Sell Your Middle Market Business for Maximum Financial Gain

Sell Your Middle Market Business for Maximum Financial Gain

Matt Gilbert

December 30, 2019

Educated Business Owners Sell for More! They see increased valuations, are better prepared, and close the deal well.

When selling a middle market privately-held business, statistics confirm that owners who align themselves with a sell-side M&A professional tend to maximize their financial gain. In other words, selling a business for top dollar is most often accomplished by employing a proven process executed by specialists who are incentivized to achieve the exiting owner’s goals.

It may sound like common sense to say that you need an experienced team who understands your personal goals, your business and its market, as well as the complex world of transaction guidance. However, these M&A experts are in high demand because they know how to navigate the world of potential buyers while astutely identifying and planning around potential pitfalls that can and do derail transactions. You’d be surprised how many business owners engage with M&A specialists who are adept at landing engagements but who clearly aren’t a good fit to represent them. Here are a few common scenarios we see:

Middle Market Businesses Represented by Investment Banks

We think middle market businesses are the best businesses in the world!  In fact, we built our firm specifically to cater to their unique needs. However, when a middle market business engages an investment bank to represent them in a sale, there is often a crucial trade-off. The trade-off is in “who” will be working the critical day-to-day aspects of the assignment.  Because investment banks exist to facilitate very large deals, their most experienced and highest-qualified people are on those deals. Despite assurances, more often than not, middle market business owners end up working predominantly with junior staff, consultants, and interns who report up to a mid-level advisor. The fact is, if your sale isn’t at least $100M in enterprise value, we don’t think investment banks offer the best model to maximize your exit. The staff you’ll work with most frequently may not be experienced enough to protect your interests throughout the course of the deal. At best, you risk ending up with compromised terms and compensation. At worst, you may fail to close the deal.


Internet, Franchise, and Main Street Business Brokers

This group of business brokers employ processes and tactics designed to sell smaller businesses to individuals, first time entrepreneurs, and other small businesses. They use the “strength in numbers” model, representing numerous business owners simultaneously. In order to reach prospective buyers and generate interest, they market to “make the phone ring” and “list their businesses for sale” on MLS websites. These brokers are best suited for what is called “Main Street” and “Micro” business sales, and they thrive on sales that are generally well below and up to around $2M in enterprise value.

Boutique Business Advisors and Sell-Side Intermediaries

If your business falls in the revenue range of $5M-$50M, you will best be served by a sell-side specialist at a boutique firm. Your best option is probably a firm staffed with former business owners who have successfully walked the path you are on. They should be able to assess your business from the vantage point of a prospective buyer and help you identify strengths that will manifest in tangible sale value as well as any inherent weaknesses which serve to introduce risk and detract from sale value. The best firms will have coaching and advisory services to help their clients “prepare for a sale” and “maximized exit.” They’ll also have CPAs on staff who provide financial expertise in-house. And the right sell-side specialist will care so deeply about your personal goals that they’ll have a track record of “doing the right thing” - often advising owners to postpone a sale when market timing or business metrics would thwart an exit that can’t achieve the owner’s goals.

You’ll find firms like this will surround you with a Deal Team and that taking the team approach leads to stronger representation. Deal teams should be led by Director-level experienced M&A professionals who have led transactions involving their own personal capital. Finally, any firm you engage for representation should propose a fee structure which demonstrates their understanding of and alignment with your goals. Having a properly aligned fee structure, complete with strategically-placed incentives related to important transaction components, will allow these M&A professionals to outperform and greatly exceed your minimum exit goals.


About GaP Business Advisors

Gilbert & Pardue Business Advisors (GaP) is a Houston-based business advisory firm serving  lower middle and middle market owners from coast to coast through representation for Mergers & Acquisitions (M&A) and through business value-growth services such as Fractional CFO, Advisory Board, Executive Coaching, and Consulting.

Matt Gilbert and Bret Pardue established GaP to provide owners of  lower middle and middle market businesses – those businesses generally enjoying annual revenue of $5-$50 million – with the quality of M&A representation and value-enhancement services previously only available to middle, upper middle, and large businesses. GaP brings highly-experienced executives, sophisticated financial and marketing products, proven-effective processes, and fully-integrated expertise to every engagement. No other M&A firm serving the lower middle and middle market provides the quality of representation and transactional expertise that we do.


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