In our last two blog posts, we outlined business transaction options available to owners depending upon where they are on our Seller Readiness Matrix. Some of these options have a higher value than others. If maximizing value is the most important issue to a seller, then they should review our Typical Transaction Types & Terms chart as well.
What one sees is that value changes depending upon the type of buyer. The left side of the chart reveals that Internal Buyers typically value the business the least, mainly because the sale hasn’t been subjected to a market based process and internal buyers are less likely to realize the operating synergies that could enhance the earnings of the business that a strategic buyer could. They are also often more reluctant to take on the debt that an independent buyer or Private Equity group would. The further right you move on the chart, all of this becomes less of an issue and value increases.
Today’s market is recovering rapidly from the 2020 pandemic lows. The Private Equity community is comprised of well over 7,000 firms, most of which are seeking acquisitions in the lower middle market and are sitting on over $1.5 trillion that needs to be put to work. This group of buyers operates in all phases of the chart. They can provide capital to sponsor ESOPs, Management Buyouts and Generational Transfers. They can partner with sellers to affect a minority of majority share recapitalization of the business. Or they can buy the company in its entirety. It’s a good time to tap into this market.
If you would like to discuss more about what your transactions options are, then please feel free to contact me at jeffs@vrnewhaven.com .
