Guest column: Options for tough times
By Carissa Giebel • June 29, 2010
Many owners of mid-sized businesses are making decisions about their futures in a quickly changing economy. I consistently urge business owners to take the initiative when planning their exits. Today, I encourage business owners to go beyond panicked headlines and take a clear look at your options in light of your exit objectives, your company's conditions, and the current Merger & Acquisition conditions in your marketplaces before you decide if your exit must move forward or be delayed.
Each owner is unique. Some are so close to retiring they can taste it, while others have years to work before they can even think about leaving. Some owners have a sense that hidden in this recession there just might be opportunities to grab. Others are looking to protect what they have built and want nothing more than to survive. Some owners invested outside of their companies, while for others, their companies are, by far, their largest asset.
If you suspect that the current economic downturn means that the departure you planned in the next five to 10 years will be delayed, you are not the only one. Now, what do you do about your target departure date? If you leave it as is, do you spend your energy protecting what you have or actively working to build value? If you decide to move your departure date forward by selling now, how does that affect your other retirement goals (transferring for the amount of money you want and transferring to the party of your choice)? Is your company attractive to buyers? Are there buyers active in the marketplace? And, how can you get top dollar for your company?
As operations become leaner and meaner, your company may be more vulnerable than ever before. Are there things that you can do to protect the value of your most valuable asset, your company? What can you do to help minimize your company's tax exposure? Is there a way to prevent the departure of your key employees? How can you help minimize taxation and protect value, trade secrets, vendor relationships and referral sources?
It is possible for owners to build business value during a recession through acquisition. Some business owners are taking advantage of lower purchase prices (by using seller financing and earn outs) to acquire specific assets (like customer lists and equipment) of smaller, less adaptable, less capitalized or poorly managed competitors.
It is always important to look at what is going on in today's Merger & Acquisition market. Look at which companies are selling, who is buying, and what credit is available to finance deals of similar size.
As a business owner, do not stand impassively on the sidelines during a time of economic volatility. Unlike the "average" investor, you are not limited to the single strategy of pulling dwindling assets out of the market. Even if the general economy suffers, your business profitability can be different.