Whether you are a small business owner or founder of a large corporation, the decision to sell your company is one that will have long-lasting effects on your legacy, as well as your financial future. If you are looking to retire, pursue new business ventures, or simply realize liquidity, having a well-designed strategy in place to ensure your legacy is protected is crucial. Proper planning can be a key differentiator in maintaining the success of a business across generations and ownership transfers.
Planning can take on many forms, but the most effective approaches center on an honest assessment of yourself and your business. Understanding your priorities in life, your vision for the future, and how that is supported by or involves your business should be the cornerstone of any planning process. Those ideals should in turn align with the realities of your company. Having an accurate sense of the value of your business in a potential transaction, along with its strengths and any potential weaknesses, is crucial in making informed planning decisions.
For many owners, the planning process is one where an advisor can bring significant value, as a strong advisor will be in position to provide an objective outside assessment of the company, as well as an experienced market perspective. An advisor will also provide guidance around when the time is right to pursue an exit strategy by considering your goals as well as company specific and market conditions.
If you determine that selling your company is the right next step, there are several factors to consider that could shape the legacy of your business.
Align Your Goals with the Sale Process
Determining what is important to you when you exit your business is one of the key steps as you consider a transaction. For many owners, assessing their current financial position to ensure their lifestyle can be continued in retirement is a key determinant. Other concerns include future family involvement in the business, positioning the company for growth, and avoiding conflicts with family around inheritance and ownership. For those with close ties to the cities and towns where their business is located, preserving their standing and role in the community may be what’s most meaningful to them. These goals will provide a roadmap for your exit strategy and define the narrative around the sale of your company.
Identify the Optimal Acquirer
After aligning your goals, one of the next steps in the sale of your company is to identify the preferred acquirer type. Potentially interested parties may include direct competitors, larger industry players, or institutional capital, often in the form of private equity. Understanding the positives and negatives of potential acquirer types will enable you to make a decision that matches your vision of your company’s future. For instance, if you value giving your current employees the opportunity to continue to operate the business with a high degree of autonomy coupled with the possibility of obtaining ownership, selling to a non-operationally focused private equity acquirer may be the ideal approach. Conversely, if you believe much of the key operational knowledge will be exiting with you, seeking out an industry participant may allow you to transition in a shorter timeframe, without a disruption to operations.
Ensure Mission Alignment
Finding an acquirer who shares a similar set of values with your organization may also be essential to solidifying your legacy. Not all acquirers are created equally regarding their mission and approach to business. Finding a partner where there is strong alignment helps maintain continuity purpose and can go a long way toward a successful transition. Some owners might prefer to work with an acquirer who will not only allow the existing management team to continue to lead the business but is also committed to supporting the current culture and traditions of the organization. In some cases, the potential acquirer most aligned with your values may not be the one offering the highest purchase price. In this situation, you will need to base your decision on the weighting of your transaction objectives.
Proactively Diligence Your Company
Another critical aspect of crafting your legacy before transitioning away from your company is conducting a thorough analysis of company financials and operations. The last thing an owner wants is for an unforeseen issue to arise that jeopardizes the sale process during the 11th hour or tarnishes their company’s reputation in the years that follow.
Proactive diligence during sale planning includes (i) reviewing historical and projected future financial statements to ensure business performance is accurately presented, (ii) confirming all corporate and legal matters are in order, and (iii) being aware of any potential risk factors such as employee, environmental, or IT problems. Successful pre-sale diligence processes are often supported by subject matter experts who identify potential trouble spots so they can be properly addressed in advance of a transaction.
Prepare for Transition
Successful exits generally involve a well-designed transition plan for the owner and other key management who are also planning to leave the company. Acquirers will generally work with sellers to design a transition process that achieves the objectives of both sides. During this time, successors are trained to fill leadership voids, operational knowledge is shared, and key customer/supplier relationships are transferred. Smooth transitions often entail owners identifying core team members and creating incentive plans designed to keep them on board during the transition period.
Identify Trusted Advisors
Having experienced, value-aligned advisors by your side can be an invaluable asset if you are considering a sale of your company today or in the future. As experienced investment bankers, we understand the importance of working with a team of professionals to help craft your legacy when selling your company. A fully developed team may also include attorneys, accountants, financial planners, and other experts who will help you navigate the complexities of the sale process. Your advisors provide you with valuable advice and guidance on how to best position your company for a successful sale, identify the optimal acquirers, as well as help negotiate the best deal possible.
Wrapping It Up: Securing Your Legacy
Selling your company can be a critical step in ensuring that your financial future is protected. With the right planning, strategy, and team of professionals on your side, you can ensure that you are positioned for success and that your legacy is secured for future generations.