Many a times it has been seen that businesses are sold to equity firms, but it does not necessarily raise applauses. However, if carefully considered it will be clear that, it is probably the best way to exit your business. The valuation models of the healthcare industries and the information technology industries can become very high which is why they might not fit into the ideal EBITDA model.
Jennifer Neighbours Chicago is a founding member of the U.S. Healthcare Private Equity Association. This is a non-profit trade organization that represents U.S. healthcare. As opposed to the healthcare industry a better initial valuation is possible to be got from strategic buyers. This is possible because these buyers include and build other synergy factors into their purchase valuation models. The private equity can be said to be a better option for all those intending to sell their business.
Some of the situations where private equity seems to be the best business strategy are:
- When a company is in dire need of growth of their capital
- When one of the two partners of a company wants to retire and the other wants to keep on going for many more years to come.
- When a business is struggling to run under poor business conditions and more than 85% of the net worth of a company is tied up in the market.
- When the owner of the business has reached the age of retirement.
There are also certain criteria that need to be taken care of before any individual attempts to purchase private equity. They are as follows:
- The Management should be strong
- It should be a rapidly growing in the market or be one of the leading shares
- It should have strong customer relationships or be some kind of an established brand
- It should be the owner of strong sales and distribution capacities
- It should have a minimum EBITDA level
- It should have a minimum level of equity investment and a minimum size of transaction according to the standards of private equity firms, and
- The management of such a firm should be interested to take on the stakes of ownership when need arises.
Jennifer Neighbours Chicago has been in a very noteworthy role in one of reputed healthcare private associations of the U.S. and thus has seen most people not selling their business up until there occurs some really drastic negative issue. These issues could be the ill health of the owner, a change in the competitive landscape, some kind of a major loss, or some kind of demand on the domestic front.
But experts recommend, if you intend to sell your business to Private Equity in any way, do it while there is still time, i.e. at least five years prior to retirement. It is best to put the bulk of your company’s net worth in some portfolio of financial assets and agree to work under the Private Equity firm for those five years. This is the most honourable and ideal strategic mode of exiting your business.