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Value Creation Blog

Selling Your Business? Find A Billion Dollar Buyer

Posted by Josh Patrick

buy a business resized 600Such a simple statement and yet so hard to do.  You have a small business, somewhere between 5 million and 20 million dollars in sales.  You have nice profits and are looking to sell your business.

If you sell to a private equity group, they have a small range they’ll pay for your business.  If you sell to a competitor cash is tight and they’ll probably ask you to be the bank for at least part of the sale.  If you sell to a private buyer, again cash is tight and you play the bank. 

If you sell to a company that does a billion dollars in sales, life is good.  You’ll get paid in cash and an extra million is not a big deal.  In fact, with a billion dollar buyer, a million is a rounding error.

This doesn’t mean billion dollar buyers are easy marks.

You can expect a billion dollar buyer to be very sharp.  They have an M&A team.  They will be very focused on what they buy.  They will want your business to be in great shape and ready for them to take over.  They will require that you go through their due diligence process with flying colors.  If you don’t have all of these characteristics then you’ll never get a billion dollar buyer.

If you think your business might qualify for this type of buyer you want to start getting ready early.  I suggest that you hire an investment banker and ask them to take you through a mock due diligence exam.  Understand your weaknesses and spend the next couple of years tightening up where you might make yourself unattractive to the billion-dollar buyer.

It’s all about intellectual capital.

A billion dollar buyer will tell you that you’re too small for them to care about.  For most businesses this is true.  The only reason that they’ll want to buy your company is because you’ve developed intellectual capital that this company wants to own.  Your intellectual capital has to be scalable so the buyer can apply it to their company.

You need to make sure first you have clearly identified what your intellectual capital is.  You then want to clearly explain how a big company would take advantage of what you’ve learned and can apply it in their own business to create millions of dollars of profits.  You will want to be able to show them how to create more profits than you presently do in gross sales.

How to get the billion-dollar buyer interested

If you’re able to develop great intellectual capital then you could get some interest from the big companies.  This is where the fun comes in.  You now are now selling your business based on what the buyer can do with your intellectual capital.  Under the best situation your business is just a throw in.  It’s the idea of how you create value the buyer is really interested in.

This is not an activity you are going to want to do by yourself.  Find an investment banker who understands an intellectual capital sale.  See if you can find more than one big buyer who is interested in what you know.  Make sure that you only tell enough to get them interested.  You want to make sure they don’t learn enough to steal your ideas. 

This is where your investment banker comes in.  If they’ve done this type of sale several times they will be able to guide you through the process.  You will want to interview several firms and take a significant amount of time choosing the one that you believe will do the best for you.  A successful sale to a billion-dollar buyer is a beautiful thing.  You’ll like the result.

We’ve put together a special report called How to Leave Your Business in Style.  To get this report, click on the button below.  You’ll learn 7 things that you need to do to help with success when you decide to sell your business.


Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: value creation, exit planning, due diligence

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