Selling a Privately Held Company – 6 Factors to Keep in Mind

What is a privately held company?

A privately held company, also known as a private company or “closely held” company, is a business that is owned by a relatively small number of shareholders or private individuals. In a privately held company, shares are not traded on public stock exchanges, and ownership is typically limited to a small group of investors, often including the company’s founders, management team, and possibly a select group of private investors.

At Raincatcher, 100% of our clients are privately held companies. While there are many benefits to being this size of business, historically it has been a challenge to sell the company or recapitalize. That is the problem we hope to solve.

More "How to Sell" Resources

Contemplating an exit? Have a look at our complete guide on how to sell a business and our pre-sale checklist.

Selling a privately held company is a complex process that requires careful consideration of various factors. Here are six key factors to keep in mind:

1. Business Valuation:

    • A business broker (for small companies) or M&A advisor (for larger companies can help you determine the fair market value of your company. This involves assessing your financial statements, assets, intellectual property, customer base, and other relevant factors. You may want to engage professional valuation services to ensure an accurate and fair assessment.
    • It’s also important to understand that there is always structure involved in business transactions. This structure will help increase total compensation and make sure interests are aligned between buyer and seller.

2. Timing:

    • While it isn’t necessarily within your control, selling in a strong market will help you maximize your total proceeds.
    • Additionally, selling when your company is performing well is a must. This should be done regardless of how the overall economy is doing.

3. Due Diligence:

    • At Raincatcher, we conduct thorough sell-side due diligence on all deals that we represent. This makes the process easier once we get under LOI with a potential buyer. Once under LOI, buyers and their advisors will scrutinize your company’s financials, operations, contracts, legal matters, and more. To facilitate this process, make sure your records are well-organized.

Thinking About Selling?

If you are entertaining selling a business, feel free to request a consultation with one of our business brokers or M&A specialists to learn about our unique process and why we believe it is the best in the industry.


4.  Legal and Regulatory Compliance:

    • Ensure that your company is in compliance with all relevant laws and regulations. Address any legal issues or outstanding liabilities before entering into negotiations. This includes contracts, employment agreements, environmental regulations, and other legal aspects that may affect the sale.

5. Find Strategic Buyers:

      • Make sure that you and your M&A advisor work together to find potential strategic buyers. A strategic buyer is one that has a synergistic interest in your business, such as a supplier, customer or even a competitor.

6. Confidentiality:

    • Be patient. If you are selling a company for less than $1M – $2M, the business brokerage process takes time. As does negotiation, due diligence and transaction financing.
    • If you’re selling your business for $3m+ know that an auction is a lengthy process as well. Your investment banker (Raincatcher) will prepare thorough marketing materials and solicit a number of bids from buyers through multiple stage gates (IOI, managment meetings, LOI, best and finals, etc.) each of these stages can take upwards of a month.

Additionally, it’s crucial to work with a team of professionals, including M&A advisors, tax attorneys and M&A attorneys to guide you through the selling process. Each business is unique, so tailoring your approach to the specific circumstances of your company is essential for a successful sale.