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After spending years—sometimes decades—building a successful enterprise, you’ll have to make countless decisions about choosing your replacement, such as the impact on your employees, your community, your customers, your financial objectives, and so on.
If there isn’t an obvious candidate within your family, and you’ve narrowed it down to some form of sale, a quick analysis of the basic types of buyers may shed some light on your decision. Here’s a look at a few:
Strategic: another company in your industry or a related industry Buying your company should bolster the acquirer’s sales without commensurately increasing costs. Because of these cost efficiencies, strategic buyers typically offer the highest bids; however, layoffs and change may increase accordingly.
Financial: a professional investment group buying as part of a portfolio Financial buyers are sometimes less interested in retiring the management, as such buyers generally avoid day-to-day involvement in operations. They can come in with a lower price than strategic acquirers, but are generally well-funded and may bring less organizational change.
Entrepreneur: individuals rallying investors and/or their own funds This arrangement provides the opportunity to gain a personal understanding of the buyer and their approach toward your business, but it is sometimes a challenge for them to marshal the resources.
Employee/Management: pass the torch to your current team This option likely represents the greatest degree of continuity, but may come with a smaller offer or a longer payout period.
Another, more specialized option has developed over the last few decades to bridge the gaps between the typical financial and entrepreneurial buying attributes. The so-called "search fund" model is a structured combination of individuals interested in leading a company and experienced investors to back them. Search funds usually seek to buy a single business, thus allowing you to gain a personal understanding of the buyer with more confidence that a deal can be inked.
Knob Hill Partners
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