this business, because I just bought my dream."
