Trigger events are a change in circumstances for a business owner or a company as a whole, creating favorable conditions for a merger or acquisition. An example would be retirement planning on the end of the founder and head.
But while trigger events usually encourage the owner to abandon the status quo and sell the business, they are not the only factors determining whether you should accept a deal. Importantly, it would be best if you did not wait for them to happen before taking the merger and acquisition (M&A) route.
Let’s talk about some of these trigger events and why you should not rely on them alone when deciding to enter into an M&A transaction.
What are some examples of trigger events?
If you had a choice, you would hold on to your business forever. But you know that’s hardly possible because change is the only constant thing in life.
And so, here are some changes that can prevent you from continuing to run your company, sooner or later:
Many people reach a point where they no longer want to work, or they simply wish to enjoy life. These are valid reasons to retire. As a business owner, you may also think it perfect to sell your company once you are planning for retirement.
The desire to cash out and move on
It is not always retirement that motivates an owner to sell their business. It can also be a non-retirement goal, such as resting from operational responsibilities and taking on an advisory role. Another example would be pursuing a different path altogether, which has nothing to do with the existing business.
Other major life changes
There are various other reasons that trigger founders to let go of their business. Some of them may also be a source of tremendous stress, like divorce or health issues in the family.
Trigger events, both good and bad, may provide a strong motivation for you to sell. But as we said, you don’t have to wait for them to happen before making that decision.
How reliable are trigger events in affecting your dealmaking decisions?
Trigger events like retirement may occur many years later. Others may come unexpectedly or not happen at all. So while they can nudge you to consider M&A, you will want to focus on industry or economic factors to know if it’s worth getting into a transaction sooner rather than later.
This proactive approach can open up doors you may not be able to access for another decade if you miss your chance now.
What else should you examine when deciding to sell your business?
Instead of depending on trigger events in dealmaking, there are external factors you can use to gauge if M&A is right for you – right here, right now. Here are a couple of them:
We’ve mentioned leveraging the red-hot M&A market, particularly in the pandemic, pre-, and post-pandemic periods. This has been largely driven by private equity (PE) firms setting their sights on the lower- to middle-market companies.
However, it’s important to note that the favorable market conditions and higher valuations you see today may not be the same tomorrow. So if you want to take advantage of the opportunity, you must act fast.
As we said in a previous blog: Economic cycles tend to run in 10-year time blocks. Once a recession occurs, it will take approximately 10 years for economic activity to rebound to pre-recession levels.
If you miss your chance now, you may have to wait another decade to get your business to a place of unprecedented growth.
What makes sense from a business standpoint
Related to the point above, you have to ask yourself if your business can stand alone during another period of downturn.
On top of that, imagine how a bigger company with deeper pockets and greater resources can amplify your business in the next 10 years. Compare that with what you can achieve if you grow your business organically. Usually, companies choose M&A to scale and bolster their earning potential.
Fuel Business Growth While Achieving Personal Growth
External factors can be a better gauge than trigger events if you think about what’s good for you and your business. In the end, you can even achieve your retirement and non-retirement goals with an effective M&A strategy in place.
At AlignBA, we are proud to share our clients’ experiences as living proof of what we preach. We have worked with small business owners who are now reaping the rewards of selling their companies without waiting for a trigger event to happen.
For instance, we had a client whose spouse fell ill after selling. As a result, he was able to take a leave of absence to care for her, something he would never have been able to do if he was still running the business.
Many clients report having more time to do what they enjoy, like hunting, fishing, or golfing. One of our clients is set to do a bunch of philanthropic work down in the Caribbean, setting up charities and programs to help underdeveloped countries. We also have a company with six family members who will all be millionaires now and get a second bite of the apple.
All these clients have one common denominator: they leveraged the red-hot market to improve the growth potential of their business and maximize their wealth. This is something AlignBA can help you achieve whether or not you’re planning to retire, pursuing another passion, or wanting to make the most out of your exit.
Our expert M&A advisors will provide you with guidance and a custom plan, so you have everything you need to succeed.
Make AlignBA your trusted partner in determining the perfect time to sell, finding the right buyer, and preparing for the completion of your deal. Contact us today to get started.