How Much of Your Business Should You Sell and What Are Your Options

Selling a business is one of the most important events in an owner’s life, one that requires careful consideration of their goals. Key decisions include (1) what percentage of the business to sell and (2) what level of involvement the owner would like post-transaction, both decisions that will shape the type of potential buyers your M&A advisor targets. As one of the leading M&A advisors in Western Canada, Capital West helps business owners identify the right type of buyer for the next chapter of the business.

100% Sale

Sellers seeking a 100% sale of the business typically attract “strategic” buyers – companies operating in the seller’s industry, oftentimes a competitor, and sometimes backed by financial groups, such as private equity or pension funds.

Positives:

• Full liquidity for shareholders
• Often able to offer the highest price, given the ability to pay a strategic premium that reflects significant synergies from combining the businesses
• Greater flexibility in the seller’s post-transaction involvement, given there is often not an expectation that the owners continue with the business on a day-to-day basis beyond an initial transition period

Considerations to Address:

• Likely to be a competitor, so special care is needed to protect confidentiality of sensitive business information during the transaction process
• Limited to no opportunity for seller to benefit from future growth in the value of the business post-transaction

Partial Sale of Business

For sellers who prefer to retain partial ownership, financial buyers can be an ideal fit as they typically acquire a majority ownership position (and in some cases, a significant minority position e.g. 30 – 49%), with the owner retaining a substantial ownership stake (often of at least 20%). Examples of financial buyers include private equity funds, growth equity funds, pension funds, and family offices.

Private equity and growth equity funds have a defined timeline for exit via a subsequent sale of the business (usually 5-7 years), while family offices and pension funds tend to hold an investment for longer periods.

Positives:

• Provides the seller with significant cash proceeds on closing plus the option to remain involved in the company in a more significant role for several years
• Opportunity for the seller to benefit from the company’s future growth through operating profits and additional proceeds from the future sale of the business
• The right partner can bring additional resources to accelerate the company’s growth, including industry experience, expanded distribution capabilities, key relationships, and access to capital and talent, which helps create further value that benefits the owner on the subsequent sale

Considerations to Address:

• The seller may not be interested in remaining in a full-time role in the business on a day-to-day basis for several years post-transaction
• New shareholder agreement is established, with negotiations sometimes contentious

In summary, the choice between a full sale and partial sale is largely dependent on the objectives of the seller. At Capital West, many of our clients are open to considering both types of transactions and different types of buyers. All of these options can be explored concurrently as part of a transaction process, if desired by the owner. We work closely with business owners to consider all alternatives that best meet their goals, depending on the terms offered and the culture fit between the parties.

If you are considering the next chapter for your business, connect with any of our partners to discuss the best options to achieve your goals and how to prepare your business to maximize value.

About Capital West Partners

Capital West Partners is a leading independent transaction advisory firm based in Vancouver, BC. As mid-market M&A specialists, we deliver focused financial advice and transaction expertise to Western Canadian companies across a range of transaction situations, including:

• Divestitures
• Mergers & Acquisitions
• Strategic Financings
• Valuations & Fairness Opinions
• Financial Advisory Assignments

Capital West has a proven track record of 30+ years of completing transactions that maximize value for our clients. Since inception, we have completed deals worth over $11 billion in total value.

Capital West is also a proud partner in IMAP (International Mergers and Acquisitions Partnership), a global organization of highly experienced mid-market advisory firms in over 40 countries with a track record of 50 years. Through IMAP, we maximize our global reach to bring industry and country expertise to every one of our assignments, and to find our clients the best buyers and investors in North America and beyond. www.imap.com