Selling a Business due to Health, Death, or Partnership Breakup

May 8, 2018

Selling a Business due to Health, Death, or Partnership Breakup

Entrepreneurs contact IBA for professional representation in the sale of their businesses for three primary reasons.  The most common reason is to facilitate retirement.  The second most frequent reason is when an entrepreneur enjoys company creation more than management and wishes to convert their business asset to a cash asset as fuel to start their next business project. The third most common reason to sell a business is when ownership is in distress.

Distress comes in many forms for business owners.   IBA, as the most selective business brokerage firm serving the middle market in the Pacific Northwest, does not represent businesses for sale that are not profitable.  We are empathetic to entrepreneurs who have not reached critical velocity in their business model, made bad business decisions, or run out of capital to facilitate business growth & development.  The potential rewards of entrepreneurship are significant, however those potential rewards come with substantial risk.   Unfortunately, our experienced, knowledgeable, and professional team of business brokers are not heroes.  We traditionally only take on projects we can complete successfully.  This selection process for our projects is motivated by our desire to have happy customers that achieve their goals and to run our own successful business model since 100% of IBA’s fees are performance based and paid when the transaction is completed.

Eliminating financial distress as a motivation for sale, IBA has a corporate culture where being of service to entrepreneurs in need is a foundation value of the firm.  We love to serve entrepreneurs who are ending a successful tenure at the helm of their companies and are ready to retire.   We also welcome the opportunity to help successful entrepreneurs who need to sell their businesses due to distress in the executive management team.

Distress in the executive management team can take multiple forms in a privately held company.   As Augusten Burroughs famously said, “When you have your health, you have everything.  When you do not have your health, nothing else matters at all”.

Health issues can be a wakeup call for an entrepreneur and motivate life changes, including the potential sale of their business.  Annually IBA facilitates multiple transactions motivated by entrepreneurs desiring to create a better environment for their personal health or support the health and care of a spouse, parent, sibling, child, or friend.

There are two certainties in life, taxes and death.   Unfortunately, the IRS and father time do not take no for an answer.  Periodically, IBA gets calls from attorneys, wealth advisers, CPA’s, spouses, children, or business partners problem solving through the death of a business owner and the fact a business is now an asset of an estate that needs to be sold.  Time is generally of the essence in this situation either due to a void in executive management of the company that needs to be replaced, issues with credit for the business, and/or the inability to strategically plan and make decisions in the “best interest” of the company due to the horizons and liabilities likely exceeding the time period the business will be owned by the estate.  Business sale due to death are not appropriate for every business brokerage firm.  The sale process requires knowledge, experience, and the ability to facilitate a timely sale while preserving business value for the heirs.  One of IBA’s unique assets that helps facilitate timely sales of businesses for all our clients is our buyer database of motivated, qualified parties.  A significant percentage of the businesses we represent for sale sell to participants in our database without spending significant time in the public domain being advertised for sale.   Individuals, companies, and non-profit entities participate in our buyer database program to get the first opportunity to look at IBA’s exclusive listings.

Business sales motivated by death are generally emotional journeys on the sell side of the transaction.  IBA professionals are happy to serve as experienced guides through the business sale process and assume delegated responsibility for insuring the transition of ownership is smooth and the “best interest” of the business and estate are taken into consideration.   Another business sale environment that frequently is emotionally charged occurs when a business owner is going through divorce or a business partnership breakup.

In all honesty, this is IBA’s least favorite business sale transaction to facilitate for a client because there is often confrontation and a lack of trust on the seller side of the negotiating table.  This creates an odd dynamic where frequently reaching agreement with the buyer is easier to facilitate for the business broker than reaching agreement between the separating parties.  Sale projects of this nature require knowledge, experience, and a superior negotiation/facilitation skill set by the intermediary.  They are often more a call to duty with a desire to help parties in need for the business broker than projects they are excited to undertake for a client.

A significant majority of IBA’s clients do not need to sell. They want to sell to achieve positive goals (e.g., retirement).  A smaller percentage need to sell.   The professional business brokers at IBA are willing & able to assist parties in need with professional representation whether they need to sell due to illness, death, divorce or partnership breakup.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.