As a result of the Baby Boomer Effect, it is estimated that more than 60% of privately owned businesses will change ownership in the next 10 years. An interesting fact is that the exit strategy of choice is the sale or recapitalization to private equity groups rather than to management, competitor or family members. Currently, there are over 2,700 private equity groups based in the United States. All these groups are in an aggressive acquisition mode and they have bottomless bank accounts. When you decide to sell your business in San Diego, don’t be surprised if your business broker 92131 recommends selling to a private equity group.
What is a private equity group?
This is a group of individuals that have the primary mission of buying portfolio companies. Private equity groups mostly target privately held businesses and own them for a period of 3 to 7 years before selling them for a significant profit. This helps them earn better returns than those attainable from holding a typical portfolio of public stocks. The private equity groups normally return about 80% of the profits to their investors.
Your business broker 92131 may recommend selling to a private equity group because these groups act faster than other buyers. You will be able to close faster and get all the money within the shortest time. This is because private equity groups have been very successful in buying and selling businesses and have a lot of money flowing into private equity funds.
As the private equity market continues to get crowded, private equity groups are not shying away from smaller mid-market companies. These groups are considering the acquisition of companies that have $1MM+ annual EBITDA. There are even some groups that are more aggressive and target annual EBITDAs that are as low as $500K. The trend is creating great opportunities for business owners to sell their businesses and close fast.
However, while private equity groups are making it easier for business owners to sell their businesses, you have to be careful where you sell your business. To get the best return on your investment, you should first consider working with an experienced business broker in San Diego. The broker will make sure that you are selling at the right time and for the best time. Your broker will then reach out to private equity groups and negotiate the best deal on your behalf.
Bearing in mind that private equity groups are run by professionals that specialize in the buying and selling of businesses, you will have a better advantage when you work closely with an experienced business broker. The broker will cushion you from the aggressive approaches used by private equity groups.