Here are a few misconceptions we often hear about selling a lower middle-market business, and why they don't ring true:
Myth #1: Strategic buyers will pay the most to acquire your business. (Or, the related myth, private equity buyers will pay the most.)
Perhaps you've heard that strategic buyers make the best offers, as they can use their synergies to build revenue or cut costs. Or you may have heard that private equity firms, flush with cash, are driving up valuations as they compete for deals. In reality, the buyer that will provide the highest value for your business is one that sees the best fit and most future potential in your business, not a buyer that falls into a certain category.
Myth #2: Wealthy foreign buyers pay high premiums to purchase businesses.
The very limited number of overseas buyers who do purchase businesses are just as well informed as any other buyers on reasonable valuations and terms.
Myth #3: You will sell to someone you already know.
Absent specific reasons to limit the sale to certain buyers, your prospective buyer list should include all your obvious industry players, along with a wide range of other qualified acquirers up and down your value chain, and across buyer categories. We spend a great deal of time on buyer research, as a strong buyer list increases the chances of a sale and drives up potential value.
Myth #4: An owner will need to stay on for x years after the sale.
Nearly all buyers want the seller to stay for a short-term transition period, but after that, some buyers may want you to stay on, and others will not. It's important that your goals for any post-sale role are communicated early in a conversation with a buyer. While you may eliminate some buyers, you save time by focusing on buyers whose goals match yours.
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