Forest2Market, in business now for about 20 years, was founded with private equity money, so there was always the specter of a sale. That happened in early 2019, the same year the company sold to Battery Ventures. The plan was for Forest2Market to become a platform, with add-ons in different verticals to follow.
Pete Stewart, president and CEO of Forest2Market, says before getting into a sale process, it’s important to understand the value system of the buying entity.
“I've heard this over my career for forever, but until you really experience it, maybe you don't really understand it,” he says. “And I didn't as good as I should have. They have to have some aligned values, and particularly the senior management of the would-be acquired company and the senior management of the private equity firm need to agree on the vision going forward.”
That, he says, means the vision for the employees, the vision for the executives, and the vision for the growth of the company. If all of those things can be agreed upon, and the parties don’t waffle, there’s a much higher chance that things will go well.
“If I was giving any advice to some entrepreneur, I would just make sure that you really understood the intentions of the buyer very clearly,” Stewart says.
Stewart says it’s important, as companies plan for a sale, to think about who your potential buyer is — whether that's private equity, a strategic. Then owners can think about what can be done to de-risk their business for that type of buyer and plan accordingly. It means having audits done, getting accounting in perfect condition, and have other processes and systems in order. But sellers, he says, should take it one step further.
“Don't just do them,” he says. “Document them and then repeat those over the years. What the buyer will perceive is there's less risk in this business because these managers know what they're doing and that's a good thing.”
Some of this, however, is easier said than done, especially for young, growing businesses.
“When you don't have much money — you're trying to build a business, build revenue, spend all your money on sales — it's quite hard to spend money on something that's not generating revenue when you're a young company,” he says. “So, there's got to be a balance. I understand that, but it cannot be overlooked.”
Stewart, along with Scott Anderson, partner at Womble Bond Dickinson; and Jim Benedict, senior vice president/senior wealth strategist at PNC; spoke at the recent Charlotte Smart Business Dealmakers Conference about how to de-risk, plan and execute a liquidity event. Hit play on the video above to catch the full panel discussion.