Selling Your Business with $1 Million-plus EBITDA

Most times, the owner of a business is concerned about what will happen to the company’s employees and customers after the sale.

When you are dealing with a private equity group or another entrepreneur as the new owner, the question is whether they will keep what you and your employees have built and enhance it, or take it in another direction, which could destroy it. There is no way of knowing.

In addition to the conventional method of recruiting and screening third-party potential buyers, another choice is possible but seldom thought of – an employee-owned ESOP as the buyer of the business. This is done using a bank to fund it with no employee contributions at a X4 or X5 multiple of EBITDA.  The board of directors is made up of current management and outside directors. The seller gets a substantial payment at closing and is paid the balance over five years with “before tax dollars” from the company’s cash flow.  Ideally, the seller would stay on for an extended period of time and be on the board of directors to help the business make the transition to new ownership and groom a replacement.

With this business model, the employees would gain total ownership after five years and a vesting period based on criteria established by the seller, with help from third-party professionals. The structure of the transaction and ESOP would be done with third-party professionals. This is an asset sale to the ESOP as the buyer.

This is one alternative to help business owners exit their businesses. Depending on the circumstances, this may not work for all situations, but it is a viable potential buyer that Dolan Sales, Inc. can help business owners explore. Dolan Sales is very active and well-connected with private equity, family investment and other small investment groups looking to acquire quality businesses with EBITA of over $500,000 per year.

If you would like a confidential conversation about how to plan and prepare for your business exit, contact me on my cell, 954-579-4687, or by e-mail at bobd@dolansales.com. My LinkedIn profile is at http://www.linkedin.com/in/dolansales.