Rob Starr, Head of M&A at Shaw & Co, runs through the three main options available to owner-managers when it's time to sell the business.
Exiting your business is the biggest moment of your journey as an entrepreneur; the chance to turn all your hard work into cash and secure your family’s financial security.
So what are the various options when it comes to exiting a business?
This is the most common route but it is extremely important that you do not simply accept your first offer. The aim is to either get a price at the top end of your range to sell the business off market or run a process to find the best buyer. Furthermore, it is also vital that you have a corporate finance advisor creating a ‘Fear Of Missing Out’ amongst potential buyers, persuading them that this is a huge opportunity that simply cannot be missed.
Here you are selling your shares in the company to the management team who can fund the sale themselves with debt or by partnering with private equity. Another option is the business owner can loan the management team the money to buy the business and they pay it back from future profits. On the downside, the price tends to be lower than running a competitive sale process to strategic buyers.
An EOT is particularly good for people-based businesses as it demands concerted buy-in from the employees who will all become shareholders in the company. This not only incentivises staff but provides the seller with a defined legacy. It can also be highly tax efficient. On the downside, the consideration is paid out of future profits so you could be waiting a while for your money which may also be less compared to a trade sale. Plus, of course, getting paid is also contingent on the business’s continued success.
After building an app that became a global hit with parents, Steve Vangasse asked for our help to sell his business. Find out how we made his dream come true.
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