According to the Business Reference Guide, only one of every four potential transactions involving family owned businesses actually closes. This can be because of broad market conditions or the fact that the unlucky companies are simply not “saleable”. More likely it is due to one or more of the following reasons:
- Lack of preparation for the process
- Lack of management depth
- Revenues concentrated with one customer
- Poorly positioned to buyers
- Unorganized or incomplete information provided to buyers
- Contacted the wrong type of buyers
- Contacted too few buyers
Business owners often wonder whether it’s necessary to hire an intermediary in order to sell their business or to source capital for growth. Although there are a number of reasons for hiring an intermediary, the most compelling and quantifiable reason is dollars and cents—the amount of money that will be changing hands.
A good advisor can mitigate a number of issues by conducting a thorough, disciplined process that increases the likelihood of a transaction closing. The lead advisor serves as a “player/coach”, making sure the process continues to move forward while handling many of the responsibilities personally. This also allows the management team to remain focused on their core competency of running the business day to day, and ensures that company performance does not falter, decreasing the chances of closing a deal.
The experience of selling all or part of a company can be very emotional and time consuming for an owner. In addition, the results of the process have lasting implications for the owner, his family and employees as well. Engaging an experienced reputable investment banking firm to facilitate the process generally produces positive outcomes and intangible benefits that more than cover the costs involved.
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