There is a little known trend happening in private businesses around Australia. About 70% of small to medium sized businesses are owned by "baby boomers". They are about to reach retirement age and many of them have succession issues. A tidal wave of "business for sale" events is about to hit the market. If you have a business with revenues between $10 million to $40 million per annum and no clear succession plan, then maybe we should have a chat. Here's why...
One of the organisations I have worked with is a private equity firm. They are actively looking for businesses with revenues between $10 million to $40 million per annum. They wish to acquire a majority shareholding (typically 80% to 90%) and will pay a premium price to owners. They are able to do this because they have experience in applying the necessary growth capital and management expertise to allow the business to substantially grow over the next 3 to 5 years.
While the business is being transformed, the original owners have a minority shareholding so that they can share in any uplift that occurs should the business be resold. The minority stake allows the original business owner to transition to retirement or the next stage in their life and also share in any value uplift when the business is resold.
The process represents a win-win for both parties. The business owner gets a chance to implement their exit strategy and get a premium price for their business. Many business owners appreciate the chance to make an easier exit and start the next stage of their life. They don't have a good succession plan often because they don’t have children they can pass the business to, or their children don’t want to be involved or the owner deems them unfit to run the business, or they simply don’t have children. The private equity buyer gets an opportunity to apply their expertise on a business that has some goodwill and is a valuable "going concern".
There are a few requirements of course. For example, the business should be solvent. There is also a process before the offer is made to the business owner for the private equity firm to gain insights into the business that traditional due diligence does not provide. The BIG DIFFERENCE compared to other sales processes is that a business owner will have an agreed value for the business upfront.
If you know a business owner that wishes to sell their medium sized business without having to compete in the coming baby boomer "tidal wave" of businesses-for-sale that is about to hit the Australian market, then please contact me for an introduction. What have you got to lose?