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September 9, 2022
The lower middle market world has changed a great deal since the 1970s or early ’80s.
At one time, this market consisted primarily of family-run businesses who operated in a more casual-selling environment – however, in today’s business world, there is ample pressure on sellers from private equity groups, search funds and strategic companies.
Therefore, it should come as no surprise these various entities are looking to make big moves.
They often communicate directly with business owners, hoping to land a deal.
As a result, sellers often feel pressured by buyers and fail to see the big picture of the different buyer options that are out there that might be right for them.
When you think about the market 40+ years ago, it’s interesting to note that often sellers didn’t have business brokers or advisors to assist them with their deals – which prompted small businesses to try to navigate the waters on their own, sometimes leading to costly mistakes.
In today’s market, thankfully, there are ample merger and acquisition (M&A) advisors available across the country to assist sellers.
But even with the best advice available, sellers still need to make the final decisions.
Potential mistakes
Some business owners could fail to get the timing right and can negatively impact their ability to get the best price.
In other situations, sellers may view their businesses more like a home sale, therefore, overlooking all the nuances of a business, such as customers, staff and ideas and strategies.
In some cases, they may even undervalue their offerings and drive down their valuations.
Sometimes, sellers assume they will sell to a competitor, but this can also prove to be a costly mistake.
Achieving the favorable outcomes
M&A advisors who understand their clients intentions – for example, if they want to remain with the company after a sale – can help them achieve their best outcomes.
Advisors should also seek to learn why clients want to sell and what they want the outcomes of their deal to be.
When advisors consider outcomes, they think not only about the price, but also the impact on the people involved, which allows them to find buyers who are the best potential fits.
When evaluating buyers, advisors should also look carefully at their acquisition histories to see if they are a strategic fit.
This process can save everyone time and money and may lead to a deal that is successful for all parties involved.
Glen Herman is a business intermediary of creative business services/CBS-Global.
