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Preparing Your Company for a Sale is About More than Numbers

Building your company has been no small feat. You’ve poured your soul into the business. You’ve persevered in the face of challenges and sacrificed a great deal personally. You’ve also experienced great success. Now, you’re ready to retire and recapitalize or sell your business to a private equity firm. But are you prepared for the transaction?

Thorough preparation is probably one of the reasons why you’ve been successful. You likely invested a significant amount of time preparing before the first time you met your largest customer, or before meeting with a material supplier, or before making a major hire. Shouldn’t you be at least as prepared for the most important professional decision of your life?

Preparing for a transaction goes beyond just having your financials in order. It’s about taking a holistic view of your company and putting yourself in the shoes of the private equity firm. If you were the private equity firm, what would get you most excited about the company? What might concern you?

In preparing for a company sale, the area we often see overlooked is succession planning and ongoing management post-closing. If you’re looking to sell and retire from your business, who will run the company if you’re no longer active? Have you developed and mentored a management team beside you to drive future growth if you’re not there?

The most progressive owners we meet have a clear plan for management succession in advance of a potential transaction. For example, Clowe & Cowan, a Texas-based distributor of high performance water pumps, pipe, valves, and other water infrastructure equipment, was founded by Art De La Torre, who led the Company for 43 years prior to exiting in a sale to Montage Partners. In anticipation of an eventual exit and retirement, Art had established a clear plan for management succession. This enabled Montage Partners to support a six-person management team to acquire the company from Art, which allowed him to fully cash out and successfully retire. The management team we backed owned significant equity post-closing and more than doubled the size of the company during our partnership, further enhancing the proud legacy that Art created. The future success of the company was directly tied to Art’s thoughtful vision to diversify the company beyond himself.

In addition to succession planning, owners looking to prepare for a private equity transaction should step back and evaluate their company through the lens of an outsider. How would you describe the company’s culture? Why do customers choose to work with your company? What would your employees and customers say about the company if you weren’t in the room? Why do employees stay with the company? What positions need to be filled to promote further growth? Questions such as these aren’t always top of mind while you’re running your company day-to-day. Some of the answers to these questions and others might surprise you (often in a positive way).

Keep in mind, just as no person is perfect, neither is there a perfect company. Be prepared to discuss ways in which your company can improve in the future. Think about areas of improvement as potential opportunities.

Most importantly, know that selling your company doesn’t happen overnight. It takes time to properly prepare for a sale, and the best companies start early and think outside of the box—beyond simply preparing financials.


About Montage Partners
Founded in 2004 and located in Scottsdale, Arizona, Montage Partners is a private equity firm that invests in established companies in the western U.S. with EBITDA between $1 million and $5 million. Above all other investment criteria, Montage Partners invests in exceptional people. Montage Partners provides liquidity to those who have spent years of their life building great companies, Montage Partners protects those companies through a transition of ownership and Montage Partners supports the next generation of a company’s leadership in executing on growth initiatives. For more information, please visit www.montagepartners.com.