Helping Baby-Boomer Business Owners Retire
Written by: Jay Sickler, CPA, CFF, ABV, ASA
It has been a lot of fun, as I enter my 60s, to be regarded as a valued and trusted advisor to my closely held business owner clients. Now with 30+ years of being a business valuation and litigation expert, I have more to offer than I ever thought I would have in the realm of mergers and acquisitions. I am not an investment banker, nor a private equity firm “deal guy,” but the succession planning challenges faced by those business owners in their 60s and 70s are real, and I can help. My clients are looking for a way to unlock the value of the businesses they have worked so hard to grow and nurture.
It all starts with the question: What is my business worth? But my response is: Worth to whom? This is important because the value/price is different depending on the buyer. Here are examples of three types of buyers who have a different take on what the value is to them:
1. The senior executive or group of senior employees who want to buy the business from the retiring owner. Value to them is typically defined in terms of what cash flow the business expects to generate to fund the internal buy out. Most often they do not have a pile of cash to pay for the shares.
2. Another closely held business owner in the same industry looking for a way to immediately grow their business. Sometimes the seller wants to take the search out-of-state for confidentiality or competitive reasons. Other times the potential buyer in the industry has already approached my client with a keen desire to buy their business.
3. A private equity (PE) firm. The PE buyer can be a private company themselves, or a publicly traded firm. PE firms come in all shapes and sizes, but typically they are looking for ways they can either turn around or enhance the profitability of the target business (my client), so that in say five years, the business can be resold or bundled with other companies in their stable. What makes a PE firm different in terms of pricing the deal is that the PE firm may be willing to pay a strategic premium for the company. A financial buyer is not able to justify a premium since they can’t realize similar synergies. I have seen much higher EBITDA multiples paid in the context of a strategic buyer.
In the end, it doesn’t matter who that potential buyer is, I am here to help my client who says, “it’s time to sell.” I help them understand “value” to whom, understand the sale process (LOI, due diligence), and be the person they trust to get them to the finish line.
Book some time on my calendar at the link below if you’re interested in hearing more.