First of all, congratulations! As a business owner who has poured blood, sweat, and tears into building their business, you should take pride in the fact that someone else values what you’ve created. Not all business owners are given the opportunity to monetize their equity.
As the M&A universe expands and more capital is made available to purchase privately held businesses, it is fairly common that owners are approached by various buyers, especially when said owner has built a reputable organization of meaningful scale. We often hear from owners who have been approached by industry consolidators, private equity groups, acquisition search funds, and the like. In some cases, these solicitations take the form of meaningful conversations and before you know it you have a term sheet in hand.
Now what, you ask?
You could walk down the aisle with the first suitor that courts you. Or, you could take a more prudent approach and do the homework necessary to ensure the offer you have is fair and competitive for your business. Interestingly, we have found that some business owners value a bird in the hand and opt not to solicit bids from other parties. In these cases, money is oftentimes left on the table and the buyer may, or may not, be the optimal buyer to carry your legacy forward and ensure the future success and wellbeing of your people, vendors, and customers.
Buyers come in many different forms, and each has their own investment philosophy, integration strategy, and ownership goals and objectives. Knowing the buyer and their intentions is as important as the offer itself so be sure to do your diligence. Additionally, there are deal terms beyond the purchase price that many owners gloss over that could have a material impact on the take home proceeds of a proposed deal.
To those who receive an offer for their business, we recommend connecting with a trusted advisor or experienced M&A professional to weigh in on the transaction dynamics and provide market-based feedback. Deal professionals with knowledge of your industry will be able to unpack an offer and provide guidance around appropriate next steps.
Business Acquisition & Merger Associates (www.buysellyourbusiness.com), a Charlotte, NC advisory firm, assists business owners in growth recapitalizations, business transfers to financial or strategic buyers, and management buyouts. BAMA also helps companies grow by providing buy-side sourcing services that identify potential add-on acquisitions to expand geographic footprint or add strategic products and capabilities.