Niche Industry: Buyers look not only to your company’s Value Drivers, but also to whether your business is in an attractive business sector. In today’s economic climate, business sector alone may determine if your company is saleable. According to investment banker Kevin M. Short of Clayton Capital Partners, today’s buyer is looking for companies in the following “niche” industries:

• Energy
• Healthcare
• Technology
• Infrastructure
• Consumer Staples

Non-niche industries would include: retail, financial, home-building or those related to consumer discretionary products or services.

Market Conditions

The M&A market for multi-billion dollar companies is tenuous, but the market for well-prepared, well-positioned (in a favorable business sector), and well-performing companies in the $5 million to $150 million range is healthy. Valuation multiples are likely lower than those during the boom part of the cycle, but solid companies can still receive a solid valuation — and there is financing available for these transactions in this marketplace.

If you and your company are ready to sell, let's look beyond the hysteria to the facts: Private Equity Groups (PEGs) have hundreds of billions of dollars available to acquire operating companies. These PEGs are looking for profitable companies in the $5 million to $150 million range. It is most important to collect and evaluate your industry's market data before eliminating this option.

If your company is worth less than $5 million, what are your options? First, assuming that the current storm is more than you can stomach, you have a solid company and an earlier-than-planned departure does not affect your retirement goals, you can pursue a sale. With local bank financing still available for good acquisitions, your company may very well be someone else’s target acquisition. Your job (and that of your advisors) is to make your company as attractive as possible by paying close attention to the Value Drivers described above, and creating and implementing a short-term action plan to increase each driver.

In addition, if conventional financing is not available to a buyer, financing is available under the Small Business Administration's 7(a) loan guaranty program. This loan guaranty program can be used to acquire businesses, with loans of up to $2 million. The Obama team has promised to increase the loan limit and temporarily suspend all SBA loan fees.

The bottom line is that financing, especially for "smaller" companies may be more available than you think. If that is indeed the case, does it affect your decision to sell or stay?

If you decide to sell…

No matter the size of your company, if you decide to sell, you must do so in a way that leaves no money on the table. This means that you must make it as attractive as possible to buyers (see Value Drivers above) and that you must retain a transaction advisory team skilled in sales of companies like yours. We can help you find these skilled advisors.

Subsequent issues of The Exit Planning Review™ discuss all aspects of Exit Planning. The provider of this Newsletter (Paul Honeycutt) offers you unbiased information about what you may need to know — How To Run Your Business So You Can Leave It In Style™.