Selling a Business for Maximum Value in a Challenging M&A Market

By Toptal Finance Expert

With $936 billion of uninvested private equity capital inching down market, why do 46% to 80% of lower middle market sell-side transactions fail to close? The usual answer is that companies are not ready for buyers’ examination and owners can be overly optimistic or even too greedy.

In my 30+ years of experience serving in the roles of president, CFO, principal investor, investment banker, consultant, and operating turnaround expert, I’ve improved the operating performance of ten businesses and completed 27 M&A, investment, and financing transactions totaling $1.3 billion. Based on this experience, in this article, I describe common reasons deals fail, and I outline what an owner can do to drive a better outcome.

I make the case that business owners can do much more to put themselves in the driver’s seat. My advice on how to sell your business boils down to (1) take the time and do the work to prepare for an exit transaction and (2) apply “intelligent greed” to close your best deal. An interim CFO can help you boost company performance, prepare for the sale process, understand your valuation range, and target and analyze potential buyers you might not have considered.

Selling a Business: Master the Owner’s Conflicts and Expectations

Monetizing your life’s work is your reward for years of building it. And of course, that motivates you to pursue a sale of the business. However, the large proportion of unsuccessful deals shows that the gap between price and seller expectations is a huge problem that sellers do not anticipate. This article provides a pragmatic approach to fix the imbalance many sellers experience where their expectations far exceed what a buyer will pay.

First, you, the owner, need to overcome your natural trepidation and apply the same determination to sell the business that you applied to build it. Every owner is plagued with thoughts like these:

  • “It’s time to sell, but I’m not sure I’m ready to let go.”
  • “I want top dollar now, but maybe I could get higher value with a two-step transaction.”
  • “There seems to be an insurmountable problem with every prospective buyer and offer.”

Those owners who close deals manage to get over those doubts. Don’t waffle–decide. Commit early to a process and make it work. This article examines the steps an owner and the company can take to improve the odds of closing the transaction, and at a higher price. An owner’s willingness from the outset of the process to take those steps both confirms the owner’s determination and increases the company’s preparedness. According to a survey of 264 business brokers in 36 states conducted by the International Business Brokers Association, fewer than half of sellers of companies up to $50 million follow a planned sale procedure:

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Overlay that with the top five reasons buyers give for not closing, and consider that at least four of these are under the seller’s control.

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Interested in more tips on maximizing your business’ sale value? Read the full article here.


Selling a Business for Maximum Value in a Challenging M&A Market was originally published in Toptal Publications on Medium, where people are continuing the conversation by highlighting and responding to this story.