03 August 2015
Why is it so hard to sell my business?
The founder CEO of a company who came to see us recently is
rightly proud of his company and what it’s achieved. The technology is good,
the products win awards and the customer list is impressive. But as he
approaches retirement, why can’t he find a buyer for the business? What’s he
done wrong?
The company earns about €2 million of revenue and makes a
reasonable profit. It sells globally in a niche market. The founder is the sole
shareholder and his expectations are sensible: he’s more looking for a good
home for the business than a high price.
A closer look shows the industry dominated by large players,
none of which is interested in acquiring his business. He knows them all, and
has spoken to them all. They like his business but there’s just no compelling
reason for a strategic trade buyer to buy his business: it wouldn’t move the
market share needle for them and the niche he operates in is quite specialized.
The company is too small for Private Equity, unless as a bolt-on to an existing
portfolio company.
It’s easy to forget that, in addition to profit and revenue
multiples, the company needs to be of the right size to appeal to buyers: big
enough to make a difference to their business and small enough to be digestible
and affordable.
He may be best offering the firm to his colleagues in a
management buyout, in which he is the provider of the finance. It sounds a
little like selling your house to someone and providing the mortgage but,
structured properly, an equity-to-debt swap can work really well for everyone.
# posted by DavidF @ 16:38 
