Value and the sale of your business
When considering the sale of a business, it is very easy for a business owner to be uncertain or even pessimistic about its value. This is definitely a mistake, particularly because it can cause a potential seller to miss out on possible opportunities.
It may be ironic that I founded an M&A boutique firm to help people sell businesses; however, my own father, when I was young, who owned a small chain of variety stores, decided to close the business rather than sell it. He sincerely believed that no buyers would be interested. Mind you, he didn’t test that theory; however, he thought he was right.
A business owner should never assume that his or her business is too small to be of interest to a large company. It is important to remember that there is a difference between the financial value as portrayed by the financial statements and the market value. The market value includes more than just how much the company is worth monetarily. It includes the value of intangible assets for example, the customer base, distribution network, location, having a unique service or product, long term and loyal customers, name recognition, etc. These factors go way beyond the balance sheet and income statement. These and other factors always contribute to a company’s value but are not always easily quantifiable.
Additionally, just because a company has modest financial results does not mean it will not sell. Buyers will look at the future of the company and make an assessment of its potential. This is especially true when the economy is in a down cycle. It is also important for the seller to accurately analyze the business’ true financial position, marketability, and potential. A good M&A advisor will know how to do this quickly and accurately.
For a company with modest financial results, it is important not to oversell the company as buyers may pull out if they feel the current financial results are unsustainable or the revenue and profit projections are unrealistic. When pursuing the sale of a company, one must strike a balance between underselling the company and overselling it and scaring off or losing potential buyers during the sales process. Once again, a good M&A advisor can help strike the necessary balance. The advisor can also provide value-added by finding the “right” buyer who will understand the value and potential of the company for sale.
Versailles Group is a 30-year-old boutique investment bank that specializes in international mergers, acquisitions, and divestitures. Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues greater than US$2 million. Versailles Group has closed transactions in all economic environments, literally around the world.
Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.
More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.
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Founder and President - Versailles Group, Ltd.