Investigating Business Owner's Reasons for Selling

Contact Neufeld Legal PC for corporate transactional and legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

All too often, prospective business purchasers have not looked into the underlying reasons behind the existing business owner's interest in selling their corporate enterprise, even though such information could have proven highly beneficial to their negotiations related to the business acquisition and the purchase price. As such, it is important to investigate and discern early on the seller's true reasons (and motivations) for selling the particular business, and if there is any strategic advantage from that particular knowledge.

Personal Factors that can Motivate a Business Sale

• Retirement: This is one of the most common reasons for selling a business, especially among baby boomers. An owner may be ready to exit the workforce and use the proceeds from the sale to fund their retirement.

• Burnout or Loss of Passion: Running a business is demanding and can lead to burnout. An owner may feel tired of the daily grind, a lack of interest in their industry, or a desire for a new challenge or a better work-life balance.

• New Opportunities: An owner may want to pursue a new business venture, a different career, or a completely new lifestyle. Selling the current business provides the capital and freedom to move on.

• Health Issues: Medical problems can prevent an owner from adequately running the company, making a sale a necessary step to focus on their well-being.

• Financial Needs: An owner may need to sell to pay off personal or business debts, or to access a large amount of capital for other personal needs, such as a major life event or a pressing emergency.

• Family or Partnership Issues: Disputes with business partners or a need to relocate for family reasons can also be a driving force behind a sale.

• No Succession Plan: If there are no family members or employees interested in or capable of taking over the business, selling to a third party may be the only viable option.

Business Performance and Market Conditions that can Precipitate a Business Sale

• Positive Momentum: It may seem counterintuitive, but the best time to sell is often when the business is performing well and on an upward trajectory. A profitable company with a history of growth is more appealing to buyers and can command a higher sale price.

• Approaching a Plateau: An owner may feel that the business has reached its peak under their leadership and that further growth would require significant investment, time, or risk that they are unwilling to take on. Selling allows someone with the resources and desire for that kind of growth to take over.

• Industry Changes: Changes in the market, such as new technology, regulations, or increased competition, may require a substantial investment that the current owner is unable or unwilling to make. Selling before these changes negatively impact the business can be a smart move.

• Unsolicited Offer: Sometimes a business owner receives a compelling, unsolicited offer that is simply too good to refuse.

• Financial Difficulties: A business that is struggling financially, losing money, or facing bankruptcy may need to be sold to prevent further losses and pay off creditors.

• Seller's Market: When economic conditions are favorable, with high demand for businesses and readily available financing for buyers, it can be an ideal time to sell and maximize the return on investment.

When it comes to the legal component of corporate mergers & acquisitions, that is when the law firm of Neufeld Legal P.C. comes into play. Such that when your company is seeking knowledgeable and experienced legal representation in orchestrating and completing business mergers, acquisitions and divestitures, contact our law firm at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.

Investigating Business Owner's Reasons for Selling: All too often, prospective business purchasers have not looked into the underlying reasons behind the existing business owner's interest in selling their corporate enterprise, even though such information could have proven highly beneficial to their negotiations related to the business acquisition and the purchase price. Read more.