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Sell to a third party
For some business owners, selling to a third party may be the best option. Once your business is on the market, it is not unusual to take more than a year to find a buyer and finalize the sale. Your advisory team will be invaluable in providing the support and impartial advice during the process to keep your best interests in mind.
Some Questions To Consider
- Where can you find an interested buyer? Who might be likely candidates within your industry, or amongst related industries, i.e. upstream or downstream?
- How confidential do you want your search to be?
- Do you want to reach buyers nationally or internationally?
- Do you want to sell the whole business or parts of it?
- Is it important that a potential buyer have the entire financial resources necessary to purchase the business, or would you be prepared to partially fund their acquisition?
- What is the most tax-efficient way to structure the sale?
Cautions
- Providing pre-sale details - If a deal does not close, the prospective buyer may have information which is advantageous to them, enabling them to move ahead in your market without you. Your advisory team can help protect your interests in this situation so seek legal advice prior to disclosing business sensitive information.
- More demanding third-party sale structure - An outside buyer will likely want written assurances that there are no liens or that assets have not pledged as security, as well as a longer payment period or “earn-out” based on performance.
- “Testing” the open market - Experts suggest it’s not wise to announce succession plans unless you truly intend to sell. It makes public your intention to get out of the business, which may increase competitive pressure.
Finding A Buyer
A buyer can come from anywhere – your customers, suppliers, business community or even the competition. A professional business broker is often useful in finding a buyer. Tap into your network -- your RBC account manager can help you extend your network.
You may find yourself being approached by an interested potential buyer. In this case, having your succession plan prepared provides easy access to the financial, business valuation and legal documentation required to facilitate a third-party sale. Leverage your advisory team’s expertise, as the sales process may become accelerated and decisions may be needed quickly.
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It could take a year or more to find a buyer and execute the sale of your business.
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