Navigate Through The choppy Waters Of A Deal Structure
Khaled Baranbo
Business Broker - Helping Small To Medium Sized Business Owners Value & Sell Their Business With Confidence
Why do you need to know the different types of transactions when selling your business?
If you're thinking of selling your business in the next 6 to 12 months in Ontario, you may be asking:
It's important to remember that buyers are sourcing for businesses like yours to buy in different confidential marketplaces. Some do hire the expertise of a buy-side broker or requisition M&A advisor.
You've finally done it.
After years of hard work, you've built your business up from the ground and now it's time to reap the rewards. You're ready to sell.
But before you do, there's one key question you need to ask yourself: What type of transaction do I want?
Here's a quick rundown of the different types of transactions and what they mean for you as a business owner.
Asset Sale
In an asset sale, the buyer purchases some or all of your company's assets, but not the company itself.
This type of transaction is often used when the buyer is only interested in certain parts of your business, such as your customer list or your patents.
One advantage of an asset sale is that it allows you to keep your company intact and potentially sell it again in the future.
However, one disadvantage is that it can be more difficult to negotiate since the buyer may not be interested in all of your assets.
Stock Sale
In a stock sale, the buyer purchases all or part of your company's stock.
This type of transaction is often used when the buyer wants to control the entire company or when the company is being bought by another company in the same industry.
One advantage of a stock sale is that it can be less complicated than an asset sale since only one type of asset is being exchanged.
However, one disadvantage is that it can be more difficult to negotiate since the buyer will likely want a majority stake in your company.
Merger
In a merger, two companies combine to form a new company.
This type of transaction is often used when both companies are in the same industry and want to combine their resources to compete more effectively against their rivals.
One advantage of a merger is that it can be less disruptive for both companies since they continue to operate separately during negotiations.
领英推荐
However, one disadvantage is that it can take longer to complete since both companies need to agree on everything from the name of the new company to who will be on its board of directors.
Transaction Settlement
Once the purchase agreement has been signed, it's time to settle the transaction.
This is when the buyer pays you and takes ownership of the company.
There are two main types of settlement transactions: full payment at closing and earn-outs. With a full payment at closing, the buyer pays you the agreed-upon amount in full at the time of closing.
With an earn-out, the buyer pays you a portion of the purchase price upfront and then makes periodic payments over a while until they've paid you in full.
Earn-outs are typically used when there's some uncertainty as to whether or not the company will be successful under new ownership.
Final Thoughts on Transaction Structure
There are many factors to consider when selling your business, but one of the most important is deciding what type of transaction you want.
Do you want an asset sale?
A stock sale?
A merger?
Each option has its advantages and disadvantages, so it's important to weigh all your options before making a decision.
Ultimately, though, the best thing you can do is seek out professional help so you can make sure you get the best possible deal for your business.
Our professionals at Ontario Commercial Group are committed to providing you with a service that you can trust. We’re very familiar with the limitations and practices for M&A in Ontario and can help entrepreneurs with matching current sell-side deals in the province of Ontario, Canada. If you’re ready to sell your business, contact us at Ontario Commercial Group!
Our hands-on approach and commitment to our client's success set us apart from other firms in the industry. If you consider selling your business, we would be honored to help you navigate the process and realize your goals
All The Best in Successfully?Valuing & Selling Your Business in 2023
Khaled Baranbo,?B. Com, CM&AA, CBI, CPES, CFC Broker - Certified M&A Advisor - Certified Business Intermediary
Direct:?416-575-4032 -? Direct Office:?211 - 3475 Rebecca St. Oakville, ON L6L 6X9
RE/MAX Real Estate Centre Inc., Brokerage - 905.333.3500
Follow us on LinkedIn for new deals?and sell-side tips