3 Keys to Successfully Selling Your Business to Private Equity Here's how to enhance the attractiveness of your business to potential buyers and set the stage for continued success in the future.

A successful entrepreneur has spent years perfecting their product or service, hiring an all-star team, finding new customers, and increasing revenues. It makes sense that if the opportunity to sell that business arises, its owners would want to sell at a premium price.

If that potential buyer is a private equity (PE) firm, the process can be complicated but also quite rewarding. PE firms typically buy or invest in businesses that have an established track record of revenue generation and profitability. A PE firm will also likely have a vision for increasing the business's value—whether by creating new products, expanding into new markets, etc.

When selling a business to a private equity firm, there are several things to know before starting. For a successful sale to private equity, it's important to follow these three key steps.

1. Build a strong management team.

Having a strong management team is arguably the "most critical way to prepare for a sale to private equity," says Craig Arends, Managing Principal of CLA's Private Equity Practice. With 35 years of professional experience, Arends helps businesses prepare to sell to PE and to get improved terms.

PE firms look for businesses that can operate independently of their owners. While an owner may remain with the business following a sale for a predetermined transition period, the rest of the leadership team can potentially remain for much longer. A PE firm wants to see that your business can thrive under the leadership of an established and capable management team.

A top-notch leadership team can also help in pre-sale preparations such as financial audits and operational improvements, including streamlining processes, improving efficiency, and enhancing decision-making. "That can instill confidence in potential buyers and probably drive up the investment they're willing to put into the business," Arends says.

It's also important to consider culture fit. Arends recommends working with a PE firm whose mission aligns with your company's culture and values. "Ignoring this can lead to conflicts and challenges post-sale," he says.

2. Develop a clear growth strategy.

A well-defined growth strategy should include both organic and inorganic growth opportunities. Organic growth might involve expanding your customer base, increasing sales, or entering new markets. Inorganic growth could involve mergers and acquisitions, strategic partnerships, or other forms of business expansion.

Arends explains the importance of this strategy in the context of private equity: "Post-sale, the involvement of the owner can vary significantly depending on what the private equity firm wants. The owner needs to be able to help during that transition period, to allow a smooth handover and achieving the growth strategies set out for the business."

Additionally, leveraging digital strategies can be a significant driver of growth. "How do you incorporate digital strategy into your business? How do you leverage new systems for better information, automation, and artificial intelligence? These are key components of a modern growth strategy," Arends highlights.

3. Work with experienced advisors.

Navigating the complex process of selling a business to a PE firm requires guidance from seasoned professionals. Arends strongly advocates engaging with experienced advisors early in the process. "Deals get done with good advisors. Work with experienced professional financial advisors and experienced investment bankers," he affirms.

CLA, for example, brings a wealth of knowledge and experience when advising a business on a sale, helping owners avoid common mistakes and enhance the sale process. As the eighth-largest accounting firm in the United States, CLA provides a comprehensive suite of advisory services, providing holistic support throughout the transaction—a valuable and distinctive service offering in the industry.

Working with advisors should include an integrated approach:

• Valuation: Accurately valuing your business so you receive a fair price.
• Negotiations: Skillfully negotiating terms to boost the benefits of the sale.
• Due diligence: Guiding you through the due diligence process so all aspects of your business meet the scrutiny of potential buyers.
• Tax planning: Structuring deals in a tax-efficient manner to increase your net proceeds.

Arends underscores the importance of a collaborative advisory team: "Having advisors who work together seamlessly can make a big difference. At CLA, we provide a one-stop shop with tax advisors, financial advisors, and wealth advisors all working together." This integrated approach connects all aspects of the sale and aligns your succession planning and overall objectives.

Click here to find out more about CLA and how their extensive experience and industry-specific knowledge make them an invaluable advisor in any business sale.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com.

CLA exists to create opportunities for our clients, our people, and our communities through our industry-focused wealth advisory, digital, audit, tax, consulting, and outsourcing services. CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.