………the decision to sell or not to sell is not necessarily an either-or decision.

To Sell or not to sell?

THAT IS NOT THE ONLY QUESTION.

Every owner of a chemical company will inevitably face this question.  There are whole host of factors that go into a decision to sell or not to sell. Most can be broken down into two categories:  financial and personal.

In the article that follows, we will review some of the most common factors that lead to a decision to sell or not to sell.  We will also discuss why “To Sell or Not To Sell?” is not the only question, and why there are a variety middle courses that can be taken.

FINANCIAL CONSIDERATIONS...

The financial considerations that go into whether an owner should sell or not sell are fairly straightforward.  Here are the main elements:

• What price can the business sell for?
• What would the owner have after-tax after the deal closes?
• Will the multiple for the business increase or decrease over the next several years?
• What would be the cash-flow of the business over the next several years if the owner kept it?
• What would the owner have after-tax, during this period of time?

These are straightforward questions, but not necessarily questions that have easy answers.  Projecting earnings and cash flow going forward is always a difficult exercise.  Tax rates may change.  Multiples will change as well. What you could earn on the money that you get selling the business involves anelement of speculation.   Nevertheless, an owner can get a reasonable ballpark on these figures and see if it makes sense from a financial perspective to sell or not to sell.

PERSONAL CONSIDERATIONS….

Financial considerations however are not always paramount.  In many cases, there is a personal element to the decision to sell or not to sell, and in some cases, personal considerations are more important than financial ones.  So let’s look at some of the common personal considerations that can go into a decision to sell or not to sell.

• Age:  Obviously at some point, age is a factor to be considered.  But old age for many is a relative term.  There are many a 70 year old who wants to ontinue to own and run a chemical business.  And there are many a 50 year old who tires of running a business.
• Health:  Another obvious factor in some cases.  If there is a prospect for declining health in the near or intermediate future, that may impact on the decision to sell or not to sell.
• Family matters:  Are there family members that can succeed you and run the business?  Is this a business that you want to leave in family hands over a number of generations?
• Do you want to retire or work? Some owners want to retire.  Some want to work for the rest of their lives.  Some want something in between.
• Are there other things you may want to do?  Some owners have other business interests or career paths that they want to pursue.
• Conflict with other shareholders. 

But the decision to sell or not to sell is not necessarily an either-or decision.  There are a variety of ways for an owner to chart a middle course, somewhere between these two alternatives.  For an owner who wants to get some cash, but wants to continue to work and/or have the prospect of a second bite of the apple at a later date, there are a number of creative ways to accomplish such objectives.  Selling a partial stake in the business, refinancing to take some cash out, creating an ESOP, merging with another company, etc.  The possibilities are numerous and creative minds can come up with a structure to meet most needs.  So when considering whether to sell or not to sell, remember that that is not the only question.