Since we published the article “Building An Exit Strategy” in our November issue, I’ve received some great feedback and questions.
First, if you’re a managed services provider (MSP) looking to sell, and you’re in the San Francisco Bay Area, let me know. I’ve got another MSP looking to acquire companies that are the right fit in that area.
Second, a couple people asked me if it matters, or if things are done differently, if you’re selling to a family member, your employees, a competitor, or an investor. Bruce Teichman, VP and partner of Cogent Growth Partners, who I interviewed in the above-mentioned article, tells me that it can make a big difference.
“Going down the family or employee avenue can give you more time to prepare,” he says. “You know these people and can make a multiyear payment plan to sell.” However, he says that unlike other scenarios where another company takes over and can leverage some of their capabilities to create an additive effect on customers, your family or employees won’t have a lot they can leverage. They aren’t another operating business that can come in and apply new benefits. They’re just taking over. That’s not necessarily good or bad, but it’s worth noting.
The investor scenario is very different, says Teichman. There are some investors who want the owners to stay involved, and others who require the owners leave. Depending on what you’d like to do as a business owner, the investor scenario might not be your best course.
Competitors are often the best option for acquisition, Teichman says, because they know your business. “Eighty percent of the time, this is who’s buying your business,” he explains. “However, because they’re your competitors it’s often impossible to have direct communications.” This is the biggest reason why Teichman’s company exists — to be that intermediary and buffer.
Teichman goes on to explain that for two companies to know if they’re a fit for one another, the first step is understanding the opportunity. To understand the opportunity and whether a fit exists, you have to share some information. How big are you? What kind of clients do you serve? Verticals? Size of customers? “It’s very difficult to tell your competitor those things, although it’s a requirement,” he says. “As an intermediary, we can keep parties anonymous. We can compare notes between the buyer and seller and find alignment.” He goes on to say that only when the fit is there will parties be introduced, and those introductions are under NDAs.
Cogent represents the buyer’s side of acquisitions. If you’re looking to buy, Teichman’s contact info follows: