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MAKE FOR YOUR EXIT The strong economy, low interest rates, huge cash reserves and fears about rising taxes are making for a silly season in M&A across nearly every industry. Looking to sell smarter? Some suggestions. BY DALE BUSS
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elix Yiu built Apricot Designs into a multibillion-dollar company over 32 years and then sold the maker of pharmaceutical liquid-handling equipment to SPT Labtech in January. It was a strategic sale within the industry, and the 65-year-old Yiu is staying on only for a year as a consultant. “At my age, there are things I would like to do that I consider more meaningful and interesting,” says the Covina, California-based entrepreneur. “Now that I have a little bit of capital, one thing is to give opportunities to entrepreneurs or small businesses who really want to do things.” Many more mid-market business owners will exit their companies this year. The M&A market is robust—even frothy—driven by the strong economy, low interest rates, ample cash available to acquirers, fears that the Biden administration will boost tax rates, the reluctance of millennials to take on the family business, and a certain “Covid exhaustion among business owners that’s accelerating plans to sell,” says Alan Scharfstein, president of The DAK Group, a middle-market investment bank.
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But while the golden ring may loom closer than ever, grasping it in this environment requires a founder’s strategic thinking, due diligence, stamina and good life planning. Strategic transaction consultant Marshall Rowe says the exit decision requires a framework he calls “the three clocks.” One gauges the level of performance and liquidity in an industry prospect for its continued success and the availability of buyers. The second “clock,” says the founder of Harvest Capital Management, which is now part of the Colony Group, tells how well the company itself is positioned. The third is the “personal and family clock” about whether it’s time to sell an entity that has “provided financial security and probably a sense of identity in the community,” Rowe says. “It’s a very significant emotional decision. And more than likely, if a deal is going to fall apart at the eleventh hour, it’s for that third reason.” Chief Executive reached out to a host of CEOs, advisors, bankers and other experts for some quick, savvy suggestions on selling into this magic moment for deals. Here’s some of what they shared.
