Preparing and marketing a mid-market business for sale is not like selling a real estate property – in most cases, you can buy a property in a good area, and then sell it for a higher price reasonably quickly. Business is nothing like this and mid-market business is far more complicated.
These assets require active management over time – 12 to 18 months of preparation to ensure maximum sales value and 3 to 6 months of the sales process to ensure we identify and attract the right strategic buyer.
Selling a mid-market business (a business with annual gross revenues of between $5 million and $50 million) is a complicated project and in our experience, it requires far more time in preparation (12-18 months minimum) than for the actual transaction (3-6 months).
When selling smaller businesses such as a corner café or hair salon, there is not a lot to do – you need to be able to verify sales, the lease of premises, and a few other reasonably simple details – very similar to when selling a parcel of real estate. However, with larger businesses, it is more complicated, and if you take that approach in more substantial companies (which is nothing like selling real estate), you will either be sorely disappointed or in many cases unable to sell at all.
Mid-market businesses are far more complicated and have many more moving parts – you need to consider all of this to prepare for a sale. Unlike real property, you cannot just buy and hold, sit back and wait until the value increases and then sell. You must actively manage mid-market business assets, continuously review and fine-tune the preparation of the business for sale.
In most cases, we recommend targeting a strategic buyer – a buyer who has a reason to pay more, a buyer for whom your business is more valuable, who has more synergies and who is looking to scale – this will nearly always get you the best possible sale price for your business. The issue, however, is that these buyers are professional and fussy: they are experienced buyers and know what they are looking for.
The key to preparing a mid-market business for sale is twofold – first, make a thorough analysis so you understand precisely where your company is currently and what you need to do to maximize value and prepare for a sale. Second, review all of the items the buyer is going to look at (reverse due diligence) – most buyers will provide a long list of things to consider such as financial, legal, employment documents – a typical due diligence list is 10 or more pages long. Ideally, you should review all of this information, update it, and resolve any gaps long before you get anywhere near a buyer.
To find out more, call us at 208-401-9300, or visit our home page, www.genlawgroup.com, and Book An Appointment.