m&a consulting and advisory services greenville sc

Sellers

Despite being diligent in building and managing their companies, an unprecedented number of sellers overlook the proper steps to transition their wealth and navigate through an exit process. PriceWaterhouseCoopers conducted a survey with business owners who had previously exited. Their results showed that 12 months after selling, 3 out of 4 business owners surveyed “profoundly regretted” the decision to sell. In turn, in another survey, the Exit Planning Institute found that 70% of business owners had not completed any formal education related to transitioning their business.

We believe one of the greatest contributing factors to seller regret is due to the contingency payments that are structured to close the valuation gap between the seller and the buyer. Stats we have seen indicate that almost 50% of all transactions include contingency payments such as earnouts or seller notes. When those payments made sometimes 6 months, 1 year or longer after the transaction has been closed, never materialize in part or whole, the seller has great regret, as the purchase price they expected doesn’t ultimately occur.

At Watermark we say “Preparation is a Capital Idea” (company motto).  What does that mean for sellers?  It means that a successful transition of wealth out of the company is dependent on how well the owner prepares for such a transition.  Preparation makes all the difference.

How does one prepare?  Watermark works with our clients in providing resources to help them maximize the preparation process so that once they enter the marketplace to exit, the twists and turns are not so harsh.  They have prepared for them.  As a result, they appreciate how to exit and finish strong.

Seller Facts and Figures

According to the 2018 Private Capital Markets Report published by Pepperdine University:

  • Approximately 26% of deals terminated without transacting over the past year.
  • The top 3 reasons for lack of ability to close:
    • Valuation gap in pricing
    • Unreasonable seller or buyer demands
    • No market for the business
  • Of the transactions that didn’t close due to a valuation gap in pricing, in 35% of the cases, the valuation gap was between 11-20% and in 35% of the cases it was 21-30%.
  • 87% of companies trying to sell needed 5 to 12 months to close.
  • 56% of closed business sales transactions involved strategic buyers.
Access our library of videos with information for sellers on preparation best practices.
Review Watermark’s service offerings for sellers.

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