Partners David Kaufman and Nathan Viehl authored a St. Louis Business Journal article outlining tips for those who own a successful privately held business and have been approached by a private equity firm with an offer to buy.
- Create and Maximize Leverage: You can create leverage by setting up a competitive sales or auction process for your business. This approach can cool the private equity firm's aggressive instincts and shorten exclusivity requirements. Urgency is crucial, as market changes or adverse events can derail the deal.
- Exclusivity Period: Be aware that private equity firms will insist on an “exclusivity period” after signing a term sheet or letter of intent. Consider adding a “check-in” point to prevent automatic extension, making exclusivity conditional on substantial buyer progress.
- Corporate Housekeeping: Ensure your business's legal infrastructure is in order. This includes the proper corporate structure, partner agreements, contract reviews, and tax compliance. Disorganization can deter potential buyers and lead to complications during negotiations.
- Personal Housekeeping: Assess your personal situation in conjunction with estate planning advisors. Explore options like gifting shares to family members, fulfilling charitable commitments with stock, and other tax-advantaged strategies to maximize proceeds and align with your financial goals.