Your Guide to a Successful Exit
The decisions that lead someone to start a business and build it over years or decades are often singular and personal to the entrepreneur. But the decision to sell is often based on two clear indicators. The first is that the business owner is ready to retire or move on to other ventures. The second is that the market is right for a sale. For those people who are ready, today’s market is a seller’s one, and big and small businesses are cashing in. With interest rates still low, and equity investors chasing fewer international deals, some might say the deal market for mergers and acquisitions (M&A) is at a fever pitch.
For the last two and a half years, the M&A market has experienced a bull run, generating capital from both private equity and strategic buyers, which are large private or publicly traded companies that are interested in acquiring smaller companies. As a result, there has been an unprecedented boom in the “middle markets,” where sales focus on companies with valuations ranging from $25 million (so-called lowermiddle) all the way up to $1 billion (upper-middle).
Increased volatility in the stock market has been a factor driving the current M&A market. “Volatility creates uncertainty, and the global markets are rife with uncertainty,” says Brooks Gallagher, who heads the Private Sales Referral Network (PSRN) at Bank of America Merrill Lynch. “This volatility has driven more buyers to focus on the middle markets, since global buyers are attracted to the company base we have in the U.S. The middle market is where they are focused, and buyers have turned out at a higher level than we have ever seen.”
Often entrepreneurs—even those with successful businesses—aren’t ready for a successful exit. While the decision to sell is theirs, many of those approaching retirement think that their ability to grow and manage a company means that they already have the necessary knowledge required to make a successful sale in a competitive market. Yet, there’s often more to a sale, and understanding all the benefits for a seller is essential.
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