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| First Person |
Entrepreneurial End-Game
Wally Obermeyer and Brett Suchor
02/02/2004
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A smart seller will position his business for sale several years in advance. The process should begin with an objective assessment of how potential buyers will likely value the business. What are the key drivers? Are they cash flow, product, technology, distribution channels or human capital? Know the elements that are likely to attract an acquirer.
Recently, a client company underpriced its interest in a $25 million sale to a larger enterprise. The seller thought the buyer
wanted its superior technology,
but the buyer really coveted the relationships our client had with key customers. As a result, the seller was in a weak negotiating position because it was promoting a value in which the buyer had no interest and it missed an opportunity to leverage the buyer’s true objective. Often, we as business owners are too close to the business to correctly identify what the buyers perceive as most valuable. Understanding how a business is valued is important but,
for the business owner, understanding what drives value is paramount.
Know Thyself
Separately, a thorough review and development of intangible assets can be critical to increasing the value of a business before taking it to market. Trademarks present a perfect example. In another recent transaction, a buyer performed a trademark search on our client, the target company, which operated in the Southwestern United States. The buyer concluded that the trademark was not viable in the Northeast—an oversight that effectively cost the seller, since the buyer would have paid more for a nationally viable trademark. Identifying these factors before selling your business can help build on strengths that are valuable to others.
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