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In the summer, the Owner of a small, but profitable manufacturer of industrial equipment in the Naugatuck River Valley with revenues under $1mm engaged me to value and sell his company.  

By the fall, we had chosen our buyer from among five offers.   Sometime thereafter, the Seller, the Buyer, the Closing Attorney and I gathered in a conference room to sign the documents to close the sale of the Company for over 2.5X earnings and over 1.1X revenues. 

The Owner worked 50 hours a week in the Company in vital sales and management functions so this was not a suitable business for an absentee owner. We needed to find the right buyer with the capacity to step into the Seller’s roles after the sale. Because the Seller’s manufacturing business had good margins and growth potential, Murphy’s unparalleled listing infrastructure garnered strong response. Over 100 qualified buyers signed the Non-Disclosure Agreement and received the Confidential Info Memo, describing the Company’s operations, markets, history and financial performance.  Five buyers submitted offers, several at asking. We chose the most qualified buyer and structured a transaction that minimized financial, tax and operational risk for both the Buyer and the Seller. 

A privately held business has three stages: (i) Start up, (ii) Growth (iii) Exit. 

In ALL three stages, Agency and Liquidity are vital factors. 

AGENCY is your capacity to make the decisions you have control over.

LIQUIDITY involves the funding BOTH your business AND your life. 

There are three main ways to transition your business: 

(1) INTERNAL TRANSFER: Selling to employees or heirs, but lack of funds from the Purchasing Parties can present significant Liquidity Challenges to the Seller. 

(2) EXTERNAL SALE: Selling to a strategic or financial buyer. Murphy’s expertise is to bring the widest universe of capable buyers to the table. 

(3) THE "FEET FIRST" METHOD…as in, carried out the door of your business feet first:  Too many private business owners choose this option, which is unfortunate because–when it comes to your business–death is NOT an Exit Strategy. This option involves the Forfeiture of Agency and a serious impairment of Liquidity. 

How do you successfully transition your privately held business? By paying careful attention to Agency—in this case, the Seller made the decision to sell and transition the business while he was still vitally engaged in the business. The Seller sold his business BEFORE he had to because the value of the business without his active participation in the transition would be seriously impaired.  When it comes to an Exit Strategy, timing and agency are everything.   

The Seller kept good books and records which allowed us to pre-qualify the business for SBA financing.  To this day, the Seller remains active in the business as an consultant, but has the time and money to pursue other interests.