In my 25-year career as an investment banker, I've
represented both buyers and sellers of mid-market
businesses ($10MM - $250MM of value) in a broad
spectrum of industries. Buyers, be they corporations, Private
Equity Groups or venture capitalists are sophisticated,
experienced and objective. They leave no stone unturned in their
single-minded pursuit of the best-possible price and they
usually get it.
Sellers in this size range, however, are a much more diverse group. While they are generally skilled leaders and savvy business owners, they are rarely experienced in the M&A world, and are hardly objective about the businesses that many have spent lifetimes building.
Selling a company for the best possible price is usually just one of a seller's primary goals. That desire to achieve
several goals combined with no experience crossing swords with buyers in the M&A world result in many sellers leaving closing tables with far less than the best possible, or what I call "outrageous" price. (An outrageous price is at least twice the prevailing average industry multiple.)
Level The Playing Field
To level the playing field I wrote Sell Your Business For An Outrageous Price. I want both buyers AND sellers to get what they deserve so it only seems fair to show novice and
experienced sellers how to play the M&A game as skillfully as professional buyers.
The first challenge for sellers is to reach the closing table. Reliable statistics are hard to come by, but there's some
indication that around 60 percent of businesses put on the market fail to sell. So, I created a four-part Proactive Sale Process™ with two straightforward goals: maximize sale price and minimize the opportunity for a sale to fail to close.
In the first step, we assess the company and the owner for sale readiness and perform a valuation including both analysis and intuition. Since most deals in this market segment fail due to the gap between the buyer's and seller's interpretations of value, this step is critical.
Owners also complete a sale-readiness assessment that
covers everything from their exit goals, family issues and their advisors to the company, its competitors, competitive
advantage and potential buyers.
All owners have looked for events that an applicant may have not disclosed, but few know how to uncover a company's
inefficiencies, waste, mismanagement or unnoticed opportunities. In this second step, that's the type of buyer due diligence I prepare sellers to undergo.
In the third step we look for the company's competitive
advantage: that not-always-obvious product the company makes or service it provides either better or more cheaply than does its competitors over time.
Finally, we gather intelligence about potential buyers in the marketplace: competitors, verticals, industry players and
Once we complete the Proactive Sale Strategy™ outlined here, owners decide whether to pursue an Outrageous Price using the Outrageous Price Process™.
The success of that Process depends on the presence of Four Pillars rather than on a strong M&A market. In addition, I've used it successfully in all types of industries so check out my book or visit www.ThinkOutrageous.com to see if your
company is a candidate for an Outrageous Price.
Kevin M. Short is managing partner and CEO of Clayton Capital
Partners, a St. Louis-based investment banking firm specializing in
mergers and acquisitions. He is also the author of "Sell Your Business
For An Outrageous Price" recently published by AMACOM