Understanding the Seller Can Help Facilitate a Smoother Transaction
Many companies up for sale in 2021 will be family-owned businesses. Entrepreneurs who founded or took over family-run businesses 30 or 40 years ago are feeling overwhelmed by the magnitude of changes their businesses face today.
The problem is that most business owners haven’t given much thought to the best way to get started. Here are six things you should know about buying a family-owned business.
1. This is likely to be the biggest transaction they ever make.
They are understandably nervous. No one wants to make decisions that will either be costly upfront or over the long run.
While your team may have been involved with dozens of M&A deals, selling a family-owned business is likely to be a once-in-a-lifetime experience.
2. They start getting advice from family members, friends, or colleagues.
They typically turn first to people they know for advice. Sometimes the people they talk to have never actually been involved in a business sale. They may only know what they have read on a business-oriented website or a business school textbook.
We encourage our clients to get unbiased, objective advice about all phases of the process. This includes a valuation from a company with M&A experience. It takes some clients awhile to adjust to the fact that the valuation is lower than they thought. Happily, some clients are surprised to discover their firms might be worth more than they thought.
3. They might not be ready for your due diligence requirements.
Because we routinely work with private equity groups and strategic investors, the LaManna Consulting Group experts advise our clients to get their businesses ready to sell long before soliciting offers.
It’s aggravating when deals fall through because the seller (and family stakeholders) didn’t fully understand what types of information they would be expected to provide during the acquisition process.
4. Complex emotions are involved.
Founding entrepreneurs regard their businesses as their crowning achievements. The business is a source of personal and family pride.
At some point, they probably envisioned turning the business over to a family member. It can be difficult for the business owner to acknowledge that family members might not have the interest or aptitude to take over the business when the owner is ready to let go.
5. Earning their trust is essential.
Some owners recall bad experiences with previous attempts at selling their business. Perhaps word leaked out that their business “was for sale,” causing competitors to gossip that their business was “in trouble.”
At LaManna Consulting Group, we operate with the utmost discretion. Every hand-picked member of our consulting team is not only experienced in the industry but also known for their integrity.
Our clients appreciate our team-of-experts approach, including the ability to help them make a smooth and successful transition to the next chapter in their life.
6. Our focus is on creating a win-win transaction for both the buyer and the seller.
We don’t want to waste your time with a deal that probably won’t pan out. We only introduce business owners to potential buyers who might be a good match in terms of strategic objectives and work culture. Our experience has taught us that the best way to manage deal flow is to keep potentially bad matches from ever reaching your desk.
We work hard to find deals that will offer the best odds for long-term, after-the-sale success.
Call me and I will tell you more about the types of matches I can find to meet your acquisition objectives.