In previous posts on the topic of succession planning, we highlighted transition options available to owners looking to sell their business. These links can be found below.
In addition to finding a viable buyer for the business, the seller must also determine the ownership percentage that they are prepared to sell, with the following options available:
- minority interest (less than 50%);
- majority control (greater than 50%); or
- full ownership (100%).
The percentage of a business that is sold will depend on the objectives of the buyer and seller, as well as their respective finances. Some of the most important questions facing the seller, are as follows:
- What kind of buyer is preferred?
- How involved do they want to be in the business following the sale?
- What are their retirement goals?
- How much influence do they wish to have over the future of the business?
- How much financial risk are they willing to accept following the transaction?
These questions are particularly personal in nature. As such, there is not necessarily a “right or wrong” answer to any of them. Instead, sellers should consider these questions in conjunction with their own beliefs, and perhaps a more comprehensive estate plan. Some of them are covered by our previous articles, noted below:
Succession Planning – Succession Planning Article
Business Transition to a Family Member – Business Transition to a Family Member
Sale to a Strategic Buyer – Sale to a Strategic Buyer
Sale to a Financial Buyer – Sale to a Financial Buyer
Sale to Management or Key Employee – Sale to Management or Key Employee
Ultimately, each transaction type has advantages and disadvantages, many of which will influence the strategic elements and negotiations with other parties.
When business owners have comparable offers “on the table”, it is much simpler to impose favourable conditions, remove unfavourable provisions from an agreement, or increase the offer price. To maximize outcomes and optionality, we highly advise entrepreneurs to consider all transaction forms and select the best option for themselves and the future of their business.
GG Observations: At Grewal Guyatt LLP, our team of experienced professionals can assist you with selling your business by providing valuation advisory, tax planning, and other support services to maximize your proceeds when selling your company. Obtaining the services of an experienced advisor will provide you comfort and allow you to make an informed decision regarding the sale of your business. Do not hesitate to reach out for more information.
