The employees may decide to buy the company (ESOP). However, this usually means a long-term payout for the owner. An individual buyer may come along such as a Warren Buffett, but what are the chances? A key member or members of management might decide to purchase the company, but generally they won’t pay the desired price. If a sale is not completed, the key management member(s) will most likely leave.
The “Overlooked” Buyer
There are many individuals who want to own their own company. They might be former executives of major companies who want to do something on their own. Some buyers have access to large amounts of investment capital. There are many qualified individual buyers in the market place. Russ Robb, editor of a leading merger and acquisition newsletter, “M&A Today,” has written a book, Buying Your Own Business, for individuals interested in buying their own company. This book has sold over 20,000 copies, which indicates the large number of people who are interested in buying a company.
There Is No Magic Answer
Selling a company comes with no guarantees. When Badger Meter Company, a public company headquartered in Milwaukee, acquired Data Industrial Corporation based in Mattapoisett, Massachusetts, this appeared to be a marriage made in heaven. Their respective product lines fit like a glove, their corporate cultures seemed compatible, and sales expansion by cross-selling was evident.
This strategic acquisition would have been fine except for one change. The parent company moved Data Industrial’s operation to Kansas, and every employee’s job was terminated. However, one should not construe that all acquisitions by strategic or competitive acquirers end up in a similar fate. Furthermore, for price considerations, the seller can draft restrictions in the Purchase & Sale agreement to prevent the transfer of the business, at least for a specified time period.
Certainly selling to the overlooked type buyer doesn’t guarantee all of the seller’s concerns are addressed, but knowing the interests of some of the various buyer types can help ensure that the goals of both buyer and seller are met. Sellers should determine their goals prior to attempting to sell their business. A consultation with a professional intermediary is a good start to this process.