24
votes
Small business owners who got bought out, care to share your experiences?
We’re a small, boutique tech consulting firm and we are being approached increasingly frequently by M&A companies. Just wondering what others’ experiences are and things that would be good to know.
I ran a one-person network company. "We" got bought by a huge multinational with the agreement that I would have to work for the new mother company for at least five years. I'm economically set for life. I'd do it again knowing what I do now.
The five years have passed. I now manage several employees, do completely different things than I used to and get paid a lot for my technical skill set. I mostly deal with emergency issues for our largest clients when they have issues, especially if the issues aren't actually on our end.
The buying company agreed to put a lot of things in writing to ensure the sale would go through. I'm sure they've made a lot of money on the deal, but it was totally worth it for me. I never had ambitions for building a large company or dedicating my entire life to work. I never had aspirations for getting really rich; not having to worry about money again isn't something I would say no to.
I have no experience with this and they’re probably not that kind of offers, but I’ve read a few stories of what happens when small businesses get bought by dubious people, so it’s worth being a little wary. The advice I’ve read is to never sell a business for cash. The risk is still being responsible for something you’ve lost control over.
Out of interest (iff you're able/happy to share) when you say M&A company do you mean a bigger consulting company, investment bank or private equity fund (or something else entirely)?
They are all bigger consulting companies that are using M&A companies as their broker/reps.
I’m a CPA turned financial advisor. I don’t have a lot of specific advice other than do a lot do due diligence. If your industry has any valuation standards, understand them- it’s usually some multiple of revenue depending on the industry. If it makes sense, consider finding a business broker in your industry and see if they think they can sell it for more.
Talk to your CPA about the tax consequences- you probably shouldn’t let the tax tail wag the dog, but it’s something to add to your pros/cons.
That’s if you even decide to sell. You could work out some other succession plan allowing employees to buy the business over time.
If you end up doing it, have a good idea of what you’ll do after. It’s easy to fall into a bout of existential dread once you cut the cord and you’re no longer attached to this thing you devoted all your blood/sweat/tears into.