The Best Advice on Selling Business for Business Owners and CEO’s

selling business

In this episode, we discuss the best advice for selling business with four experts: an investment banker, a private equity partner, a strategic acquirer, and a CEO who sold his company to his employee – through an employee stock option program also known as an ESOP.

Murray Rudin, managing director for Riordan, Lewis & Haden (a private equity firm), shares his views on selling a business:

“That transaction [of selling business] is the beginning of the road… when we’re doing a transaction, we’re just beginning a 5-7 year business marriage, you might call it, with the entrepreneur. So I might say the measure of our success is not when we do the investment transaction, it’s when we exit. And there is a real satisfaction. We sell companies every year. Probably something in our portfolio turns over one or two transactions depending on the maturity of the company in the light. But there is a real satisfaction after you work with a business and a management team for those many years to see a couple of things happen. Most importantly the entrepreneur realizes their dreams; they get a second bite of the apple, a windfall that allows them to do whatever they want for the rest of their lives; which is wonderful! You see the opportunity that has been provided for the management team to have the experience of building a great business, and then typically to remain in place with the new owner… when you have something like that, there’s a real satisfaction, and that’s probably what gets us up in the morning every day.”

Cal Lei is President and CEO of Recom Technologies, a software development shop, whose ownership sold the business to its 600 employees through an ESOP in 2000. He tells us the best advice he

“The advice I would give is really to think about what you want to do. Surround yourself by good outside advice. I think we’ve heard that a lot today, and I think that advisors are key. One thing I heard a lot is that, “You sold your company to employees that must have been a really quick transaction.” It took a year and a half. When you have to go through the due diligence and all the legal aide work needs to be done and the creating of the trust and the refs and warrants, and the passage of liability from ownership to the company itself, it’s a very arduous process and I think the one thing is that it’s easy, easy to believe these transactions are very simple and easy to pull off but they’re complex, they take a lot of time, and I think that invariably throughout the process you reach a point of exhaustion where you’re like, God this is taking a lot of effort why am I doing this? And the risk there is that you spend so much time in the transaction, and as said earlier you lose sight of operating the business. So something the key takeaway for me was we were fortunate in that we were able to pull off a complex transaction ordeal and at the same time grow our business and not take our eyes off the ball.”

John Hammett is an investment banker with Corporate Finance Associates, and a former company owner himself. John explains why his auction-like strategy makes sense for selling a business:

“My biggest piece of advice is to be realistic about what the value of the company is and to be thoughtful in the final valuation. It’s so tempting to try to get the last half a million bucks out of a purchased price out of the last million dollars of the deal. And it does get the competitive juice flowing.”

Steve L’Heureux, Vice-Chairman of Ryco Solution, tells us about his experience with strategic buyers and private equity firms over the years to sell and buy companies:

“Most entrepreneurs and founders of the company spend most time nurturing their company than they probably do their own biological children at home. So the companies become their babies. And during the selling process, especially during the due diligence process, it is a process where the buyers are looking for weaknesses in the business. And as a result it can get to be very challenging from an ego perspective for the sellers, so my advice is don’t bring your ego into sale and don’t take the process personally. There’s going to be moments during time, whether it’s negotiating the letter of intent or the process of due diligence where it’s going to get potentially adversarial. But at the end of the day, as many of the folks pointed out here on during this session, at the end of the day as the process comes to fruition it’s really about two parties coming together and putting together a deal that creates a win-win scenario for everybody.”


Cerius About Helping Companies Avoid Painful Lessons Learned

Leave a Reply

Your email address will not be published. Required fields are marked *