If you’ve built a good business as a CEO and are thinking that it’s time to sell – consider this question: How are you going to get the company ready to be sold at the highest price possible?
Not being ready can cost you millions of dollars.
The fact is that most CEOs have never sold a business before – and for most CEOs, this is the most important financial transaction of their life.
And if you ask private equity buyers (and if they were honest), they would tell you that most of the companies they see are NOT ready to be purchased. Often they don’t mind, however, since that means that the private equity firm can buy the company for less than they would have paid otherwise. In other cases the business is so NOT ready that they won’t even bid to buy the company, regardless of how attractive the industry sector or management team might be.
Either way, the current owner of the business loses.
A good example is a company that I’ve worked with for two years. We were hired to initially represent the company in a sale to a private equity firm which had knocked on their door. We went through the process, and as we neared the end, we recommended and the seller agreed NOT to complete the deal. We both agreed that the terms weren’t good enough for the quality and size of the business.
Realize that this was a company that had not grown sales in 5 years. Nicely profitable, but not a growth business.
I suggested that we work together to double or triple the size of the business in 3 years and sell it.
He initially thought I was crazy.
But as we talked further, he realized that there was an opportunity to expand, and we could work together to get the financing to pull off the growth. We spent a couple of months putting together a strategic & financial plan. My firm wrote the plan and created the financial models. We originally thought we might need up to $3 million in new equity, but later realized that the company itself was producing enough cash to self-fund controlled growth.
Two years later the company had doubled revenues, more than doubled profits and more than tripled the company’s equity value.
We now have a buyer for 80% of the company at a value that gives the CEO more than 5x the original after tax proceeds – AND he gets to continue to be CEO and owns 20% of additional upside.
As a nearly 40 year veteran in the investment banking industry, I’ve had the good fortune to know and work with a couple hundred companies. It is time in my career to transition from just focusing on transactions, to work with CEOs on a one-on-one basis to help them achieve their goals.
I’m looking for CEOs who want to achieve a great result, but are smart enough to know that they don’t know everything about how to position and sell a company. A fresh perspective from an outside third-party, I’ve found, can be a great catalyst for positive change. Just like the company that had flat sales for 5 years, a new perspective allowed that CEO to double revenues in just 2 years. He now will walk away with more in his bank account than he ever thought possible, and has the opportunity to double the business and sell again.
Send me a message if you’d like to have a private chat.