Advice on selling your business to a private equity firm

By Maureen Milford

Charles Scheidt, who sold his family business, American Roland Food Corp., to Vestar Capital Partners in 2013, offers some advice for family business owners considering selling their companies to a private equity firm:

Start the process early.  Allow enough time to explore all the options, including a sale to a family office or a strategic buyer as well as a sale to a private equity firm. “The process was twice as demanding as I thought it would be,” Scheidt says.

Hire the right advisers. You should feel comfortable that you’re engaging an investment banking firm or other adviser who is committed to your interests. Scheidt used an intermediary to approach investment bankers so that they didn’t know who the prospective client was. He says he found significant differences in approaches and styles among advisers. Scheidt advises family businesses to insist on confidentiality agreements during the process of hiring an investment banker.

Analyze your numbers. Scheidt found that although he had a very good accounting system, third parties would slice and dice the numbers “in ways I never heard of [and had] never been interested in.” During the selling period, Scheidt would get requests for various reports, and it became an enormous strain on the business.

Wait for the right buyer. Tell your adviser to investigate prospective buyers and bring in only those who have a good reputation. Be confident the business and its team will survive under the new owner.

Expect change. After the business is sold, the new owners will do some things differently. “Buyers will change things and you better realize that going in and not take it personally,” counsels Scheidt, who says he also prepared his employees for change.
 

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