The Denver Post


Gary Miller: Waiting for your operation’s value to increase is a gamble — at best

Gary Miller - Sell your businessBy Gary Miller – Managing Director, Consulting Division, SDR Ventures

Over the past several months, a number of business owners have told me that they are ready to sell but haven’t pulled the trigger. Most think that if they wait, their business valuations will continue to increase. They are taking a gamble.

There is much talk about the strength of the current seller’s market over the next six to 12 months — but that could change.

Three major factors significantly affect the value of your business: business optimization, exit planning and the state of the capital markets.

It’s the capital markets that are the unknown. So let’s first examine business optimization and exit planning.

Business optimization is an internal factor controlled by the owner. Generating an attractive future earnings stream is critical. Various performance drivers — strategic business plans, management bench strength and leadership, sales, competitive positioning, marketing, operations, financials, intellectual property and market share — impact the buyer’s investment risk. Owners can continuously improve the strength of these drivers to enhance business value.

Exit planning, another internal factor, focuses on how satisfied the seller will be after the transaction closes. If you are willing to sell now, plan what your life will look like after the sale. Once your goals and exit plans are firmed up, and once your company is ready to go to market, a wealth planning team can help you with estate, tax and wealth management plans that conform to your exit strategy. Your wealth plan should be in place at least three to six months before you go to market.

The state of the capital markets is the last factor but, of course, this is beyond your — and everyone’s — control. Economic conditions influence how available funding is for an acquisition. Capital markets are cyclical, and move from a “sell environment” to a “neutral environment” to a “buy” environment — in that order, repeating approximately every 10 years.

Key indicators sometimes can signal the transitions between the phases in the capital markets. But predicting those transitions takes expertise and luck — and complete accuracy is impossible.

Market conditions fall into two distinct time frames: present state and future state.

The present state of market conditions includes cost of debt, leverage multiples, industry betas and public company valuations. The future state is influenced by such things as Federal Reserve policy, unemployment rates, GDP growth, shocks (terrorism, wars, disease outbreaks) and bubbles (technology, real estate).

It is not possible to accurately predict the economic outlook far enough into the future to be meaningful for an owner, especially if he or she is considering selling a business sometime in the next 12 to 24 months.

Preparing a business for sale can take six to 36 months, and then another 12 to 18 months to complete the deal. Depending on where you are in the cycle, things can change dramatically during such a time frame.

BNY Mellon capital markets analyst Jeff Mortimer suggests that barring a major market shock, the frothy multiples paid for privately held companies over the last two years will not change any time within the next year and a half.

But after that, he believes the markets will soften and move to a “protect” state, and then on to a buyer’s market before taking perhaps another five years to return to the current seller’s market.

My advice to owners who are considering selling their businesses is as follows: Hire an M&A consultant to help develop your exit strategy and prepare your business for market and then hire a wealth planning firm to help you manage the proceeds of the sale.

If both tasks are completed to your satisfaction, and you’re ready to sell, pull the trigger — before it’s too late.

Gary Miller is the managing director of the Consulting Division of SDR Ventures, a Denver-based investment banking firm. Gary specializes in strategic business planning, mergers and acquisitions advice, exit-strategy consulting and capital formation. Gary often speaks at conferences on M&A matters. Contact: 720-221-9220 or

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