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If you have founded a successful company and are considering selling it to a private equity firm, there are some key factors to consider to ensure a successful transaction. Private equity firms typically look for a return of up to seven times EBITDA within three to seven years of acquisition. It’s important to understand the risks involved in selling to a private equity firm, as well as the potential rewards.
One example of a successful acquisition by a private equity firm is Spanx, which was acquired by Blackstone in 2021. Despite facing challenges in the market, Spanx was able to secure a deal valued at $1.2 billion, allowing founder Sara Blakely to remain a significant shareholder in the company. This highlights the importance of having a strong foundation and profitability when seeking equity investment.
When considering selling to a private equity firm, it’s crucial to ensure that your company has a well-structured leadership team and clear expectations for the partnership. Lack of clarity can lead to unhappy endings, as seen in the case of a consulting company that went out of business due to misaligned strategies with the equity firm.
Before pursuing an equity investment, it’s important to understand what it can and can’t do for your business. Consider your strategy for selling to the equity firm – whether you want to exit completely or stay involved to benefit from the growth. It’s also beneficial to interview other entrepreneurs who have worked with the same private equity firm to gather insights and make an informed decision.
To maximize the potential of a successful exit plan, have a clear succession strategy in place that outlines the transition process and considers factors like employee care and your business legacy. By exhaust all growth opportunities before seeking outside investors, you increase the likelihood of attracting the right partners for your business.
In conclusion, selling to a private equity firm can be a lucrative exit strategy for your business, but it’s important to carefully consider all aspects of the transaction to ensure a successful outcome. Consult with experts and thoroughly evaluate your options before making a decision.
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