Seller's Market

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Selling a company may get even tougher in the next couple of years. Experts expect the current M&A boom to last a while, but a huge number of baby boomers are on the verge of retirement; one out of every two company owners plan to sell their businesses during the next 10 years, according to a recent survey by PricewaterhouseCoopers. That could result in a glut of companies on the market, driving down valuations and giving new leverage to buyers.

No matter what the state of the market, never make the first move. You'll usually get a better deal if you let buyers approach you. "As a serial entrepreneur, I've learned the best time to sell a company is when someone wants to buy it," Lieberman says. Just ask Berglund. Last fall, she sold the Winetasting Network to flower purveyor 1-800-Flowers.com for $9.1 million. The deal offers the best of both worlds. Berglund and her staff run the company with little input from their new parent. And the Winetasting Network's distribution center is undergoing a major upgrade to handle 1-800-Flowers' 15 million customers. "I'm still passionate about my business," Berglund says. "I still have dreams. I just needed the resources to achieve them."

On the Buy Side

It's a seller's market, but with so many companies up for grabs, it's not a bad time to go shopping. Here are four tips to consider before you do:

Bank On It

These days, it's a lot easier to finance an acquisition. Why? Lenders are optimistic about the economy for the first time in years, and many banks and commercial lenders are aggressively marketing loans to small businesses, says David Malizia, managing director at Florida Capital Partners, a Tampa-based private equity firm. Meanwhile, interest rates are still low enough to make borrowing affordable.

Build Rapport

Not surprisingly, competition is tough. To set yourself apart, establish credibility right away, says Lee Reams, CEO of TaxSmart in Chatsworth, Calif. After approaching an acquisition target last year, Reams showed he was a serious contender by providing financial documents proving he could afford the purchase. He also built trust by negotiating one-on-one with the seller, rather than with a cadre of attorneys.

Set a Price

Figure out how much you're willing to pay and stick to it, advises Gary Moon, senior director of San Francisco-based investment bank Viant Group. Determining a sale price doesn't necessarily require a pricey formal valuation, Moon says. Instead, consider the company's earnings, growth potential, and the valuations of similar-size peers. Tap an investment bank for help or, for smaller deals, enlist a seasoned entrepreneur.

Stay Cool

Some business owners get so excited about making an acquisition that they forget why they're doing it. The phenomenon, dubbed "deal heat," is especially common during periods of increased M&A activity. To avoid overheating, focus on your reasons for making the purchase and think about potential pitfalls. If a problem crops up, restructure the deal to include safety nets, like contingency payments. Or walk away.

Hot Tickets

Last year, about 5,000 small companies were sold. Below, the most active sectors:

Resources How much is your company worth? Learn more about valuing your business on the Business Valuation Resources website (www.bvresources.com). Also, check out Scott Gabeheart's Upstart Guide to Buying, Valuing, and Selling Your Business, which features sample forms and contracts.

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