Selling your business to a competitor a.k.a. strategic buyer will always yield the lowest transaction value.

By:  Michael Fekkes, M&AMI, CBI, CEPA

The unfortunate truth… A competitor never pays more for your business.

Although there are legitimate reasons for a competitor to have significant interest in your business and recognize inherent value, history has taught us that competitor acquisitions of small businesses yield the lowest transaction value based upon price, structure and terms.

While you have built a turn key business that has considerable value, a competitor has most of these organizational/operational elements in place and will view the overall value differently.

Many competitors approach these acquisitions as the purchase of a customer list, picking up a few good employees, add an asset or two, and maybe establish a key relationship or territory with a vendor.  Some are simply looking to eliminate a competitor. The bottom line is that they do not need everything you are selling like someone new to the industry.  The worth of this turn key operation is not valued the same from a competitor versus an outsider.

Does a competitor need, want, or place significant value on the following assets?

Tangible:

• Furniture, Fixtures, and Equipment (FF&E)
• Vehicles
• Inventory
• Real Estate

Intangible:

• Customer lists
• Client […]