15 June, 2011

Private business exit: Q9. Should you sell gradually or all at once?

One of the questions to consider when you’re thinking of selling a mid-size business is “Should you sell gradually or all at once?” There are many reasons to not sell all in one go; eg.:

  • Your buyers insist you keep some skin in the game as proof that the business is as good as you claim (eg. if you are going down the IPO route and there are no other current shareholders staying on).
  • Your buyers can’t afford to buy it all yet.
  • You want to start selling but you think there’s more upside you want to share in.
  • You want to share in some of the gains that your buyers will bring to the business.
  • You’re not ready to give up control yet.
  • You want to keep a stake in the business you built.

Of course, there are also many reasons to sell it all at one time; for example:

  • Clean transfer of control.
  • Easier integration into the buyer’s other businesses.
  • Maximising price (100% control usually is worth more proportionally).
  • Minimising administrative hassle for you and the buyer.
  • Minimising ongoing exposure to the future performance and risk of the business.
  • You need the money for another opportunity.
  • You just want out.

You might find you have few options. Some buyers may insist on 100% sale, others may insist you keep some level of investment. The point of the question is to explore your motivations, to make you aware of the possibilities, and as always to identify any issues or opportunities to improve the ease of sale and value of the business.

First posted August 27th, 2008

No comments: