private equity firms

The Advantages of Selling Your Business to a Private Equity Firm

Selling a business has never been easier, as there are many companies looking to expand or buy a competitor. However, you will find getting a fair or even excellent price is not always as easy. One way of ensuring that you get a good deal in selling part of or the whole of your business equity is to consider private equity firms.

What Are the Reasons for Selling Your Business to a Private Equity Firm?

  1. One of the business owners is nearing retirement and wants to exit their stake in the company.
  2. One owner may want to diversify their investment portfolio to avoid tying up their net worth in the business.
  3. Some business partners desire to remain partial investors, shedding off some managerial roles. They become rollover investors.
  4. The business lacks the financial muscle and stamina to finance growth and expansion. It requires an external capital injection to oil its business growth.
  5. The company operates in a disruptive industry and is going through operational headaches. It needs an experienced partner to jump-start the business with fresh and innovative ideas.

Benefits of Selling a Controlling Stake to Private Equity Firms

1. Expertise

Private equity firms are investors with vast experience in operating businesses. Although they’re not business operators, they can use the expertise to guide the company to sound decisions and good ROI. With private equity buyers, your business can explore other lucrative opportunities.

2. High Overall Returns

While the selling business needs to look for the best price, it also needs to focus on long-term benefits. Overall, the sellers would benefit from the initial sale and the proceeds from the sale of the rollover investor’s remaining equity later.

3. Refined Company Vision

As the private equity buyer works with your management team, the company’s vision is likely to improve. Business growth can change for the better if it’s coupled with a recovery business strategy.

4. Cash Availability

Investment in real estate has been hit hard by the global pandemic. But the good news is that private equity firms (PEFs) have abundant resources to invest in middle-market businesses. So if you’re running a family business with a good track record and are thinking of selling, PEFs are the way to go. These investors can purchase 100% of the company’s equity, providing immediate cash to owners. It’s helpful, especially for a partner who is thinking of retirement; they can get between 80-90% cash out.

The Bottom Line

Private equity firms present an ideal exit strategy for your business as they provide immediate cash to the sellers. For more information on selling your business, please contact us today.