-
- News
- Books
Featured Books
- pcb007 Magazine
Latest Issues
Current IssueThe Sustainability Issue
Sustainability is one of the most widely used terms in business today, especially for electronics and manufacturing but what does it mean to you? We explore the environmental, business, and economic impacts.
The Fabricator’s Guide to IPC APEX EXPO
This issue previews many of the important events taking place at this year's show and highlights some changes and opportunities. So, buckle up. We are counting down to IPC APEX EXPO 2024.
Getting to Know Your Designer
In this issue, we examine how fabs work with their design customers, educating them on the critical elements of fabrication needed to be successful, as well as the many tradeoffs involved. How well do you really know your customer? What makes for a closer, more synchronized working relationship?
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - pcb007 Magazine
Punching Out! Timing: When is the Best Time to Sell?
August 18, 2016 | Tom Kastner, GP VenturesEstimated reading time: 3 minutes
A few of the top questions we receive relate to the timing of the sale of a business. The first is, "Is now a good time?" The second one is, "How are market conditions?" These are the top FAQs.
The ideal time to sell is when the business is growing, there are no major issues with the business, sales and profits are up, the industry sector is good, the overall economy is doing well, and buyers are active and have money falling out of their pockets. The stars do not align very often, so it is difficult to time the market perfectly. For example, we all know owners who sold before the markets collapsed in 2000 and 2008. For every owner who sold at the right time, there are probably 10 who waited too long.
The two big questions to ask yourself are, “Is the business ready?” and, “Am I ready?”
To determine if a business is ready, here are some of the major items to check:
- Are sales and profits up for 2–3 years?
- Is your forecast positive and achievable for the next 12 months?
- Are gross profit, net profit and EBITDA margins steady or improving?
- Are there any customer concentration, key person risk, environmental issues or other risk factors?
- Are the financials in order, and how is the company’s financial reporting?
- Has the company kept up with investments and technology?
These are all major factors for achieving a good valuation for the company, as well as obtaining the best terms (cash at closing vs. deferred compensation) and ensuring a smoother sale process. The electronics industry in the 2010 to 2016 period has experienced unsteady growth, and few companies have seen 12 or more consecutive quarters of expansion. A top reason for deals to not get to the finish line is for revenues and/or profits to drop while a business is in the market. Even if the company has done well before going to market, it is important to maintain growth during the sale process.
Are You Ready?
The company may be performing well, and all of the company’s reporting ducks may be in a row, but the owner needs to be prepared for the process. Some of the key questions we ask owners are "What are your goals?" and "What are your plans post-sale?"
There are a few reasons why we ask owners these questions. First, we want to determine if an owner wants to retire soon after the sale, or stick around and help the company grow, as some buyers have different preferences. Second, buyers will ask the same questions, so it is good to see if the owner has a good answer prepared. Lastly, we like to determine if the owner has concrete goals post-closing. The process can be time-consuming, stressful, and lengthy, therefore, it is helpful if the owner has a clear goal in mind. Your advisors should help to make the process easier, but even the smoothest projects ultimately will have some bumps in the road.
Buyers and advisors all have stories of deals that fell apart at the last minute because the owner pulled the plug, often after spending significant time and money on the deal. Here are some questions to ask yourself before going to market:
- Am I ready to let go of the business?
- Do I have plans post-closing? (By the way, I hear golf gets boring pretty quickly…)
- Is my retirement plan in place?
- Have I talked with an estate attorney/tax advisor to set up any trusts or charitable donations?
- Do I want to sell and retire, or keep a minority stake in the company and help the buyer grow it?
- Are the stakeholders in the business (spouse, children, minority partners) ready for a sale?
- Am I prepared to speak with buyers who might call my baby ugly?
When buyers first meet or speak with an owner, they are assessing the business, but they are also trying to determine if the seller is reasonable and trustworthy. Even if you plan to throw the buyer the keys at closing, the buyer will still need to work with you for several months during due diligence. The buyer does not want to waste time and expenses working with an unprepared seller, so the better prepared the smoother the process will go.
Timing the sale of a business is key, but being prepared is critical. The well-prepared owner of a market-ready business can help ensure a higher valuation, better terms, and a smoother process at any time.
Tom Kastner is the president of GP Ventures, an M&A advisory firm focused on services for electronics and technology companies. To contact Kastner, click here.
Suggested Items
Elementary, Mr. Watson: Ensuring Design Integrity
03/28/2024 | John Watson -- Column: Elementary, Mr. WatsonBack in February, many of us watched the "Big Game." It reminded me of the saying, “It's not how you start that is important, but rather how you finish." It is perfectly okay when you are talking about sports, you get off to a bad first half and need to recover in the second half. However, when it comes to PCB design, this is not a good practice. If things start badly, they usually don't recover. They continue down that same path, costing more money and losing design time.
ASMC 2024 to Showcase AI, Smart Manufacturing and Sustainability to Advance Chip Industry Manufacturing Expertise
03/27/2024 | SEMIMore than 125 experts will offer insights into the latest semiconductor manufacturing strategies and methodologies as hundreds of industry stakeholders gather at the 35th annual SEMI Advanced Semiconductor Manufacturing Conference (ASMC 2024), May 13-16 in Albany, New York.
Mycronic to Showcase More Versatile, High-productivity Assembly Solutions at IPC APEX EXPO 2024
03/27/2024 | MycronicMycronic, the leading Sweden-based electronics assembly solutions provider, will continue to respond to growing customer demand for high-flexibility, high-productivity solutions for zero-defect PCB assembly at IPC APEX EXPO 2024 in Anaheim, CA on April 9 - 11.
IPC APEX EXPO 2024: LPKF—Debunking Depaneling Industry Perceptions
03/27/2024 | Nolan Johnson, I-Connect007In this audio interview, listen to Jake Benz discuss advances in laser depaneling at LPKF. Thanks to advances in laser technology, perceptions about laser depaneling are changing from a low-speed, specialized process to a high volume process suitable for production manufacturing. Benz elaborates on some of the development and engineering that went into creating their latest, most capable depaneling machines.
The Many Complexities of PFAS
03/26/2024 | Marcy LaRont, PCB007 MagazineIn its simplest definition, PFAS is a group of chemicals used to make fluoropolymer coatings and products that resist heat, oil, stains, grease, and water. Fluoropolymer coatings can be in a variety of products. Though this definition is not inaccurate, it can be misleading. Depending on who you ask, there are upward of 10,000 PFAS chemistries that can meet various definitions.