Sun Acquisitions | Chicago Business Broker and M&A Firm

Sun Acquisitions is a Chicago-based business broker and M&A firm. Our team of advisors specialize in buying, selling, and acquiring privately held companies. We can help you sell your business.

Blog Posts

Why Hiring a Business Broker/M&A Advisor Can Help You Successfully Sell Your Business Faster

Selling Your Business to the Right Buyer: How to Find the Perfect Match

The Dos and Don’ts of Due Diligence in Mergers and Acquisitions

Rivals to Partners: The Surprising Benefits of Merging with Your Competitors

How to Sell a Hotel Business

Understanding the Likely Buyer for Your Business

by

Understanding Your Business Buyer
Photo by Adeolu Eletu on Unsplash

Are you thinking of selling your business? Do you think the business would fare better under new leadership? Or perhaps selling has always been your proposed exit strategy? Regardless of the reasons you’re selling your business, one thing is certain – you want the best buyer possible. For this reason knowing how to identify and distinguish between the different types of business buyers will go a long way in saving you both time and money. In order to better understand the buyer let’s take a closer look at the different buyers and the pros and cons of selling to them.

1.   Selling to a competitor

  • Type of business buyer: Competitor

Sometimes a competitor may make an offer to purchase the business from you or you may initiate the conversation. If they approach you first they might be looking for a possible merger. One of the major reasons mergers and acquisitions take place is the desire for growth, expansion, and possibly monopolizing the industry. The advantages of selling to a competitor include peace of mind knowing that the buyer is qualified; potentially receiving a higher offer price and the buyer getting faster access to financing because they are already a proven business. Associated cons may be that your competition isn’t interested in ensuring business legacy or taking care of your employees and existing customers.  Also, the competitor now knows you are thinking about selling and could use this information against you in the marketplace which could have a significant impact on the value of your business.

  1. Selling to an investor group
  • Type of business buyer: Investor Group

When selling a business, you may be approached by an investor group. Investors by nature are looking for opportunities where they can make money while assuming as little risk as possible. Additionally, buying an already established business means immediate cash flow and eliminates the pressure of having to start from the ground up. By purchasing a financially sound and mature business, investors will have skipped the initial startup phase where little to no income is generated. These are the aspects you as the seller need to play up during your talks with an investor group.

3.   Selling to a strategic buyer

  • Type of business buyer: Strategic Acquirer

Among the different types of business buyers you’ll come across are strategic buyers and financial buyers. According to a 2016 Private Capital Markets Reports, 57% of all businesses sold in 2015 were bought by strategic acquirers. Why is this? On average, strategic buyers tended to pay more when closing deals than financial buyers making them the preferred buyer. PriceWaterhouseCoopers (PwC) echoed the sentiments and encouraged sellers to seriously consider selling to strategic buyers because such transactions allow the seller to receive the most liquidity once the deal is closed. As with all things there are disadvantages to be had. The biggest cons of having your business acquired by a strategic buyer involve role duplication and possible dilution of customer and employee loyalty.

4.   Selling to a private equity group

  • Type of business buyer: Private Equity Group

If you’re not ready to completely let go of the business and don’t mind staying on and helping to grow the company with the help of a backing partner then the type of business buyer you’re looking for is most likely a Private Equity Group (PEG). The PEG will purchase a portion of the business (probably a majority stake) leaving you as the seller with the remaining part. Done right, you can still exit lucratively in the future when you’re ready to let go completely. If you’re looking to sell but not ready for a full exit, then a PEG might be a good fit. 90% of PEGs will not involve themselves in the day-to-day operations of the business but will provide you with financial resources, human capital, ideas as well as experience to manage the firm.

5. Selling to your employees

  • Type of business buyer: Employees

Selling a business to employees is actually not very common but it can happen. Selling to current employees has many advantages which include the fact that they already have a good appreciation of the company’s ethos and brand identity. There will be continuity as the customers and vendors know the employees already. In addition, the employees will still have a job which is something that’s not guaranteed if you sell to another buyer. On the downside, because they are already privy to the dysfunctional aspects of the company you may need to negotiate a lower selling price. Probably the most imminent challenge for the employees will be getting the finance needed to buy the business from you. Proving they have a good enough credit score to lenders will be the major hurdle.

6. Selling to your family members

  • Type of business buyer: Family

Perhaps you don’t wish to sell the business to outsiders but wish to keep it within the family. In this case, you can approach family members and make the proposal that they buy the business from you. When it comes to the different types of business buyers, family can be the most difficult to deal with. It must be mentioned that selling a business to family members is not always the easiest route. Difficulties may arise if members cannot secure the necessary finance from lenders outright and alternative payment options like seller financing are entered into. Regardless of how well you trust your family, treat them like any other buyer. The only way to avoid future problems is to ensure you’ve sold the business by following the necessary state laws and got the paperwork to prove it.

Talk to a legal expert about selling your business

Would you like to discuss selling a business with an attorney? Get in touch with one of our advisors to learn more about how Sun Acquisitions can help during the buying and selling of a business.

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

Selling Your Business? Here Are The 4 Key Questions To Ask Your Business Broker

by

Sell Your Business with a Business Broker

“Are you interested in my business?”

This sounds a lot like you’re hocking your business on a street corner, but believe it or not, this question is often overlooked when business owners interview business brokers in order to list their businesses for sale.  Does it seem a little obvious to you?  I hope so; however when one’s thrust into the world of selling their business, it can be hard to see the forest through the trees.

A quality business broker will take the time to get to know the business intimately, from the obvious items like cash flow, balance sheet, and assets, to operations, employee stability and skill, vendors, and the strength of customer list.

But not all business brokers are interested in selling your business—they’re interested in the commission.  So, how should a business owner select the right broker to represent their business?

1. “What do you need to know about my business to represent it?”

If the broker doesn’t respond with a laundry list or implied with a more or less tongue-in-cheek response of “everything”, a red flag should go up on whether or not the broker would be able to adequately value your business or source viable buyers.

A successful transaction begins with a thorough understanding of more than the books, but also the business’ inner workings.  Is the existing team self-sufficient and are successful with a hands-off investor-owner or do they require a strong managerial leadership from a highly-present owner?  Are any customer or vendor contracts coming up on expiration which need to be negotiated to maintain the same profitability?

2. “What is your experience representing businesses in my industry?”

The broker should have either industry or transferrable experience to be taking lead in the sale of your business for the same reason we don’t have oral surgeons performing bypass surgeries.  Both are highly skilled doctors, however the tools and techniques are vastly different.  While it’s great to give someone a shot, do you really want their first stab at it to be with your nest egg without experienced oversight?

3. “How many businesses for sale are you representing currently?”

This is less a question of ability and more one of time.  Are you one of 20 or one of 5 he’s actively promoting and negotiating at the moment?  Will you be leaving a message every time you pick up the phone to check in?  Your business broker’s availability really comes into play as prospective buyers begin responding to marketing.  You want to know for certain your business’ representative will be on their “A” game when the time comes to schedule deal meetings.

4. “What’s the average size business for sale you represent?”

Not necessarily a disqualifier, but certainly worth noting if you have a $5 million dollar business and her bread-and-butter deal is north of $15 million.  You may not be as high priority to the broker as her other clients.

Flipping the script, if your business is valued at 4-5 times the average deal your independent business broker handles, is your deal out of her league? The response you should be after should this occur is learning about the additional resources and colleagues available to aid in marketing your business and structuring the deal.  Having the rolodexes of a few more brokers is helpful when you’re looking for a bigger prospect pool than a single broker can provide.

At the end of the day, it’s experience that will sell your business.  At Sun Acquisitions, our team of experienced business brokers have successfully represented business sellers and buyers in a range of industries and are eager to help you sell your business.  Schedule your free consultation with one of our busines

5 Mistakes You’ll Make When Selling Your Business And How To Avoid Them

by

Mistakes When Selling A BusinessSelling a business is complex and requires a great deal of planning to determine what approach works best for your company. How will you identify the best prospects? How will you get the word out without letting others know too soon? What is the value of your business, and how do you get back what you put into the business?

Many challenges can hinder the sale of your business, and doing it alone makes the process more drawn out and complicated. Here are the five mistakes you’ll make when selling your business and how to avoid them.

1. Not Getting a Business Valuation

You want the highest value for your business, but how can you achieve that ideal price when you did not receive the proper valuation?

Aiming too high can do similar harm as aiming too low. You will not win over lost buyers with a price drop. A business valuation shows you where your business stands and areas you may want to address before putting it on the market.

2. Not Seeing Flaws as Opportunities

No business is perfect, and flaws can present opportunities for investment and growth. Buyers want to purchase a sustainable business. However, many buyers appreciate a challenge and see potential where you may feel burned out dealing with the challenges.

You can take steps to refine your processes and policies now. Becoming re-acquainted with the ins and outs of your business will help you solidify and make the final deal stick since you will be ready to answer all questions.

3. Hiring the Wrong Advisers or None at All

You may think that hiring a general lawyer or accountant will be enough to take care of your legal obligations. It is not enough. Hiring expert mergers and acquisitions advisers will ensure that you get the right value for your business and conduct your due diligence thoroughly.

The right advisers will guide you through due diligence and any human resources hurdles. You hire an M&A advisory team to see you through the beginning, middle and end of a sale while the wrong advisers will not know how to handle obstacles and potentially harm the value of your business transaction.

4. Giving Away the Sale to Employees Prematurely

Never tell employees that you plan to sell your company until the deal is closed. The senior level staff that makes up your advisory team can accidentally disclose the fact that the company is on the market, so it is important to stress that all involved in the deal do not disclose information without your approval. This includes keeping data and paperwork away from prying eyes and only discussing the topic in private.

Corporate actions, such as quickly shutting down whole processes, product lines or departments, naturally send employees into a panic. Is the business shutting down or being taken over? What is happening? Your employees are a highly valuable asset, and the retention of your talent costs less than the new buyer having to replace them.

While some turnover can be expected in an M&A, strong businesses plan for transparent and supportive transitioning — but after the deal is made to avoid unnecessary panic. An M&A can create opportunities for employees, but giving away the details too soon can quickly disrupt the positivity of the deal.

5. Failing to Make an Exit Plan

Your exit plan is linked with your plan to sell the business. Would you like to be a consultant? Do you plan to start a new business or retire? Do you care or worry about the continuation of the company mission after the sale?

All of these questions factor into the type of buyer you are looking for and what you will do with your life once the deal is made. You can decide to sell your business and make an exit plan at any stage of your life and career. That said, it is best to sell a productive business with a solid reputation.

No business is perfect, but avoiding these five mistakes will make selling your business easier and better for you, the buyer and your employees. Start with a business valuation and learn to see flaws as opportunities. Don’t give away the news too soon to employees to keep up morale.

Hiring the right advisers will ensure a successful M&A and that you achieve the value that you put into your business. Value is linked with quality, and you should take every step with care.

Contact Sun Acquisitions to develop a plan to help you achieve your M&A goals. We can confidentially market your business to our extensive database of buyers and will stay with you when the deal closes.

Planning Your Exit Strategy: When and How To Sell

by

Exit strategies are far too often overlooked or delayed among business owners.  Statistically speaking, the average business owner has at least 90% of their wealth tied up in the business, yet more than 70% of owners don’t have a planned exit strategy or succession plan.  While this isn’t beneficial for the current owner who may suddenly require liquidity through need or personal desire, consider the fallout of poor planning: organizational failure, employees at risk of job loss, vendors and customers abandoned—a missed exit strategy is a failure in leadership.

Counting On Heirs To Run The Business

An all-too-common expectation is after a founder has passed, his/her heirs will carry on with the family business, continuing the growth and expansion you set forth.  The reality of this legacy-mindset is while 88% of owners believe their business will stay in the family, only 35% survive to the second generation, 12% to the 3rd, and less than 4% of businesses will continue on to the 4th generation.  While these statistics may be alarming, a well-developed succession plan may be the difference between the 65% and 35% of 2nd generation businesses.

When To Sell My Business

We’ve discussed ways to sell your business numerous times, so we won’t cover the nuts and bolts of selling, but rather the “when” question.  Setting a universal age or career timeline is simply not practical nor helpful for the masses, but what is universal is creating a framework or mindset of planning for owners to consider the next phase of their lives and the business. Planning your exit strategy does not mean you are ready to sell in 1 year or a decade, but accomplishes 2 goals:

  1. You can list the business for sale and close a transaction at a fair market price, transferring the equity you have in the business to your personal wealth for future investments, expenses, or pleasure, and
  2. provide clear steps to ensure survivability and longevity of the business in the absence of your leadership

Planning your exit strategy often involves more than you, a pen and paper, or even your corporate attorney.  Select and retain a business broker or business advisor to learn about your business and help structure a leadership succession plan and growth strategy to maximize your return on a future business sale.  To learn more about our Business Advisory and Seller Services, contact us to schedule a complimentary confidential consultation.

Contact Us

Contact Us

Name(Required)
What Are You Interested In?(Required)
This field is for validation purposes and should be left unchanged.