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Business Sale? Remember the Window/Timetable Lesson

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in The Business of Business Finance

One of the great challenges for entrepreneurs who build a valuable business is recognizing a good opportunity to sell their business. The hard truth about unloading a business is that the most lucrative time to sell is seldom dependent on a personal timetable. More often there's a "window of opportunity" created by market forces. 

That window is often disguised because those market forces have their genesis in a corporate strategy meeting inside a potential acquiring company — most often within a company you are not familiar with.

There will always be stories in the Wall Street Journal (WSJ) or the business press about well-known companies that attract a lot of interest and bidding from many potential buyers. Cadbury serves as a recent example.

But what about your company?  What about small businesses ($5 million - $50 million annual revenues)?  Small companies are bought and sold every week with very little fanfare. And since small businesses are often owned by a small ownership group or individual, they usually have a personal timetable in which they want to sell. A timetable for sale is often based on the age of the owners, graduation of a youngest child or a pre-determined revenue goal.  This table can be very costly for business owners who ignore the "window."

Case in Point
A recent WSJ article on Hawker Beechcraft Corp. illustrates my point very well.

In late 2006 there was a lot of interest in Hawker from the top global private-equity companies, including Goldman Sachs Capital Partners, Cerberus Capital and the Carlyle Group.  Goldman was the unlucky winner, paying $3.3 billion for the private airplane manufacturer.  Since then the recession has hit, sales have fallen off a cliff (just one aircraft sold in 2009), 2,500 employees have been laid off and Goldman has written down 85% of their investment according to a 9/30/09 letter to investors.

Although Goldman partnered on this deal with Onex Partners, they value Hawker at $2.8 billion less than what they invested in just three years ago. Talk about taking advantage of a window of opportunity! What a windfall for the owners of Hawker!

Lessons Learned
What is the lesson to business owners and entrepreneurs? 

Great ownership is not the ability to just build a great business, but also recognizing when the market will occasionally present a window of opportunity in which you may have a chance realize a significant premium for the company you have built.  Even though the timing may not fit your strategic planning, you owe it to yourself to be aware and alert when the window opens...

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