How would it feel to sell your business twice?
Selling a percentage of your company to external investors, working with them to grow it further over a three-to-five-year horizon before taking an eventual full exit is a great way for an owner to realise some value from a business. There can also be advantages in the interim when it comes to sharing risk and benefitting from the professional expertise of investors to grow what the business is finally worth. Let’s explore how the process might work.
How do you know when to sell?
Selling a stake in a business to an outside investor can be an option for owners to realise some value when their goals may no longer fully align with those of the business. Indeed, the move can be profitable for an owner, securing some of the value now, while also bringing on a partner to take the company to the next level.
For example, if there are opportunities for the business – expanding into new geographies, launching a new product or acquiring another business – but as an owner you are hesitant about the potential downsides, then this might be a sign it’s time to bring on a partner.
External investors can help mitigate concerns around access to capital, while bringing new contacts and experience. They are well-positioned to help take a business to the next level.
There is also a benefit to risk sharing. If an owner might be dissuaded from growth initiatives by the perceived risk, sharing the burden with outside investors can help put the needs of the company first.
Taking on an external investor – be that private equity or another stakeholder – should not be viewed as a negative step
Is it right for me?
Of course, if you have built a business from scratch, you might not feel the need to sell. Perhaps you are planning to work for another decade or more and enjoy the hands-on experience of the day-to-day running of a business – then perhaps a sale is not the right option. Are you reliant on a dividend? Again, a sale might not be the right avenue, as this may no longer be possible in the same way if you are working with investors.
But, importantly, taking on an external investor – be that private equity or another stakeholder – should not be viewed as a negative step. Indeed, it represents a significant opportunity. You can get as much money, even more, selling on your second exit.
Investors can bring expertise in geographical expansion, conducting acquisitions, using ‘buy-and-build’ strategies, scaling the business and refining the internal organisation of a company. The owner takes value from the business, but maintains a stake in any upside moving forward – so in many ways it means you can have your cake and can eat it too!
How can we help?
Clearwater can connect sellers to the right investors – identifying which private equity investors might work for you and helping you to navigate critical questions such as will your investors stand by their offer, or are they likely to lower it further down the line? What is their track record in these kinds of deals? What do former clients say about them? This experience is something we can bring to the table.
Facilitating meetings, making connections, seeing how people answer questions and sharing information, we are on hand to advise during the process. We are proactive, working with business owners to maximise of the benefits of selling a portion of a company.
Knowledge
We don't hide behind jargon and complexity. Instead, we aim to open up the black box of M&A, illuminating the path with clear insight, simplifying the process, and delivering valuable information.
