National Center for the Middle Market, Fifth Third Private Bank Business Transition Advisory Team Issue Report Entitled 'Owner Transitions in the Middle Market'

WASHINGTON, Nov. 11 (TNSrep) -- The National Center for the Middle Market, Columbus, Ohio, and Fifth Third Private Bank Business Transition Advisory Team issued a 10-page report in September 2022 entitled "Owner Transitions in the Middle Market - When Business Gets Personal: A Business Owner's Perspective on Selling a Middle Market Company."

The report was written in collaboration with The Ohio State University, Chubb and Visa.

Here are excerpts:

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Middle Market Business Owners Remain Inextricably Tied to Their Companies-- Even When It's Time to Sell

Middle market businesses are the lifeblood of the U.S. economy. Because these organizations tend to be privately owned--many by members of the same family for generation after generation-- the men and women who founded the businesses are deeply and intimately tied to their companies' success stories. They play a hands-on role in many aspects of their businesses, even as their companies mature, grow and evolve.

When a business owner sells all or part of the organization into which he or she has poured blood, sweat and tears, it is no surprise the transition is much more than a business transaction. It is an extremely personal event in the business owner's life. Indeed, personal considerations impact every aspect of the sale, from key drivers to how owners prepare for the transaction to the concerns and challenges along the way. In many cases, these personal factors bear more weight and affect the sales process to a greater degree than purely business or economic factors do.

Most middle market business owners who sell do not attempt to address all these issues on their own. They build teams of advisors around them and report the critical importance of having access to the right advice during the process. Ultimately, most sellers with an experienced advisory team express a high degree of satisfaction and success with the transition. They are pleased with the price received and the ease of the process itself, and often eager to put the funds to work in new ways.

However, few owners make a complete break from the businesses they sell. Nearly nine out of 10 remain involved in some capacity. Sometimes, this happens because buyers need sellers to ensure a smooth transition and other times for personal reasons. Maintaining a connection or degree of control in the business is a top consideration for most sellers.

Whether or not owners stay connected to the business, most owners admit to struggling with the process of letting their companies go. This may help explain why more than a third of owners report negative feelings post transition. Fully eradicating all feelings of regret, concern or worry when it comes to such a momentous event in the life of the business owner may not be possible; but, an extra dose of preparation or trusted advice may help ease some of these less positive emotions.

In the end, selling is a (mostly) rewarding endeavor for middle market business owners. It need not not spell the end of their business careers or even their personal involvement in the businesses they sold. While it appears that you can take the owner out of the business to some degree, you cannot take the business out of middle market company owner. These passionate leaders are deeply entwined in the success of the organizations that fuel the U.S. economy and will continue to be so into the future.

HOW THE RESEARCH WAS CONDUCTED

To better understand how owners' personal considerations, feelings and perceptions impact every aspect of middle market business transitions, the National Center for the Middle Market, in partnership with Fifth Third Private Bank's Business Transition Advisory Team, surveyed a group of 300 middle market executives. The sample included 75 owners of privately held middle market businesses, who benefited from the sale of all or part of their companies in the past 24 months. Of these 75 organizations, more than half are family-owned, with more than three-quarters of these family-owned organizations in their second, third, or fourth generation of ownership at the time of the sale.

We asked these owners about their reasons for selling, the length and the activities involved in the preparation phase, the challenges faced, advisors consulted and the range of emotions experienced. We asked for the sellers' perceptions of their transactions' overall success. The center fielded the survey in April 2022; all transactions occurred during or in the aftermath of the pandemic.

This report shares the summary findings related to the personal dynamics of the sales for these 75 organizations along with insights based on Fifth Third Private Bank's Business Transition Advisory Team's real-world experience advising middle market business owners undertaking sales transitions.

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Key Findings

1. Key sales drivers are often tied to accessing funds for investments or other business opportunities and are not primarily motivated by the owner's retirement.

2. The degree of personal preparedness for a sale is often much lower than the degree of business preparedness, and owners voice significant personal concerns throughout the process.

3. The most challenging aspect of the sales process for middle market business owners is contending with the many emotions entwined with "letting the company go."

4. Business owners' post-sales perceptions are generally positive with feelings of personal satisfaction driven by the success of the negotiations and the sales price secured.

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The National Center for the Middle Market is the leading source of knowledge, leadership and innovative research focused on the U.S. middle market economy. The center provides critical data, analysis, insights and perspectives to help accelerate growth, increase competitiveness and create jobs for companies, policymakers and other key stakeholders in this sector. Stay connected to the center by contacting [email protected].

From business as usual to business unusual, Fisher College of Business prepares students to go beyond and make an immediate impact in their careers through top-ranked programs, distinguished faculty and a vast network of partnerships that reaches from the surrounding business community to multinationals, nonprofits and startups across the globe. Our students are uniquely prepared and highly sought, leveraging Fisher's rigorous, experiential learning environment with the resources of The Ohio State University, a premiere research university with 500,000 proud Buckeye alumni.

Chubb is the world's largest, publicly traded P&C insurance company and the largest commercial insurer in the U.S. With operations in 54 countries and territories, Chubb provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. As an underwriting company, Chubb assesses, assumes and manages risk with insight and discipline. Learn more at chubb.com.

Visa is the world's leader in digital payments. Their mission is to connect the world through the most innovative, reliable and secure payment network--enabling individuals, businesses and economies to thrive. Their advanced global processing network, VisaNet, provides secure and reliable payments around the world and is capable of handling more than 65,000 transaction messages per second. The company's relentless focus on innovation is a catalyst for the rapid growth of connected commerce on any device. As the world moves from analog to digital, Visa is applying their brand, products, people, network and scale to reshape the future of commerce. For more information visit usa.visa.com/about-visa.html, usa.visa.com/visa-everywhere/blog.html and @VisaNews.

Fifth Third Private Bank is a division of Fifth Third Bank, National Association, offering banking, investment and insurance products and services. They bring more than 160 years of experience as trusted advisors to high net worth and ultra-high net worth individuals, business owners and families with over $36 billion in managed assets and named one of the top 40 wealth management firms in the U.S. by Barron's and one of the world's best private banks by Global Finance since 2020. To learn more, visit 53.com/PrivateBank.

Fifth Third Bancorp provides access to investments and investment services through various subsidiaries, including Fifth Third Securities. Fifth Third Securities is the trade name used by Fifth Third Securities, Inc., member FINRA/SIPC, a registered broker-dealer and registered investment advisor registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Securities, investments and insurance products are not FDIC insured, offer no bank guarantee, may lose value, are not insured by any federal government agency and are not a deposit

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The report is posted at: https://www.53.com/content/dam/fifth-third/docs/external/ncmm-fifth-third-bank.pdf

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