I just returned from a meeting with investment bankers from around the world. The meeting was held in Greece, where ancient myths were born and used to explain just about everything.
However, Greece does not have a monopoly on myths. There are numerous myths that exist about selling a company. Most are not true and believing them can dramatically impact how much you get for your fleet when you sell.
In no particular order, here are the top five myths I encounter most often about selling a fleet operation, and why they’re just not true:
Myth #1: I have to leave the company
The majority of the time “selling your company” means selling a share of the ownership of the business. Although company owners sometimes want a complete exit, in most cases they stay on and continue to play a vital role in running the business. If you’re selling to a strategic buyer (a bigger player in your industry), they generally want you to stay for at least a couple of years while the companies become integrated. If you’re selling to a financial investor, such as a venture capital firm or private equity group, having a talented management team that’s willing to stay on after the sale is a positive selling point that helps command a premium price. You could also negotiate employment agreements that let you stay on in a consultant role, or bring in some new management so you can focus on the areas that you find most fulfilling.
Myth #2: I have to time the market
Business is down right now. I won’t be able to get as much for my fleet. Wrong. Buyers value your company based on its performance and profitability and the unique synergies that a partnership could bring. Merger and acquisition activity does not track with the economy. Does your fleet use proprietary technology or systems that one of the big players would love to have? Do you have a significant domestic footprint that would be ideal for a European company that wants to expand into the U.S.? How about a unique or highly sought-after customer base? Those things are attractive to buyers regardless of the overall state of your industry.
Myth #3: The new owners won’t care about my company
Private equity groups are in the business of investing in companies and seeing a return on that investment. Because of that, they look carefully at the balance sheets and financial statements when deciding whether to buy a company and how much to offer for it. That doesn’t mean they’re a bunch of penny-pinching pocket-protector accountants who aren’t interested in your company’s values or employees. You and your investor have the same goal— for the company to become more profitable and more successful— and they know as well as you do that the most successful businesses have a strong corporate culture and motivated, loyal employees. A quality private equity group cares about your company as much as you do— and they should, because they are about to own a major part of it!
Myth #4: They can’t run my fleet like I do
Many owners assume financial investors are just “the guys with the money.” I don’t want to discount the power of an infusion of growth capital in the life of your company, but the truth is that the right investor can offer you much more than just a big fat check. Many of them have a talent pool of professionals who they bring to their portfolio companies. That might mean they bring in a seasoned executive to sit on your board and provide strategic guidance, marketing, or an experienced CFO who can bring a new level of sophistication to your finances.
Myth #5: I’ll think about it later
The number-one mistake business owners make is not starting exit planning soon enough. Even if you aren’t thinking about selling, you need to have an exit plan in place now. If you were killed in an accident, would your company survive, or would your estate be forced to sell the company at a loss, putting all your employees out of work? Or let’s say you wake up one morning and just decide you want to do something different. You need a plan. It takes 9 to 12 months to sell a successful fleet operation. Where do you want to be this time next year? You could be retired, or at a minimum, financially secure from the sale of all or part of your fleet operation.
Greeks used myths to explain what they didn’t understand. Most fleet owners believe in the M&A myths, because they don’t understand the M&A process. Do your homework. Create an exit plan and know where you want to be in one year, two or even ten.
