I recently sold a $6.7M manufacturing business that the father started more than 25 years ago he owned 100%, and that carries the family name as the brand. A number of the adult children grew up in the business and still worked there, but were grossly overpaid and mostly non-productive. Needless to say, the children were not motivated for the sale.
All decisions were done by a family committee, so it was a slow process. Worst of all, one of the children was a transaction attorney who filtered information going to the father and tried to make everyone happy, which is a near-impossible task.
The business makes good money and had a reasonable, but firm, asking price based on a multiple of earnings. It was located in a populous, desirable place to live. It had clean, accurate accounting records. It was in a niche with little competition. The company provides high-quality products and super service with human beings answering the phones. The employees are nice people who had been with the company for years.
The problem was that Dad is in his eighties; healthy now, but with some recent health issues. He realized the business would be doomed if he left it to the children. Almost all the children had an agenda and everything was very political.
The seller (Dad) was particular about who should buy the company, since he spent so many years building it from nothing; was concerned for the employees, who were like family to him; and the buyer would keep using the family name as the brand. As with all transaction like this, maintaining confidentiality was the top priority.
After many buyers were considered, a perfect cash buyer appeared that was not a private equity company – Dad had ruled those out as potential buyers. Each step of the way of moving forward, the attorney son had the buyer jump through hoops and demanded unreasonable time limits, as well as other unreasonable requirements for due diligence. The transaction had gotten past the offer, but the due diligence was delayed due to the attorney-son’s restrictions and slow response time. The transaction was about to blow up due to the seller’s attorney-son.
We were able to have the family’s highly qualified attorney, who is not a family member, deal with the buyer’s highly qualified attorney, who dealt directly with Dad to negotiate the details, and we were able to close the transaction.
The moral of the story: Have one person (Mom or Dad) be the point person and decision maker. Do not try to sell a business by committee or let someone filter information to the seller. We were lucky that the buyer really wanted the business and was patient. Most buyers would not have put up with all the drama. Having an experienced, patient, straight talking, good listener, intermediary representing the transaction is also a must.
As a seller or a buyer, if you would like a confidential conversation about how to prepare, please contact me on my cell, 954-579-4687, or by e-mail at firstname.lastname@example.org. My LinkedIn profile is at http://www.linkedin.com/in/dolansales.