Many middle-market business owners will come to a point where they either need or want to raise capital for their business. Whether the goal is to sell their company outright, raise capital, or buy out a partner, a liquidity event results, meaning some percentage of ownership will be exchanged for money.
Sellers Need to Bring Value to the Table
In essence, if you’re taking the money (liquidity) then you have to give some value in return. This value could include a percentage of ownership in the company, stock in the company, future profits, your customers, technology, personnel and more.
At the same time, sellers need to take a long, hard look at their company today, and understand that it’s going to look (and feel)different when new players enter the mix. How much organizational and structural change are you open to in order to gain liquidity or realize business growth?
A reputable investment banker can help you weigh your options and identify the type of investor and the type of deal that would work best for your circumstances. As you go through this process, remember that bringing in a business partner almost always comes with change. At the same time, change can result in the liquidity you need. In fact change maybe exactly what your company needs to continue to grow. Some scenarios you should contemplate include:
- How much control are you willing to give up? Instead of just you making decisions, you will have a partner who gets to weigh in.
- How open-minded are you? Your new partner may have a different perspective and priorities than you.
- Can you hand over the purse strings? Your business partner will have a say regarding how and when you spend the business’s money.
- Picking the Team. Part of the deal may involve new management and personalities coming on board. What say do you need to have regarding new leadership?
- A change in culture. Are you OK with a potential cultural shift or change to the work environment your employees are accustomed to?
Once you’ve weighed your options, accepted that change will occur and identified a business arrangement that makes sense, it’s time to move forward. Your investment banker will have the insight necessary to develop a marketing plan and cultivate buyers.
Buyers Bring Cash to the Table
Bringing on a business partner with cash in hand can provide the capital needed to fulfill personal and business goals. You can take a few “chips off the table” and access some of your hard-earned money for personal use. And, for entrepreneurs who have taken the company as far as it can go without a capital infusion, the right investor can provide the strategic resources necessary to take the business to the next level.
Case in point, Allegiance Capital helped Z Wireless CEO Kevin Tupy secure a deal where he was able to receive an influx of capital to expand his business, while maintaining a significant stake in the company. Kevin was able to access significant liquidity and Z Wireless (one of Verizon Wireless’ top five premium retail agents in the U.S.) grew from 116 locations at the time of the transaction to more than 300 stores today.
You may feel uncomfortable bringing new partners and personalities into your company, but outside resources are often necessary to provide liquidity and help your business thrive. Change has its benefits, so embrace it!
Contact a Reputable M&A Advisor
Selling a business will always involve give and take. If you’re ready to take the next step, talk with an investment banker who will do the work necessary to find the right type of buyer and deal for you. The investment bankers at Allegiance Capital Corporation are here to help. To discuss your options for raising capital in today’s market, contact us at (214) 217-7750.
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Keywords: selling a business; M&A advisor; investment bankers; CEO; selling a company