Are You Ready to Transition or Exit Your Business?
It started as a dream, and then through hard work and determination, you built a thriving business. You have achieved success by solving problems, building an amazing team, and making an impact in your community.
As an owner, you may have reached a decision to sell your business, with the objective of optimizing the value of the asset representing 90+% of your net worth. You consider doing the work yourself – especially when you calculate the fee for hiring an investment banker. You are used to doing things in-house with your team. However, the best ROI decision you can make is to hire an investment banker.
Hire a Professional
Study after study shows that using an investment banker yields a high financial payoff. For instance, a University of Alabama and Portland State University study involving 4,468 transactions over a 20-year period, estimated that sellers who hired an investment banker received valuation premiums around 25 percent, depending on their methodology.
Similarly, Northern Trust’s Business Advisory Services group analyzed 4,316 transactions and found that sellers represented by an investment banker obtained an average EBITDA multiple 1.5x higher, with narrower dispersion in outcomes (i.e., lower risk).
Many private equity investors are former investment bankers and typically have a large contact list of potentially interested buyers. However, when these private equity companies sell a business, they hire an investment banker to maximize value.
Aside from the total purchase price, here are a few of the most important advantages that business owners can realize by engaging an investment banker:
- Greater cash paid up-front with the best terms
- Increased likelihood of a successful closing
- Staying focused on your core business
- Reduced stress levels.
In addition, hiring an investment banker adds credibility, giving the prospective buyer the impression that there are competing buyers for the acquisition. It also sends a strong message that the seller is committed to the sale.
Most business owners have never sold a company before, so having a professional sharing their wealth of knowledge and managing the entire process will help get the deal successfully across the finish line, while minimizing the stress and anxiety associated with what is typically the largest financial event of a sellers’ life.
At CLA we believe that our purpose and specialization in working with privately held businesses throughout their life cycle, especially their transition and exit give us a unique ability to help you navigate selling your business.
Thank you to Craig Arends for contributing to this post.
Allyson works for businesses of all sizes, maintaining a primary focus on business tax and consulting. She provides her clients with creative resolutions for technical tax issues and clearly interprets proposed and existing business tax law. Moreover, her thorough experience with trusts and estates allows her to deftly guide clients through the complicated legislation and the intricate processes involved in compliance, maximization of returns, and sustaining business and family wealth. She first gained knowledge and experience working for several years in a national firm, in a small firm environment, and in solo practice. She was also a partner in a regional legacy firm for 15 years prior to joining CLA. Her extensive tax experience bolsters CLA's talented staff and cultivates client relationships and makes her an invaluable member of the professional and civic communities.
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