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When is the best time to sell, merge or recapitalize a successful, privately held business?

The best time for an owner of a successful, privately held business to consider selling, merging or recapitalizing his company is when business is good, profits are rising, an experienced management team is in place and future prospects look bright. In short, the best time for an owner to sell is when he has absolutely no pressing need to do so.

Why sell, merge or recapitalize a successful, privately held business?

Some owners wish to achieve liquidity, solidify an estate plan, reduce taxes or mitigate their exposure to the risks and uncertainties inherent in having what is frequently the lion’s share of their wealth in a single, illiquid asset. Other owners wish to have more time to pursue personal, charitable, and professional or leisure interests. Still others wish to accomplish several of these objectives, or to ensure management continuity and stability, oversee a transfer of ownership to a party and in a transaction of their choosing, provide stability for their employees, secure capital for expansion or become part of an international organization with global resources and capabilities.

This brief questionnaire can help you determine if now could be the right time for your company and you:

   
YES
NO
  
1. If a bona-fide offer to acquire your business were made tomorrow, would you be able to enter discussions from a position of strength?
2. Has your business been growing, and is it a leader in its market and industry?
3. Would you benefit emotionally or financially from an increase in your liquid wealth and a reduction in your personal risk to the uncertainties of the economy in general and your industry in particular?
4. Does the thought of being able to take the majority of the value of your equity in your business out, in cash, while still owning a significant, perhaps controlling stake in the business appeal to you?
5. Does your company have a management team that is experienced and committed to the future growth of the company and that would like to participate financially and operationally in its future?
6. Has your industry been consolidating and would your company confer material strategic or operating benefits on leading industry consolidators?
7. Do you place any value on planning for the stable transition of your business and providing for the future protection of your management team and employees?
8. Would the liquidity you receive in a sale, merger or recapitalization of your business help you with your estate and tax obligations?
9. Have you considered the amount of investment in capital equipment, human resources, distribution and marketing necessary to bring your company to the next level, and have you considered the length of time necessary to realize an acceptable return on those investments?
10. Do you have other business or personal interests to which you would like to be able to devote more time?
11. Would you be interested in a transaction that both enables you to realize full value for your business while also enabling select members of management to become owners at a more favorable value?
12. Would you be interested in considering a transaction that would enable you to defer capital gains taxes on the sale of your business indefinitely or perhaps have them avoided altogether?
 

 

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