Timing the sale of a company can certainly be a tricky decision. You don’t want to sell too soon, and you don’t want to sell too late either. In both scenarios, you risk leaving money on the table if the timing isn’t right. So what is a business owner to do?
Fully understanding the market in your sector is critical, and having an M&A advisor to guide you through the process can make all the difference in the world as far as getting the timing of a deal right. By being on the market, you can at the very least see what buyers believe that your company is worth. This can help you decide what types of strategies for growth you may need to implement to drive up your company valuation. It can also reveal that your business is worth more than you ever expected, prompting you to consider selling earlier than you previously would have.
There are other benefits of taking your company to market, too. Getting a jump on the due diligence and preparatory processes helps you get properly organized for when you are going to sell, whether it is now or later. Being sale-ready is a major advantage because potential buyers know that you are serious about selling, and having your financial house in order demonstrates that it is more likely to be a well-run business. This undertaking can take a great deal of time and work, so getting an early head start is always beneficial. It also means you can be ready to pull the trigger on a sale if an ideal opportunity arises. Many business owners make the mistake of waiting to sell their business because they think it isn’t ready to sell. This misguided viewpoint can cause you to miss out on a great deal (and money), which is why you should insist that your business is ready.
When considering whether to sell your company, you should weigh several factors. Economic aspects are certainly one thing to consider, such as the current state of the economy, interest rates, buyers’ positions, and how long of a window of opportunity you might have. How much do you think it’s worth it to hold out? And there are other less-financial-driven questions you should ask. Are you reluctant to sell for emotional reasons? Will you be miserable without the business you’ve worked so hard to build? Do you want to remain with the company but in a different capacity? Will you feel satisfied by moving on to another venture? Are you ready to retire? Indecisiveness and procrastination can be costly mistakes, so you will want to be confident in your position before you take your company to market, which is ultimately one of the most important decisions you will ever make.
A key notion to keep in mind is that the best time to sell your business is usually when you do not have to. When business is good, it can be hard to fathom selling. But you’re simply not going to get a better deal when your business is facing tough times. Buyers want businesses that are thriving and demonstrate future growth potential. And that’s what they are going to pay more for. Selling from a position of strength will always get you more value than selling from a position of weakness.
Just look at what happened with the Internet company Yahoo. The firm peaked in 2000 with a market cap around $125 billion. In 2008, Microsoft proposed a $44.6 billion buyout of the company, which Yahoo rejected. Nine years later, Yahoo was acquired by Verizon for just $4.48 billion. As if the $44 billion difference wasn’t bad enough, the final price tag would have been $350 million higher had Yahoo not disclosed details of data breaches a few months prior to the deal.
Finding examples of companies that sold too soon is nearly impossible because there is no way to know what would have happened had they not sold. We can always speculate that a company could have held out and sold for a higher valuation at a later date, but it would be merely just that: speculation. Knowing when to sell is an intricate craft that M&A experts are able to navigate well thanks to their unique resources and years of experience. They also know how to help you avoid common pitfalls that can cost you a significant amount of money.
Let Us Help
At Benchmark International, getting business owners the most value possible in a sale is what we do. It’s what motivates us to get out of bed in the morning. We would love to talk to you about your company, how we can help make the difficult choices a little easier, and how we can turn your dreams into the real thing.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Lawrie@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.