Timing is one of the most important factors in achieving a successful company sale or divestiture. So how do you know when the “best” time to sell occurs?
The best time to sell a business is when you have no need to do so, when the company has demonstrated solid performance and the future looks bright. You should also rely on your investment banker, who can provide insightful information regarding market trends and assist in judging the best time for you to sell based on your situation.
Sell a company when it is performing well and prospects are bright. Buyers are attracted to a successful track record. Further, buyers are attracted to the perceived future upside. You should not be overly concerned about leaving this future growth for the buyer as you will get compensated for it through the premium paid. Here’s the bottom line: Sell a business when things are going well and the future is promising.
In addition, set forth below are five primary factors to consider when you are thinking about timing the sale of a business. Rarely do all these factors peak simultaneously, so judging them on a relative basis is important. However, timing a sale when the general momentum is in your favor improves your odds of achieving a high price. The five items to consider include:
- Macroeconomic Conditions: A stable or growing gross domestic product, relatively low inflation and low interest rates provide fundamental support to a healthy economy, confidence and deal making.
- Industry Trends: Positive underlying trends, such as a strong growth cycle, related to your company’s industry often correlate with heightened levels of acquisition activity and high purchase prices.
- Company Performance and Prospects: The ability to credibly demonstrate a successful historical track record of earnings along with bright future prospects will generate the most interest from buyers. More interest from buyers often leads to competitive bidding, thereby providing the leverage to achieve the highest price.
- Capital Flows: When there is an abundance of capital from strategic buyers, financial investors and lenders competing for deals, the market becomes very liquid, sometimes frothy, which fuels transaction activity and high valuations.
- Merger and Acquisition Activity: An active merger and acquisition market is the manifestation of the interworking of these factors and signals that deals are being completed at compelling prices.
Further, herein below are several other points to note regarding selling a business. First, quality companies with unique competitive advantages, a strong market position within their niche, growth prospects and solid management are successfully sold in just about any market.
Second, buyers generally pay based on trailing twelve months earnings and expected future earnings. So, if company performance has recently declined, you should not anticipate buyers paying based on some level of past average earnings achieved. Sell a company before this happens.
The sale of any business is a complex and lengthy process which will inevitably prove to be both mentally and emotionally taxing. That said,
you should sell your business only when you are personally committed to the process. Given the number of deals buyers review and their limited transactional resources, they will not waste their time with uncommitted sellers. Aligning good business performance and personal commitment puts you in a position of strength, which provides the greatest opportunity for successfully achieving your goals.
Bottom Line Management, Inc. is a business brokerage service with more than 30 years of experience. Over 30 years of providing brokerage services has enabled the Bottom Line Management, Inc. experts to assist
owners of mid-sized private firms and executives as well as directors of public companies in marketing, structuring and executing a number of complex transactions. These decades of transaction experience has permitted Bottom Line Management, Inc. to gain firsthand involvement in often complex and detailed company sales, mergers, acquisitions, recapitalizations, private placements, debt financings and public offerings.
For proven and reliable assistance and guidance regarding selling your business, use only the best business brokerage services — Bottom Line Management, Inc. at https://www.botline.com
or call them at 470-990-0160.