As a business owner, you have invested a substantial amount of your time, energy, and resources into growing your organization with the hopes of one day being able to enjoy the fruits of your labor. There are several ways to accomplish this type of liquidity wealth event, some more favorable than others.
Family succession planning is a very common way to pass the torch; however, many business owners do not have a family member willing and capable to effectively run the business after the current owner has stepped down.
The management team is a possibility but more often than not, they cannot raise the capital needed for a fair valuation of the company and you’re left with less than you bargained for.
A strategic buyer is a very common way to liquidate a business owners’ equity position. Strategic buyers know the industry and have a synergistic reason for their interest in your firm. Typically strategic buyers are willing to pay a premium to have a deal go through due to a foreseen alpha of intrinsic value of the company being acquired.
One of the best ways to capitalize on the blood, sweat, and tears that went into creating the company you have constructed is to partner with a private equity group (PEG). Due to their track record, they are granted large sums of capital to infuse into the private sector in order to continually establish a growing economy.
Partnering with a PEG can also allow for a second liquidity event in which equity was retained by the original owner and years later cashed out in what we like to call, the second bite of the apple.
In the very best of events, a strategic buyer is financially backed by a PEG. This partnership is very powerful in the sense that all attributes are maximized. They have the operational team who know how to succeed in the industry and the financial team with the capital backing to perpetuate organic and acquisition growth. These types of partnerships have been known for developing some of the largest, most respected firms in their industries.