The most important success that every business owner strives to achieve, is their successful exit. Financially, this is the basis that allows them to design the life and the work that they love. It also allows them to transition from ‘private business’ to their ‘family office,’ which takes care of their wealth and their family’s activities and interests. Succeeding in an exit is also critical to protect the business itself from a decline and eventual failure, which has such negative consequences on owners, employees, their families, towns across the nation, and the economy.
But the process of buying and selling businesses is complex and can be fraught with challenges.
One of the main challenges for companies that are put up for sale is finding the right buyer – or, finding a buyer at all. According to industry statistics, 95% of companies put up for sale through intermediaries do not sell in the first year, and between 90% and 95% of them are never actually sold.
A reliable buyer with the right strategy is the difference between success and failure. The most important success that every business owner strives to achieve is their successful exit. Succeeding in an exit is critical to protect the business itself from a decline and eventual failure. The vast majority of companies fall out of LOI several times and never sell, and this has negative consequences on owners, employees, their families, towns across the nation, and the economy. How can owners avoid these fatal mistakes? What 2 types of buyers should owners avoid and which kind should they seek out? We sat down with Founders Trust to get the scoop.
This can be attributed to several factors; from lack of capable buyers for that type and size of company; to beliefs about valuation which are not supported by the specific industry and the specific size of the company; to buyers not being able to close; to buyers strategies of layoffs and slashing which make owners uncomfortable.
Founders Trust is a buyer which is different from the other buyers on the landscape in the U.S. Founders Trust is an investor with a unique approach to acquisitions, which involves growing and supporting its companies instead of consolidating them. It is not private equity, it does not have investors, it does not have a limited fund life, it is not in a rush, and it does not have internal returns that it needs to meet.
Founders Trust invests in and supports the growth of each of its companies in the long run, and this is its method for creating long-term value and sustainable success.
On the landscape of buyers, there are two main types: financial buyers and strategic buyers. Financial buyers, also known as private equity firms, are primarily interested in the financial performance of the company rather than the long-term viability of the business. They acquire companies, often with the strategy of cutting costs or dismantling the company to make a profit. They must perform for their investors within each fund’s 8 to 10 year life, and, within each fund, they buy and sell each company within a 3 to 5 year period. They strive to meet internal rate of return (IRR) targets for their investors, during this limited fund life. Most people are familiar with all of the constant news stories about significant job losses, a decline in the quality of products and services, and a negative impact on the local or national economy.
The second main type, strategic buyers, acquire companies with the intention of conglomerating them with their existing operations. While this can lead to synergies and increased market share, it can also result in job losses as redundancies are identified and eliminated. In some cases, strategic buyers may also be motivated by a desire to eliminate competition, which can lead to a reduction in innovation and a decline in the industry’s overall health.
The successful exit from a company poses a challenge for owners. New leadership and culture, or the shutting down of operations, often result in the loss of the company’s quality of products and services, identity, vision and values. This can be particularly difficult for founders and owners who have invested a great deal of time and effort in creating a successful business.
Founders Trust is an investor with a unique approach to acquisitions, which involves growing and supporting its companies instead of consolidating them. The invests in and supports the growth of its companies in the long run, and this is its method for creating long-term value and sustainable success.
Founders Trust completes acquisitions with its Frictionless Acquisition System™ (FAST) which consists of (1) understanding and liking the core strategy of the buyer, (2) all parties knowing each step of the buyer’s acquisition process in advance, (3) all parties having the documentation and forms of contracts in advance, including most of the terms of transactions, before discussions begin, and (4) reliability of closing.
For private companies, since 2008, Founders Trust has completed each and every transaction for which it has entered into a Purchase Contract. It has also never renegotiated terms after it has entered into a Purchase Agreement. This is important for owners who need to achieve their exit, especially for small and lower middle market private companies, where 90% to 95% companies listed for sale in the U.S., fall out of contract, often multiple times, and never sell.
“Even in the worst and most uncertain markets, it is important to know that you have entered into a transaction with a partner that you are able to rely on,” says Mr. Williamson.
In the broader industry in the U.S., the majority of small companies that go under contract, later fall out of contract. This is not fair to owners. In contrast, Founders Trust is experienced enough to always close each transaction for which it enters into a Purchase Agreement. Also, by being transparent in its approach, this avoids misunderstandings and miscommunications later in the process, which can often lead to complications and delays or broken deals. This can be particularly important in the context of mergers and acquisitions, where negotiations can be complex and sensitive, and any ambiguity or lack of clarity can cause significant problems down the line.
Some exiting owners want to retire, while others want to stay on, with less hours, and only doing the work that they love at the company. In both cases, existing employees at the company are trained, alongside with new individuals with similar values and culture, where needed, to complement in needed areas.
Founders Trust has a proprietary system with which it analyzes a company’s existing teams, processes, culture, and personalities, and brings in additional well-matched capabilities with the key human metrics which will complete the whole circle.
Often, owners love one area of the business but hate a lot of the other constant stressful work that comes with ownership. Often, owners want to exit, upgrade their life or family office with cash from an exit, and a the same time stop doing the constant work that they hate, but be able to stay on for less hours, doing only the work that they love, in one area of their business.
This is a win-win situation, because the owner achieves all of his goals, and the buyer feels safe with a company whose culture is still anchored by the values and energy of the founder or owner.
This continuity makes continued stability easier, while providing quality of life 360 degrees to the owner – in doing what he loves, while having the cash from having achieved the exit.
Matt Williamson, CEO of Founders Trust, says, “Business owners build their companies from nothing. We have respect for these people. And we’re here to help them achieve their exit. They deserve to see their work and what they believe in to continue on”.
Throughout the process, Founders Trust remains transparent and communicative, working closely with founders to come up with a solution that supports their timelines and goals. In many cases, the owner of the company is allowed to take an advisory role in the company and is assigned a unique desk from where he can contribute towards the development of the organization. The company is dedicated to preserving the values, teams, and independence of each business it acquires, and it is committed to ensuring the long-term success of each company.
Mergers and Acquisitions (M&A) can be a complex and challenging field to navigate, and success often depends on having a clear strategy and approach. The business has found success in the industry as an investor and buyer that specializes in acquiring small to middle market privately-owned companies in the U.S. with successful management in place and a solid operating track record.
Founders Trust stands out as a unique acquirer in its core strategy, which involves growing and supporting its companies instead of consolidating them. Unlike traditional private equity firms that acquire companies to restructure and consolidate them, Founders Trust takes a long-term approach and invests in companies to help them grow and achieve their full potential.
There are well-defined criteria for the businesses it’s interested in acquiring, which sets it apart from its competitors. Mr. Williamson says, “Founders Trust has very specific criteria for the businesses that we are interested in. We buy small to middle market, privately-owned companies in the U.S. with successful management in place and a strong operating track record. That means profitable companies that have some successful history behind them. We’re not interested in start-ups because start-ups do not have management in place which is already successful, with a history behind them.” This focus allows them to be more efficient and effective in their M&A activities by avoiding companies that are not a good fit for their investment strategy.
Founders Trust’s Frictionless Acquisition System™ is a testament to their commitment to transparency and certainty. This ensures that both parties have a clear understanding of the terms and conditions of the transaction from the outset.
Founders Trust’s recent recognition as the “Best U.S. Small & Medium Business Buyer 2022” by Acquisition International and Best SME-Focused Acquisition Firm, USA 2022 by New World Report North America Business Awards, are achievements that highlight the company’s excellence in the M&A industry. The awards are a testimony to the company’s ability to be a reliable buyer, and also, as importantly, provide stability and quality of life to its companies and teams in the longer term.
Matt Williamson, CEO of Founders Trust, expressed his gratitude to the team by saying, “Our thanks goes to the team here at Founders Trust, from individuals in each of our focus areas to the founders we work with, to the teams at each company. We truly believe that they are the best in the industry, and we are grateful. The team lives and breathes the shared mission that drives the core of what we do”.
Pull Quote: For private companies, since 2008, Founders Trust has completed each and every transaction for which it has entered into a Purchase Contract. It has also never renegotiated terms after it has entered into a Purchase Agreement. This is important for owners who need to achieve their exit, especially for small and lower middle market private companies, where 90% to 95% companies listed for sale in the U.S., fall out of contract, often multiple times, and never sell.
Pull quote: Founders Trust is not a Private Equity buyer or a Competitor buyer. It does not buy then sell a few years later, and it does not do layoffs or conglomerations – it supports each company for long term independence, growth and success.
Description of the company: Founders Trust, www.founderstrust.org, is a company that specializes in helping small and middle market, private companies, sell their businesses in a way that preserves their values, teams, and independence. With a leadership team with decades of experience in acquiring companies, Founders Trust understands the complexities and challenges that come with the sales process and has developed the Frictionless Acquisition System™ (FAST) to be a reliable transaction partners for owners to succeed in their exit.
– Editorial Staff