The following is an excerpt from CBI's Privately Held Company Newsletter:
While every seller wants the highest possible price for his or her business, there are other factors that will vary in importnance from seller to seller. What's your objective in selling?
Highest Possible Price
This is the submarine commander who directs the crew to "Damn the torpedoes, full steam ahead." The seller wants the top price - regardless of employees, moving of the business etc.
High Price, but with Other Considerations
One example of an "other" consideration is that the business not be moved. Whatever the other considerations may be, the seller only has one or two, and beyond those, the top price is the main consideration.
Good Price, but Only Willing to Accept Some Risk
A large competitor would most likely overlook weak or retiring management along with a fair price. The downside is that the competitor will learn a lot about the business, which creates problems if the deal subsequently craters.
Good Buyer, even if Lower Price
A financial buyer, for example, may not pay the highest price, but will focus on increasing profitability. The intent is to build the business, then sell it, hopefully, for a substantial profit. The owner and management may also profit from this new sale.
Management Buy-Out
This may not bring top value to the owner(s), but if there is significant customer concentration or dependence on management, this might be the safest and easiest way to sell the company. In many cases, the seller will have to finance a portion of the selling price, but the opportunity for additional funds as a result of an earn-out or dividends is possible.
Seller Wants to Remain with the Company OR is Ready to Retire Completely from the Company
The seller may receive a top price by agreeing to remain with the company for an extended period of time. Many sellers want to take the money and run. Many buyers want the seller to remain with the firm and, in some cases, even maintain equity in it.
