How a Partial Sale Can Enhance Value for Sellers
A partial sale of a company is often a very attractive way for a seller to receive substantial cash on close and also participate in accelerated growth and value enhancement post-sale, by maintaining an equity interest.
In many cases, the valuation a seller obtains on a later sale of their retained equity interest is substantially higher than the initial sale. Below are examples of how a transaction, with the right partner, can help accelerate growth, leading to a seller’s participation in a second transaction at a much higher value:
EXPANSION OF MARKET SHARE AND ENTRY TO NEW MARKETS
- Joining a larger enterprise allows a seller to expand its market reach and customer base as part of a larger, more diversified entity, driving incremental sales and creating a more dominant position in the industry.
- Many buyers open doors to new markets and distribution channels not previously accessible due to barriers to entry and associated risks.
LEVERAGING ADMIN / SUPPORT RESOURCES OF A LARGER PARTNER
- By combining with a larger company, certain processes can be streamlined to create synergies and cost savings, resulting in operational efficiencies.
- Buyers’ access to diverse supply chain relationships and buying power can be leveraged to get better pricing, leading to improved margins.
- Leveraging a larger partner’s admin / support resources can free up key leaders of the seller’s business to focus on higher impact activities, driving revenue growth.
ACCESS TO IMPROVED TECHNOLOGY, IT SYSTEMS AND EXPERTISE
- Implementing effective and secure information systems are integral to staying competitive; however, these tools are expensive and can be complicated to implement.
- Many buyers have access to more robust IT systems and substantial resources to support and implement IT systems.
Capital West Partners - IMAP Canada has advised on numerous transactions where business owners retained an interest in their business in order to capitalize on accelerated growth and value up-lift, post-transaction.
