In this article, we briefly discuss why sell a business when new legislation changes negatively affect companies’ growth. We will also tell you the story about a client running a business in the chicken farming sector who finally decided to sell his company because of these changes. Let’s go!
Legislation changes could affect your business
It is common for new laws to cause a lot of stress for companies. In many cases, business owners can foresee the change coming because they are also operating in other countries that have already gone through a similar process. That is why they can take the initiative and sell before this causes a crisis.
Other times, a regulatory change requiring a strong investment creates a need for external capital because the internal cash flow generation is not enough. For example, new regulation might require important investment that the business cannot afford because of its size or growth path.
This situation happened to us with a client in the chicken farming sector. A new animal protection legislation required an increase in the standard of living of the hens, which meant important capital requirements. Our client was not willing to risk his own capital for the needed investments and was afraid of asking for debt, fearing the free cash flow produced by his business would not be able to pay it. After we analyzed and discussed the alternatives, the client decided to sell. We had a Dutch group and an Italian group bidding against one another. It was the Dutch group who eventually won the bid for the company.
THE NEED FOR AN INCREASE IN CAPITAL TO STAY COMPETITIVE IS VERY COMMON. DO YOU WANT TO LEARN MORE ABOUT IT? HAVE A LOOK AT “REACT TO YOUR COMPANY’S NEED FOR CAPITAL BEFORE IT IS TOO LATE!”, YOU WILL FIND AN INTERESTING STORY ABOUT A CLIENT WORKING IN THE MANUFACTURING OF MACHINERY FOR FOOD PRESERVATION.
Do not wait until it is too late
One way to survive and maintain the value of the assets (clients, brand, products, technology, etc.) is to merge into a larger group. Many business owners wait until it is too late. They do not want to recognize how critical the change is.
If you want your company to survive when there is a critical change in your business environment, react with urgency because the finding of a good buyer and all the negotiation process will take time.
This article was written by Enrique Quemada, ONEtoONE President.