- 08 September 2022
- Michael McGrath
How to Sell a Business: Lesson #1:
The shareholders of established private companies in Australia, many of whom will be seeking an exit in the next ten years, ought to be aware of certain realities around deal doing and the market.
I am going to unpack some of these over the next series of posts, which I hope people might find helpful.
Much of this I was not aware of in 1992 when I sold my own company at age 28. Basically, I got in the ring with a 500-pound gorilla, without anybody in my corner, and I understandably got my arse kicked!
Typically, our clients are selling to much larger acquirers. To illustrate this, for the last ten transactions at Oasis Partners the acquirers had combined revenues of c$39 billion. Our clients on the other hand had combined total revenues of just $100m. In effect when it comes time to sell, vendors are likely to be getting in the ring with a 500-pound gorilla.
Now a gorilla as a buyer is a good thing, they’ve got loads of muscle (money), which is a great start. However, getting it off them, in sufficient quantity, on reasonable terms to justify the exchange is an altogether different matter.
A key feature of the metaphorical gorilla is they are not only big, but at some point, they will throw their weight around. They are used to having things their own way and are hugely experienced.
Most deals are a David and Goliath affair. It’s not about trying to match a buyer’s strength; it’s about understanding what’s going on and playing to your own strengths.
Lesson number one is to make sure you have somebody in your corner who can help you navigate this process. They need to be able to stand up to bullies and they need to know the road ahead. Even if the gorilla seems nice at the beginning, get some help in the form of professional representation. Representation must be commercial not just financial and legal – somebody with a good track record of doing deals is a great start.
If you or anyone you know is considering their options around succession and exit, feel free to contact me or one of my Partners at Oasis Partners for a confidential discussion. We would be happy to share with you what we are currently seeing in your sector and assist in any way we can.
Until next time.
Stay safe and Good luck!