Selling a Business – A Case Study

If you want to sell a business then complete knowledge of your business and the market is the key. In the business world, case studies are such readily available and powerful tool from which you can replicate the success by avoiding critical mistakes. Many cases studies have been published about selling business quickly at maximum price. Case studies are such reference guides of the business world to look at the solved problems to solve our own.

From the pool of available case studies on how to sell a business successfully, we have picked one of the best case studies here under for your quick reference. This case study shall guide you on how to prepare best to sell your business.

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Overview:

This case study is about a mid-sized pharmaceutical manufacturing business in Himachal Pradesh, India, running for more than 20 years. The owner had approached his retirement age which made it difficult for him to manage the business from his native place, Gujarat. His son had settled down abroad and was not interested to run the family business. The only option was to sell the business and invest money for retirement.

Problem

The primary issue was lack of knowledge. If you have no clue where to sell your business and how to find a serious and genuine buyer quickly, it gets tougher. The most critical problem faced was lack of strategic planning. He tried to sell his business without clear strategies which wasted his three years.

Solution:

After struggling a lot, he approached one of the prominent merger and acquisition consultant to find out the way, however he had to pay high retainer fees along with commission on sell. Mind you not everyone can afford consultants and their fees and commission as results are not even guaranteed and might have to compromise on price.

Facts and Figures

The first approach was to get the facts and figures about the business aligned so that it can be conveyed well to the prospective buyers. Finance, Assets, Cash Flow, Legal, Licenses, Human Resources, Patents and Copy rights, Environmental clearance and other relevant documents were prepared. Market research was performed about company products and formulation for its future growth, competition and market share. Existing orders, Orders in pipeline, existing and pipeline customer’s summary was also prepared. The reason is simple – every investor wants to know your past and current financial performance and future business prospects, as nobody wants to invest to make loss. Buyers valuation and seller’s valuations differs many times, and therefore valuation must be done using standard formulas and process. You can have different valuation done so that you can understand the price range you can expect.

Proposal

When proposal was prepared, decision making points were highlighted to attract potential buyers with the help of marketing team. When you advertise your business selling proposal, it should immediately attract potential buyer. An appealing presentation fetches more price.

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Advertisement

Since business owner had already tried to sell to his internal and known sources, option was to take help of advertisements to find out buyers. You must remember that finding out serious buyer is the most crucial and difficult task in the business selling process, because rest of the things are in your control and can be handled by other professionals.

Advertisement plan was made with newspaper, pharma business publications and other closely related trade magazines. Main focus was in nearby states as it could be easy for local investors to manage the business with local people. Further to support newspaper advertisements, internet medium was extensively used. Free classifieds and social media were used online, however response was low. Premium business buying and selling websites used to advertise effectively. A good marketing and advertisement plan worked well to attract very serious buyers.

Multiple Buyers

The critical part, which helped to gain more than 28.5% over market price, was selection of multiple buyers. Each buyer was proposed differently as their objectives were different as few wanted to diversify, few wanted to expand the product line and few were wealthy investors through private equity. After due diligence process and negotiation, which is essential and every buyer and seller has to go through, finally deal was cracked at 28.5% higher price than expected.

Take away:

Well planned exit strategy and good understanding of the market and business is the key get more than expected price. It has been noticed that a well planned exit strategy can bring 20%-50% more value.

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