When you have decided to sell your Company you should already have an idea about which of the different types of buyers for your company or property would best be suited for your goals. Perhaps you might have family or your children in mind for take over? Or maybe you would like to give some loyal employees a chance? Or do you want to maximise the value you get for your company?
Knowing the answer to these questions will determine the type of buyer we should target.
This is an important step in selling your company. We at CREF are able to find the best possible solution to meet your future goals.
What Are The Different Types Of Buyers?
- Strategic buyers
- Family (children)
- Management or employees (MBO)
- Individuals (MBI)
- Private Equity (also with portfolio companies)
Lets start with strategic buyers. A strategic buyer is the type of buyer that sees the potential for synergies with your company. This type of buyer, in most cases is willing to pay the most for your company.
Strategic buyers almost always have the funds on hand (at least most of the funds) and seldom have difficulty in raising the required capital to acquire your business.
Children or Family
This is a specific category. In a lot of cases it has been the sellers intention for the start of the company to one day see his/her hard work in the hands of his children/family. A few things to take into serious consideration are. Whether or not the considered family members are qualified enough to run the company? Do they have the necessary experience within your industry? Have you tested their skills enough ? Are they motivated to take over or are they trying to make you happy?
If you have a strong desire to see your children or family members take over your company. It would be wise (depending on the candidate) to have them work in the company and get a better feel about how things are done. Use this time to converse with them about their desires and interests for their career. This is an important decision that you are not making only for yourself. You do not want your children to be set up for failure due to lack of skills, motivation or experience.
Management or Employees-Management Buy Out
When your employees buy your company is called MBO or Management Buy Out. This type of acquisition can be done by only the Management of your company. Or it can be done by a full group of employees. The advantages are you do not need to search for a buyer and you know the buyers well. However, it’s not as easy to arrange financing for a MBO and the chances that you get a premium price for your company or shares is reduced. If getting a premium price for your company is the objective then letting us find a strategic buyer would be a better option.
However should you be adamant about giving your hard working employees a chance at a acquisition.We could find you a Private Equity Group willing to buy the company together with your employees. Another way would be to use something like a subordinated loan. Should a subordinated loan be used the funds will remain with the company thus giving the employees the chance to acquire the financing to do the MBO.
Click here for financing MBO’s click here
Management Buy In-MBI
Management buy in or MBI is when interested individuals from outside your company wish to acquire shares and grow the company further. MBI candidates often have previous experience in running companies with success. Our experience working with these types of buyers tells us that. Their financial means are less than that of a strategic buyer and don’t usually pay premium for your business. As synergies are not as important as they would be to a strategic buyer.
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Private Equity Groups
Private equity groups or firms are investment managers who’s primary objective is to make a financial return for the shareholders who’s money they manage. Private Equity firms are extremely driven by cash returns from their investments. The investments made are seldomly long term. This type of buyer will usually look for good returns within 5 to 7 years at the most.
These types of firms are often on the look out for for the acquisition of companies to be added to an existing portfolio. Many Private Equity Firms use the buy and build strategy and could be interested in acquiring your business for this reason. PE groups also buy shares in companies with in the hopes to grow with you.
Want more info?
Perhaps you would like to attempt at selling your company or property yourself. Contact us and we would be glad to help you find out what type of buyer to target. Or perhaps you have a buyer in mind who needs financing do not hesitate to contact us to find out more on how we get financing for you.