Selling Your Company to a Strategic Buyer
As businesses grow in the market, business owners start to create more plans for the future and should have a plan on what their exit strategy will be. Many businesses might consider selling to a strategic buyer, but before doing this there are several things they should consider, which are:
Know who your buyer is
The first thing business owners should do is identify if their buyer will be a strategic or a financial buyer. When selling to a financial buyer most of the valuation is based on EBITDA. In the case of a strategic buyer the company is valued more than the multiple of EBITDA. A strategic buyer’s investment is valued on the solution and experience that the business is bringing.
Have a clear explanation and vision on why you want to sell your company
Showing the buyer the value of the company and how meaningful it is for the industry or market will give the seller more likelihood of going through with the transaction since the buyer will be able to know why they want to buy the company.
Calculate your ROI
When calculating the value of your company, the seller should give themselves a price and what premium they can get since they were the ones building and running the company.
Risk Factors
As a business owner you know that risk factors can come your way. You can run the risk of providing too much information to a buyer about your business, or risk not providing your employees a good transition of new management. It is important to protect your business information as well as your human capital.
After evaluating these steps, your deal will have a higher probability of going through. You will be able to understand what the value of your company is and be able to provide the buyer more insight on why they should buy your company.
Read the full article here:
Should You Sell Your Company to a Strategic Buyer? [Solidity Financial]
