Why sell your company to a strategic buyer?

Are you thinking about selling your company and gradually stepping away from your business? Maybe you feel that you have done your part, and that you want to move on with your life, avoid future risks and max out the value which you have built up. In that case, a strategic buyer—who usually acquires 100% of the company—could be what you are looking for. But leaving the business overnight is rarely an alternative.

A strategic buyer knows the market of your company and eventually they will be able to carry on without you, but you have to be prepared for that it could take some time.

“You’re likely to be the upholder of the company’s culture, the one on whom important customer relationships depend, or you may have an important operative role. Expect to stay on for a transitional period”, says Gustaf Plyhm, partner at Valentum.

How long that period lasts can vary. If your role has not been operative it could be relatively short, otherwise you should be prepared for this period to last a couple of years. To ensure that you, the seller, stay with the company, some of the purchase sum is often paid out at an agreed, later point in time. For some sellers, the decision to sell is not a decision to leave. There are entrepreneurs who have sold their company and kept their leading roles for many years.

Regardless of your motives, there are many advantages to choosing a strategic buyer, not least for your employees who will stay.

Oftentimes, it can be very lucrative for the company and the employees to become part of a bigger company. New sales channels that can help the company grow and reach new customers may become available.

Naturally, the purchase price is affected by many factors, such as required return, forecasts and financing possibilities. However, it is a myth that strategic buyers are prepared to pay over the odds when they can glimpse potential synergies. Generally, they want to reap the benefits of synergy effects alone.

Another myth is that the brand name disappears when selling to a strategic buyer, for example when a fashion brand is sold to a more famous brand.

This does happen, but far from always. On the contrary, many strategic buyers want to let the companies carry on under their own brands and let the synergies develop organically.

One enterpreneur who sold his company to a strategic buyer is Peter Hällström. In 2010, he founded ProOptix, a company which distributes fibre optic transceivers, fibre cables, wavelength-division multiplexing, measuring instruments and communication equipment for the fibre network market.

To free up more time for other projects he hired an outside CEO after a few years. After three years of good results, Peter thought the time had come to sell up and leave. He was contacted by Valentum and realised that an outside partner was necessary in order to find the right buyer who was willing to pay the right price, but also be able to stick to a tight schedule.

“There was no doubt that I needed help and I immediately felt great confidence in Valentum. Admittedly I felt it was expensive, but after a while I realised I would never be able to find all the potential buyers myself. They contacted 50-60 companies. I had never even heard of any of them”, says Peter Hällström.

In the end, Peter chose to sell to Lifco. He has now completely left ProOptix and is thinking about his next adventure.

Gustaf Plyhm emphasizes the importance of having nerves of steel, regardless of what situation you are in as a seller.

“Never accept the first bid”, says Gustaf Plyhm.

Questions to ask yourself before you choose to sell to a strategic buyer:

• Does your product need a bigger context to grow?
• Does your ownership constrain the company? Perhaps you lack funding for necessary investments?
• Is it the right time to sell, will you be able to receive a fair price?