Successful entrepreneurs are bold and audacious in their goal setting. If you want to create a winning mentality in business, start thinking big. The larger the audience you can connect with, the more relevant your organization will become.
It seems obvious to suggest that in order to achieve goals, you must set them first. Goals are only dreams until you set deadlines and plans for yourself.
Sir Edmund Hillary, the first person to ever reach the top of Everest, once said, what we conquer is not the mountain but ourselves. If you want to change reality, you need to dream.
Many people live in a world of “what is possible” instead of “what could be possible.” The thought of someone running a mile under four minutes was impossible, until one man proved it to be false.
Roger Bannister believed in himself and achieved the impossible. Three years later, nine additional athletes achieved the same feat, with each of them adopting the mindset that the task was no longer impossible. Things are only seen as impossible until someone decides to change that mentality.
Destiny is not a matter of chance; it is a matter of choice. It is not a thing to be waited for, it is a thing to pursue.
As such, nothing spectacular has ever truly been achieved without passion; it is only with genuine passion that one can unlock and surpass their goals.
An essential part of creativity is not to be afraid of failure. Success is not built on success, it’s built on failure. Failure is the key to success because every failure teaches us something. Winston Churchill pointed out that success is the consequence of going from failure to failure without losing enthusiasm.
Andy Grove, chairman of Intel, said that success feeds complacency and complacency feeds failure. And so it is, when arrogance appears decadence begins.
If you do not have big dreams for your company, if you do not have maintain bold goals, if you do not create a winning mentality, then maybe it is time to think about selling your company. Do not hesitate to contact our team for advice!
To retire off the back of selling one’s company remains one of the quintessential dreams of any entrepreneur, but such an outcome does not simply arise from having a successful business. Some owners delay the process of succession until it’s too late. So, when is the right time to retire? In this article we will analyze the best retirement options for business owners, focusing on selling the company.
Many businessmen who founded their company in the 80’s find themselves stuck due to their heirs not wanting to continue on with the business, either because of their varying interests or because of family conflicts that need to be avoided. Other times, it’s the owner’s son or wife that has a conflict with company partners or the directive team and in turn, the businessman anticipates a conflict once he is due to pass the business on.
When is the right time to consider your retirement options?
Like everything in life, preparation hold’s 99% of the key to success. If the business owner observes that his family members are unfit to continue the business, the owner must be proactive in the search for a buyer.
It is a big mistake to wait for a buyer to appear. It is unlikely to happen, and when it does , it is rare that they are the best fit. More often than not, it is likely that they will bargain an undervalued price in an aggressive negotiation, all under the premise that you do not have any other alternative.
The risk that an owner takes is that as time passes, the will to continue the business wears off, and this in turn transitions into the rest of the team. This means that the business will begin to deteriorate, as the leader is becoming less interested in the project, whilst emitting less energy and enthusiasm for the company. The employees are the ones that suffer the consequences.
Why you need a plan
Just like athletes, businessmen need to know and admit to themselves when it’s time to retire. The difference here is that unlike an athlete, a business owner must have a long-term retirement and succession plan in mind, potentially several years before it is time to retire. Selling a business is a professional process that takes time, and there is nothing more important in a business’ professional’s life than that of their company’s sale.
As Saint Paul says in his letter to Timothy: “I have fought the good fight, I have finished the race, I have kept the faith.” It is crucial that a business owner prepares his retirement in such a way that he can finish selling his business in a strong condition. He will have the satisfaction that his mission was accomplished and to have placed the cherry on top off a process that creates value and ends in a magnificent operation.
Finding not just any buyer, but rather the buyer that will create the most value for your company; one that gives off the best image, adequately manages communication, classifies business by what will bring the most value and enjoys good alternatives with other possible buyers. It is crucial so that the operation has widespread and ongoing success.If you are ready to retire and need to sell your business, don’t hesitate to contact us!
Once the indicative offer has been placed and the letter of intent has been signed, the next step is to validate that everything that has been said is true and that there are no hidden liabilities. Surprises are not appreciated in business, and especially in M&A when they can cost business owners millions of dollars. So to prevent these surprises from arising, due diligence has to be conducted before buying a business.
What is the due diligence in the buying process of a business?
As stated above, due diligence is an analysis that the buyer does to verify that what we have said is true. The buyer´s objective is to verify that what they are buying is what they are receiving. This is simply because after acquiring the company, both its advantages and problems will become those of the buyer.
Many inexperienced entrepreneurs tend to easily accept the first option they find and will look for a shortcut with the due diligence phase because they want to close the deal as fast as possible. This may happen because they have been looking for a company for a long time and are weary of negotiating: and above all, they would not want to start the whole process all over again. However, the due diligence analysis requires calm and objective actions, conducted through a thorough and rigorous revision. It usually takes between four to eight weeks.
In other cases, the seller will hold back from sharing all the information with the owner, or the owner may also be afraid to ask for it. Given the complexity and the resources needed on these corporate transactions, it is important to explain all the negative aspects of the business at the starting point as well. By not wishing to harm the relationship with the potential seller, the buyer could leave important matters uninspected. The consequences could be detrimental. If after due diligence the buyer discovers that the reality is different to what was negotiated, it is possible that he won’t even make another offer. He will simply stop the process leaving a bitter taste in everyone’s mouth due to the time and effort wasted.
The results of the due diligence can be an important tool for verifying if the offered price is adequate and the buyer often uses the results as a negotiating tool for price and contract terms. Sometimes, the seller isn’t aware of his own problems until the buyer discovers them in the due diligence.
Main aspects to analyze in the due diligence
In due diligence, there are three areas that must be analyzed: the business, its finances and its contracts.
The following aspects, within these three areas, should be evaluated: the history of the company, its transactions, products and services, the market and competitive position, its clients, the quality of both directors and employees, the established compensation system, competitors, facilities and machinery, stocks, financial statements, the production, planning and control systems, marketing, internal reporting, technology, environmental issues, its legal situation, social security, future prospects, business model, insurance, patents, brands, and debt.
The buyer must prioritize the information that is most relevant for him since the seller usually provides limited information in the due diligence process. Besides, his energy and documentation delivery will slow down as the process develops.
Due diligence provides four types of information:
Key facts needed to decide whether to buy a company or not
The price range
Terms and conditions of the sale agreement
Opportunities to improve the company
There are certain findings that can cause a rupture between the buyer and seller. Some outcomes create an insurmountable difference between the expectations of the buyer and the seller. Other results reveal very high risks for the buyer.
Thus, the operation is usually broken when (1) the financial picture after the due diligence is very different from what the seller said, (2) it is discovered that the perspectives of the companies are bad, (3) there are high contingencies, (4) the company depends too much on the seller, or (5) the company requires strong investments to be able to stay or go back.
Lastly, it is advisable to interview former employees before buying the company, as they may reveal other issues which have not yet been exposed.
Buying a business is a long and arduous process, accompanied by intense emotions. The advisors that have participated in numerous M&A transactions know it is a matter of perseverance and patience. Finding creative formulas also accelerates the process until the objective is fulfilled. If you are looking for a business to reinforce yours, do not hesitate to contact our team of experienced advisors.
There are many executives who don’t understand their own business model or who don’t even know what their business model is.
Opportunities arise when the whole industry agrees to offer bad service to the customers. In that scenario, you can provoke a disruption by creating a strategy that better caters to the needs of a segment of clients by designing a difficult-to-imitate business model around it.
Different types of customers have different needs and require different value propositions. If you want real success, you must configure your business to serve a specific type of customers with a specific need, creating an ad hoc business model in order to do so.
Even if you have a magnificent idea and a brilliant strategy, if you don’t build a good business model you’ll fail.
How a business model fails
That is what happened to Quirky. Their idea is very good, to be a platform that helps inventors build and market their inventions.
Anyone can publish their invention on Quirky’s website and if Quirky considers it to be marketable they put designers to work, make prototypes, register the patents, manufacture it under agreement with Chinese producers and sell it through 35,000 associated stores. Quirky pays royalties to the inventor.
Quirky members present 2,000 ideas per week, even then, only 100 of them reach the market. Even though they managed to earn 70 million dollars in 2013, the company has gone bankrupt. A great idea that democratizes invention, but with a business model that has not been able to adequately connect all the pieces in such a way that this distinctive idea can generate sustained returns.
Competitors may try to copy your best practices, but will not be able to imitate a complete business model. Anders Dahlvig, president of IKEA, said: “Many competitors may try to copy one or two of our features. The difficulty arises when you try to recreate everything we have. They can copy our low prices, but would need our volume and worldwide supply capability. They must be capable of copying our Scandinavian designs, which isn’t easy without a Scandinavian heritage. They must be capable of copying our distribution process with flat packages. And, they have to be capable of copying our internal expertise – the way we arrange our stores and catalogues”.
What you need to do
Your business model must be in line with your strategy. You must align your resources and capabilities with your service proposal to create a differential value for the customer, and with the different activities carried out so they reinforce each other. This way a competitive edge is created.
IF YOU ARE INTERESTED IN LEARNING MORE ALIGNMENT, YOU CAN ALSO HAVE A LOOK AT “IN BUSINESS,THE KEY TO SUCCESS IS ALIGNMENT“, WHERE WE ANALYZE HOW TO ALIGN YOUR BUSINESS STRATEGY WITH THAT OF YOUR TEAM
You will need to establish the central rules of your business model, since they’ll help you create an organization that learns. In IKEA, everyone has internalized the basic rules and made decisions according to them, reinforcing and improving the model.
You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.
If you can’t create a compelling business model your business will suffer heavily. In such a case, it is best to start thinking about selling the company, specially nowadays that the M&A world has gone crazy and prices are at their peak. As advisors who have taken part in numerous operations, we know that many times you are unsure if M&A is the best route for you. If you need advicing to decide what the best option is for you don’t hesitate to contact us!
Sectors are in constant dynamism such as new technologies (3D printing or big data), new forms of logistics and changes in the habits of consumers. These are a few examples of disruptions that cause the need to look ahead for the sale of one’s business.
A businessman must be aware of his environment, its causes and effects in respect to its business’s framework, to not be hindered. One must be ready to reinvent themselves if possible, or be ready to sell in case of an unfavorable outcome. Listed will be warning signs of when it is time to sell.
1.Concentration in the sector: mergers and acquisitions represent, in most cases, the least costly route to modify, globally, the structure of a sector. There will be a concentration of providers and competitors and your business will be left without any scale and your leeway will continue to be minimized.
2.The appearance of new economic players with greater competitive capacities that will threaten the future of your business. These players tend to be from different geographic markets or products. In these cases, selling the company while it continues to be relevant could be a wiser choice than waiting until your competitor takes over your clients and the market.
3.Declining profit, due to having little to no products that were developed or distinct. Having a scarce amount of development is a clear reason to reflect upon a sale. The business is suffering a progressive deterioration of its balance. Many times instead of creating profit one is diminishing it.
4.Growth, in some cases is precisely the problem. When a company takes on a larger size that was not foreseen, it creates a conflict with management because the company was not prepared for it. It is prefered to sell off to a larger business or one with greater management capacities.
5. The need to internationalize or relocate the business (so it can be competitive), puts the owner in a tough situation, causes the owner to sell the business before the decline becomes greater. The businessman sees how relevant competitors are relocating to different countries and he cannot do it himself.
6. The loss of human capital: if one is having trouble hiring, working together or keeping a team that is running the business, these are signs that it is time to sell your business. At this point, the owner does not have the will or strength to try and make the business grow at a rate that is of interest of other external directors.
7. The loss of important clients: this can be a sign that one is losing competitive strength or that the company is in need of new ideas or new strategies.
8. Clients are doing vertical integration: they are buying from our competitors and they stop buying from your business.
9. The need for the incorporation of new resources: if one finds themselves seeking an amplification of capital to continue to be competitive. It is possible that the businessman, especially if they are near the end of their career, is not willing to re-invest in the assets that they have already generated and extracted from the business and prefers to let go as a whole.
10. Detach from unprofitable divisions, to the ones that can no longer receive more resources, that do not fit in to the company’s competitive strategy or that needs to be sold to obtain liquidity and sustain the main business.
Upon the narrowing of margens that cause companies to be liquidated with foreign companies, that are more competitive, for cost, size or investigation capacity, development or innovation, many businesses end up needing formulas to reduce costs via productive synergies with other similar companies to obtain market cuotas sufficient enough to generate economic scales.
In the last years, the change in velocity has accelerated the need to be quick to identify the right time to detach yourself from the business. The key is in acting before it is too late. Act now and make the right decision, you may need help from experienced advisors. Don’t hesitate to contact us for a strategic advisory!
Surely you have heard of the expression “words are gone with the wind.” Keep this phrase in mind when you are planning your M&A strategy. You must understand that there is a great difference between a handshake with verbal agreement and a letter of intent. When buying a business, one must write down everything. It is necessary because throughout the conversations amongst each other ambiguities are generated. It’s called selective hearing, when one only hears and listens to what is most convenient for them.
Perhaps you did not know this but during a negotiation there are three conversations being produced: the conversation of the seller with himself, the one of the buyer with himself, and the one with each other. It happens often that when one is speaking the other is not listening because they are invested in the conversation with themselves or they are thinking of what they are going to say next. Consequently, a dialog like this is produced:
Buyer: “we agreed on this”
Seller: “we never made a deal on that”
Buyer: “but I told you and you agreed to it”
Seller: “no, we never even spoke about that”
It does not necessarily mean that the seller is a liar, he was just not listening.
This is why it is important to have your advisors write a letter of intent of everything that was agreed upon between the seller and the buyer, if possible have both parties sign the document. The letters are key to a smooth corporate operation.
What is a LOI and why is it necessary when buying a business?
The letter of intent (LOI) is a document that is relevant during the selling of a business, due to its implied jurisdictions. This document contains the main points that have been agreed upon by the buyer and the seller.
It is of vital importance that all relevant aspects of the agreement are written down since thereafter, you, as a buyer will invest in auditors and legal advisors. If it’s the case that the most important and relevant points were not addressed in the LOI, then it is possible that the process will fall apart and everyone involved waisted their time and, in your case, a lot of money.
The agreement should include if the deal is about capital extensions, a purchase of financial assets and financial liabilities or shares, the price, percentage at purchase, what form of payment will be used, payment deadlines, adjustment formula for price and any other sort of reimbursement ( consulting fees for the buyer).
An agreement of confidentiality and a term of exclusivity (in which the seller cannot negotiate with other buyers) that proceeds with due diligence and a contract of trade. Often a deadline is placed for the signing of the contract and a calendar of financial performances.
There can be an incorporation of the type of banking debt that will be used for the purchase.
In various occasions it is established what the due diligence will cover, but of course, the seller should facilitate the information necessary for the due diligence.
In this agreement you must establish that the business will continue to be managed until the purchase in the manner established. It shall remain intact and without any alterations of significance to the working capital nor the relationship with the providers and clients; you cannot distribute dividends or make extraordinary expenses or sell financial assets; it is prohibited to sign other contracts different to those of the normal management, change salary or compensation plans etc. For this type of action, written authorization of the buyer is required.
You must condition the validity of the agreement until you are satisfied with the due diligence, to obtain the financing necessary from the banks and, of course, until there is no substantial changes in the financial or operative aspects of the company.
Moreover, it is recommended to make an agreement that states that if the seller retracts himself or leaves the sell, he should pay the expenses of the due diligence. This is crucial because the seller can become nostalgic in the final steps of the sale and cancel the process.
The LOI is what you will present to the banks so they can begin financing what was agreed upon. Do not let the “words are go with the wind,” if you truly desire to buy the business.
As the days pass, the world that we take part in becomes more globalized, buying a business presents itself as a magnificent path towards new markets or to reinforce a competitive position. The biggest challenge that emerges with these opportunities is knowing how to approach them to be able to maximize profit and not be deceived. If you are planning on buying a business and you are looking for advising, do not hesitate to contact us for strategic advisory!
You already have identified the best business to buy, started the acquisition process and met the seller. Now, if you are interested in learning more about the company you want to buy, it is time for you to make a move and present an indicative offer.
Advantages
When writing an indicative offer, the most important advantage you have is that there’s no juridical implication.
Moreover, the indicative offer shows the buyer intentions and what the seller can expect from him. The seller needs to get the indicative offer to decide if he wants to start the negotiation and understand if there are good chances to close the deal.
For buyers, the indicative offer also represents a great way to show that they are reliable.
Content
When writing the indicative offer, you are indicating an approximate price range, whether you are going to acquire the company buying shares o paying full price, and when you would like to sign the Letter of Intent. It will also help you to prepare a calendar with the steps you need to take to close the transaction. At the same time, it could be a vague document, because its goal is writing a first proposal to start the negotiation process.
Many business owners aiming the sell their business told us they were really impressed when they received the indicative offer, especially because it gave them a great motivation to start the negotiation business. Business owners usually sell their company once in a lifetime and buyers have to pay attention to details and make sellers feel important.
Indicative offers could also have an unexpected impact on business owners that weren’t interested in selling their business yet. If you are interested in buying a company and you are not sure whether it is on sale or not, think about it!
The process of buying a business is a long one, in which there are moments of intense emotions, of breakdowns,of crisis, in which it seems that the operation has reached a total impasse. As advisors who have taken part in numerous operations, we know that it is a question of tenacity, of not giving up, of looking for creative formulas which resuscitate the operation time after time until we achieve our goals. If you are looking for a company to strengthen your competitive position, don’t hesitate to contact us!
Those who founded their companies in the 70s and 80s are entering retirement age. In many cases, their children have chosen other paths, leaving them without a generational relay. This coincides with the current great liquidity, economic optimism and low interest rates, which is leading to many sales of companies in our country. The usual thing is that, if it is the first time that an entrepreneur sells his company, it is easy to make mistakes due to inexperience. Since selling a business is much more complex than it may seem, we would like to point out ten mistakes that many entrepreneurs make when selling. Avoiding them will not only allow them to complete the operation, but it will help them maximize their income.
10 common mistakes when selling a business
1 Do not make a firm assessment of the company
If the employer does not know what the company really is worth, because it is difficult to negotiate with rational arguments. It could be asking for an unreal price and therefore losing prospective buyers willing to pay a possible price.
Negotiating on a basis of desires and not the objective data often leads to the breakdown of negotiations. If we only look at our desires, and do not make the effort to understand the value we bring to the other side, we can hardly negotiate with quality.
2 Change interests or motivations during the sales process
A previous and serene reflection on why we sell and what we want to do after the sale is fundamental. If the employer is not clear, his own emotions can betray him and harm the operation.
The buyer may notice strange things in the owners’ attitude and this will generate concern, interpret that they are not being sincere, that they are hiding information (he doesn’t know the internal struggle of feelings) and begin to distrust the operation. It triggers their perception of risk and inevitably lowers the value assigned to the company.
3 Negotiate with a single buyer
In a negotiation with a single buyer, he always finds out that he is alone. In those cases, the buyer plays with the time and the wear and tear, thus lengthening the deadlines by requesting more and more concessions.
4 Not managing the process with confidentiality
The lack of confidentiality can cause key managers to abandon the ship and create uncertainty in the market about the future of the company. After the time different actors comment “This company must have problems because it has been on sale since time without success”, undermining the perceived value of the company.
5 Facing only the process, not hiring advisors
The sale of a company is a laborious process that consumes many hours; It requires professional advisors who have experienced this type of situation many times and know how to disable the traps that the buyer tends. Entrepreneurs must focus on improving the company’s results, while monitoring the advisors and demanding that they be informed of each step they take. Without advisers it is very difficult to maintain confidentiality and to make a rigorous search process of the best possible buyer for the company.
6 Dismissing the business during the sale
Experience has shown me that if the owner only negotiates, negotiations with buyers are often irreparably broken. There can be a situation that, at a time in the process, the seller realizes that he has made a mistake and that there is no turning back and that will harm the value. Because of this, the rope is tense in the negotiation and it evidently ends up breaking.
The result is that the owner must start a new buyer search process, which implies neglecting the company even more.
7 Find the buyer in the local area
If you look for confidentiality, this is probably not the best option. Nor is it clear that prospective national buyers are the best buyers or those to whom the company can create more value, nor the ones that can pay more for it.
BANNER: REASONS FOR SALE
8 Do not assume that there are other minority shareholders
It is fundamental that there is an alignment of all the shareholders, thus avoiding last minute surprises that lead to the fret of the operation after the costs are incurred and so much work has been developed by all parties.
It’s a mistake to think “they’ll get into the operation when I tell the minority shareholders, they sure will be happy to sell.” We need for those people to share the things that affect us because we don’t like to be taken for granted.
9 Wanting to sell in a hurry
Hastiness is very bad counselor. It greatly undermines the negotiating and search process of the best buyer. The other party notices the rush. On one hand, it will arouse mistrust, and on the other, you will give him margins to press in with demands.
10 Do not plan the process
An orderly sales process maximizes the value. The disorder causes them to lose pieces of value in each of the phases. When the disorder arises, so do the surprises for the buyer and these are always seen as elements of risk that make them lower their perceived value on the company.
Experience indicates that an unplanned sales process is much longer and, given the complexity of selling a company, the chances of failure skyrocket.
For many entrepreneurs selling a business is the most important operation of their lives, so avoiding these mistakes is of vital importance for your company and for your assets. To take the right decisions, you may need help from experienced advisors. Don’t hesitate to contact us for a strategic advisory!
Organizations are systems, everything’s connected to everything else. Because of this, alignment is crucial to achieve success. If the pieces of your business model are not aligned, margins will deteriorate and competition will overcome you.
The alignment of your strategy, your business model, the structure of your company, your culture, your capabilities and your remuneration system is the key to creating profitable growth and increasing returns for shareholders and employees.
Search for misalignments between strategy, structure, operations and your organization´s culture.
How to aligne the strategy with your team
You’ll only be able to align your team with the strategy if the latter is compelling, distinctive and outstanding because, in this case, you’ll have a centre of gravity. If your strategy is too ordinary, they’ll forget it soon.
You’ll need enormous help from your team to keep consistency alive. If you want success, your strategy must be shared by everyone. Achieving this will not be easy.
The first step is to make your team act and feel as participants in your strategy’s creation and development, they must feel included. People tend to resist doing what they’ve been tasked with and tend to favour what they’ve helped create.
Strategy cannot be imposed. You have to apply it by listening and persuading, not by speaking and demanding. People don’t change until their hearts are moved, so your leadership must be one of influence, not power. Open a discussion with your team to help them align themselves with the vision.
Even when you believe you have clear ideas, don’t approach them with the solution. Display the situation, share information and ask: What should we do? You’ll be surprised at the quality and richness of their propositions and it will help you define an improved strategy.
Don’t impose your ideas. You must be open to their influence and to defining your ideas with their input and they must see that this is so. Alignment within organizations doesn’t happen at the summit, but in one-to-one conversation with the employees.
There is a curious gravitational force within companies that make people feel excluded. Your employees are constantly trying to figure out if you’re as involved in your relationship with them as they are with you, and if they believe you are not, they’ll disconnect from your goals.
The first step is to gain the support of relevant executives and leaders. They’ll help you spread the vision and the strategy.
You must accept in advance that not everyone will buy into your vision, some will resist and leave, while you’ll have to ask some others to leave as well.
Encourage debate with your team, don’t be authoritarian. Be open to discussion, one of the things that most limits our learning is thinking we already know something. It doesn’t matter how intelligent your plan is if your team doesn’t buy it and execute it as it was their own.
A leader’s job is to align their team, to give shape to and reinforce the culture. You can try to change your employees’ way of thinking and trust that it will lead them to a change of behaviour, or you can change their behaviour and hope it will lead them to a new way of thinking. The latter is more effective.
Consequences of no alignment in business
The greatest enemy of profit is misalignment within the organization. Companies lose considerable resources while they apply different and contradictory strategies that interfere with the others and completely undermine efficiency.
You must align all functional decisions in your company with the competitive advantages in which you want to distinguish yourself. Choose three things that you want to do really well in your company. Choose three priorities, if you choose ten it is like choosing none. After making your choice, you must communicate the relevant priorities to the rest of the company.
Your compensation system must be very aligned with the strategy. If your variable remuneration looks in a different direction than your strategy, you’ll create great confusion in your team.
If you think that the different pieces in your organization are not aligned and that you are unable to align them, start thinking of selling the company because unfortunately it will not stand the pressure of competition. Find out now the three reasons that indicate that we are in the best moment to begin the process of selling!
Many business owners are breathing easier because their companies are growing again in billing and profits. Until recently they thought of selling and resting or retiring, of moving to a less turbulent lifestyle. Now they are being to doubt. They no longer know whether to sell the business or launch themselves into an investment.
In the world of buying and selling companies, the best thing is to go against the grain. When you no longer feel like it, it’s usually the best time to do it.
The three reasons that indicate that we are in the best moment to begin the process of selling a company are:
Top moment of a bullish economic cycle. How this affects to sell a business
The most advisable thing is to sell a business at a peak moment of a bullish economic cycle. There is more abundance of money, the stock markets are at historic highs and buyers are much more optimistic. In these times of economic boom it is easier for buyers to finance themselves to acquire, either through banks or by issuing corporate data, which allows them to pay even more.
Interest rates are at historical minimums
An external element that is vital to determine the value of a company are the interest rates. If the rates are low, companies are worth more mathematically.
Interest rates have never been as low as now. Companies have never been worth so much. The rates will inevitably rise again with inflation.
Ocean of unprecedented liquidity
A radical set of policies to get out of the 2008 financial crisis has provoked an ocean of liquidity of unprecedented proportions. Money in the hands of venture capital is at record highs, central bank balance sheets are inflated and the liquidity of listed companies is causing a wave of sectoral concentration. You know your sector. If the wave has started, it will change its competitive structure and the margins will suffer more. The last ones that remain without participating in the concentration will not be able to hold on.
The sale of a company is one of the most important decisions that an entrepreneur makes in his business life. On many occasions, although he has powerful reasons to do so, he looks for excuses and arguments not to take that first step. Indecisiveness is an attitude that also has consequences.
If an entrepreneur resolves to deal with the sale or search for investors for his company, my recommendation is to not look for a buyer, but to look for the one who creates the most value for the company and its employees; according to my experience, it will most likely be a foreign group, since they will have less redundancy, it will give them more space for growth and they will appreciate the added value offered by accessing a new market.
