Hey look kids, there’s Big Ben, and there’s Parliament.
-Clark Griswold, National Lampoon’s European Vacation
Round and round and round the Griswold family went in this 1985 comedy film. Regardless of how many times they traveled the same roundabout, the view never changed. Undoubtedly, many business owners feel the same way as they look at business succession; looking at the same options time and time again – not necessarily finding a solution that fits well for them.
The number of options for transitioning (or selling) your business isn’t limitless. In general, the business owner can sell to a third party, a select group of employees, a family member or the employees. Unfortunately, selling to employees is often the last option considered, if at all.
The majority of companies are sold to third parties. Third parties include competitors, suppliers, distributors and private equity just to name a few. Third party sales can be a double-edged sword – it’s where the owner is likely to get the highest or the lowest price. If the purchaser is a synergistic buyer, they may be willing to pay a premium. However, a third party is also the buyer most likely to make a “low ball” offer, particularly if the seller needs to liquidate in short order.