Selling Your e-Commerce Company For Private Equity Money

Of course, some exit strategies are better than others. Anything beginning with 'Chapter' ' as in of the U.S. Bankruptcy Code ' is generally not a good choice. Let my heirs sort it out leaves little work for you, but can create an expensive mess for those left behind. Passing the business on to children requires that they be interested in running the business ' but many do not have the dedication of their parents, especially if the parents' success has made the children wealthy.

Private Equity Purchases: A Path to Consider

Instead, many plan for the eventual sale of the business, even as part of the initial business plan. (See, 'Punk Rock and the Sale of Your e-Business,' in the January edition of e-Commerce Law & Strategy.) With that goal in mind, no business seller today, regardless of size or type, can ignore the private equity ('PE') fund as a potential buyer. As the well-known bank robber Willie Sutton is reported to have said (but did not, as discussed below), he robbed banks 'because that's where the money is.' According to a study by Dealogic reported in a Wharton School publication (http://knowledge.wharton.upenn.edu/article.cfm?articleid=1639#, registration required): 'Nearly a third of the dollar value of all U.S. acquisitions (in 2006) involved private equity firms.' Another Wharton study reports the opinion of private equity kingpin Steven Schwarzman of The Blackstone Group that: 'Private equity has jumped from the backs of financial journals to the front pages of mainstream newspapers.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1661 ' registration required.) A Wharton professor noted the PE funds' interest in smaller companies: '(E)ven large investment firms are willing to take on small, seed and first-round financing. That's very good news for innovation in the United States. These top-tier firms used to not want to do small deals. Now they are willing to do them just to get their foot in the door.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1639, registration required.) One private equity firm's Web site, www.altassets.com, even chronicles the private equity markets as the self-appointed 'private equity industry's leading information source.' Entrepreneurs contemplating a sale of their company today, therefore, must look to private equity markets for the same reason that Willie Sutton focused on banks. (See, www.people.hbs.edu/jlerner/info.html, and www.library.hbs.edu/guides/venture, for a list of resources for locating such funds.)

By private equity fund, I mean the closely held entity, typically a limited partnership or LLC, that invests substantial amounts in businesses with growth or profit potential, typically in conjunction with acquiring significant input, if not control, over management. Many definitions are available online (see, e.g., http://www.answers.com/topic/private-equity-fund?cat=biz-fin, www.allbusiness.com/glossaries/private-equity-fund/4953793-1.html or http://en.wikipedia.org/wiki/Private_equity_fund), but no universally accepted one exists ' and why should one? From the perspective of the recipient of the investment, the investor's money is welcome (and control disliked) whatever it may be called. Typically, however, private equity funds do not build equity value in themselves (although they obviously want equity to build up in the companies in which they invest, often called their 'portfolio companies'). As profits are generated from the sale of portfolio companies, the proceeds are generally quickly distributed to investors; such distributions frequently are required by the terms of the investments in the PE fund. (As will be discussed below, private equity buyers typically do not have retained earnings available for payments ' other than earnouts ' or future indemnity claims by a disappointed seller, which will affect how a seller negotiates a sale to a PE firm.)

As Schwarzman's comment notes, a casual search of the business press will reveal many recent sales to PE funds, from such well known firms as Chrysler, to nuts-and-bolts firms of all sizes. The seller of an e-commerce company faces the same landscape. A Wharton School analysis of the market for private equity purchases of certain types of e-commerce firms reports on the growth in funding of so-called 'Web 2.0 companies.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1787&CFID=34335163&CFTOKEN=73985713&jsessionid=a83029861dc8176a5207, registration required). Indeed, PE buyers ' who traditionally may have looked for more stability than what is found in a typical e-commerce firm ' today are behaving much more like the venture capitalists who underwrote the growth of Silicon Valley e-commerce in the 1990s. According to Wharton management professor Saikat Chaudhuri, 'the rush to fund private equity is blurring some of the lines that were once drawn between venture investment, hedge funds and leveraged buyout companies. Hedge funds, which once focused mainly on public companies and had a short-term horizon, are now also delving into privately held firms and even small venture-type investments that may require patience.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1639, registration required.)

Doing the Deal

But how does an e-commerce firm sell itself to a private equity fund? What do the private equity funds want? Although it may seem so to outsiders at times from the volume of reported deals, there is no PE Web site with a 'SELL NOW!' button to facilitate such sales. Instead, the e-commerce owner must first understand PE funds' goals, and market to a similarly minded firm. (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1661, registration required, for a general discussion of the different types of PE buyers.) Some ' like more conventional firms ' are financial buyers. Those firms typically need to acquire certain financial characteristics, such as a particular earnings or revenue stream, to complement their existing operations. Because such buyers want 'more of the same,' they are less likely to replace the target's management, and will look for definite plans to convert the asset back into a more liquid form, in a relatively short time. Unless the e-commerce firm is well established, with a record of performance that can be expected to continue, it might be less attractive to such financial buyers. A PE buyer looking for predictability would be less likely to dabble in a volatile marketplace.

In contrast, a strategic buyer typically has a more distant time horizon, and hopes to profit from rapid, if not exponential, growth of the target. Often, the strategic buyer already has an interest in a business similar to that of the target, or is assembling a portfolio of similar companies, so that the target may receive guidance and support, in addition to money (http://knowledge.wharton.upenn.edu/article.cfm?articleid=1722, registration required). Under these circumstances, the PE investor might have knowledgeable industry management available, if not handpicked. Because a growth spurt from the target is desired, existing management (that presumably had not generated that level of profitability) is expendable. Indeed, this perception can hinder PE deals. As one PE operator noted in a Wharton study: 'A lot of managers don't want to meet with private equity firms because they think we will come in there and fire them all.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1722, registration required.)

In my experience, a management team whose company had been taken over located a series of PE investors to back their bid to return to the business through a new firm, so that their target's existing management would have been superfluous after a brief transition. As a result, a key planning point for our client, the target of the new firm, was negotiating severance for the existing team to keep them involved in the deal. Management of the e-commerce firm seeking a strategic PE investor, therefore, must prepare itself for the natural consequences of the investor's goals, unless it can convince the investor that the team will be crucial to future growth. On the other hand, departure of the e-commerce seller's management is not inevitable. The target's management may have industry knowledge that the PE fund lacks, and can lead the PE fund to other sector opportunities using that knowledge. According to one PE investor: '(P)rivate equity investors are teaming up with entrepreneurs they have already financed to find new deals,' using the target's contacts in an industry, to join in the target management's future deals. 'The private equity firm would love to come in side by side in some of these other investments, because the entrepreneur knows what's going on. If a private equity firm is smart, it can turn its investments into future investment partners.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1722, registration required.)

From the PE investor's perspective, in contrast, whether strategic or financial, the e-commerce firm may present a different profile than more conventional target firms. Since many e-commerce firms remain the product of entrepreneurial founders, the investor may find that decisions are made based as much on emotion and intangible qualities as from purely financial motivations. In other words, the proverbial 'offer you can't refuse' may well be refused if the changes in control are perceived as too great, even if it means less money in the business owner's pocket ' because he or she gets to 'keep' his or her own business. Similarly, the e-commerce owner who remains as an employee, even a very well compensated one, may demand greater levels of control or autonomy, or both, than the PE investor typically allows, because of this owner's identification with the business. Resolving these conflicts during the business sale negotiations, rather than after the fact in a courtroom, can smooth post-sale operations ' or end deals destined to fail.

When considering an eventual sale of the e-commerce business then, the seller should examine whether the company will fit better with a strategic or financial buyer, and develop the business accordingly. Of course, whichever type of buyer is deemed most suitable, the seller must also realize that another sale is likely ' PE funds legally obligated to distribute profits to investors must address exit planning even more than entrepreneurs must (www.news.com.au/business/story/0,23636,22586756-5012428,00.html). According to one PE advisor: 'What owners must understand from the outset is that private equity has an end-game: an exit strategy. This is to sell the business at some point down the road, meaning the owners must sell their share too.' Says another: 'It takes a family-run business a little while to get their head around that ' they've got their kids in the business or whatever the situation is and sometimes it doesn't work. We want to be able to sell 100% at the end ' if you get to $20 million or even assets to $40 million, people aren't going to want to buy 50% of it; they're going to want to buy all of it at that size. The way we approach it is effectively saying, 'We're going to sell in this period of time and you're coming along for the ride,' and once they agree to that we're OK.'

Issues to Consider

Of course, negotiating to sell an e-commerce business to a PE fund isn't just about long-term planning. The nuts and bolts of doing a purchase agreement can take on very different dynamics, even for someone experienced in buying and selling businesses.

Management Matters

For example, as mentioned above, the role of existing management (and, often, ownership) must be addressed. Operation of the business during negotiations can become difficult if key employees are uncertain about their future, or leave (which could decrease the PE fund's interest in buying the company).

Control Issues

Similarly, control issues can cause friction ' especially if the e-commerce firm was closely managed by its founders from startup. While operational control after a sale has always been a deal point, and from long before the growth of PE funds, today the typical PE investor might apply an enhanced version of the traditional 'golden rule,' that the one with the money makes the rules. '(T)he perception that private equity wants to seize absolute control puts some business owners off. (But) there's no doubt that private equity players want to have a say and make sure that everything's being governed well because they've got money at risk.' (See, www.news.com.au/business/story/0,23636,22586756-5012428,00.html.) As in any sale of a business, e-commerce or otherwise, the investor will demand ultimate control. While the level to which the investor intervenes in day-to-day operations will depend on its familiarity with the industry in which the business operates, certainly major decisions will be subject to the investor's approval.

Nipping Negotiations

PE investors might also strongly resist making changes to their acquisition documents, unlike deals with more conventional buyers. If the PE fund is assembling a portfolio of companies, then it often will try to standardize its acquisition terms so that it needn't invest time in reviewing the terms of each deal as it moves forward. A relatively uniform set of acquisition documents makes it easier to package and sell the entire investment portfolio of companies more easily, which is the ultimate goal of any PE fund. Of course, the e-commerce seller will be told that limiting negotiations is the cost of getting what often can be a generous purchase price.

Representations, Warranties and Covenants

Also, representations, warranties and ongoing covenants by the PE fund often will be severely limited. This position reflects the reality of selling to a PE fund: Should a claim arise, 'there's no there there' from which to recover. And because PE funds are just conduits for investment by their financial backers, they will generally try to sell their portfolio, and do not keep large quantities of assets on hand ' funds are collected for future investment or distribution to investors, rather than for paying out indemnity claims.

Of course, that position doesn't work both ways. Since PE buyers have great leverage ' the purchase price they are willing to pay ' they can demand aggressive protection from sellers in the form of indemnification, with very limited caps, if any, and extended statutes of limitation. The PE buyer needs these protections to make the portfolio company more marketable on resale. An e-commerce firm selling to a PE fund, therefore, should expect a very limited opportunity to modify the buyout deal. While the rewards may be generous, the seller should also expect to retain more risk of giving money back to indemnity claims than may be possible in a sale to a seller that will operate the business itself.

The Right Fit

Knowing that reality of the PE market, therefore, the task of the seller ' and its advisors ' will be to find the fund most likely to be interested in the business, and, to the extent that deferred compensation (salary and earnout) is used, to grow it before a second sale. In other words, an e-commerce seller that has decided to sell ' a critical decision discussed in the January issue of this newsletter ' should pick the most lucrative deal, and target the fund likely to pay the most. Private equity funds with an interest in the seller's field will likely be most willing to consider a purchase, and make the best deal.

From that perspective, the true story of Willie Sutton's celebrated 'that's where the money is' supposed quote reveals that how one appears (to a potential buyer) can be more important than the reality (www.banking.com/ABA/profile_0397.htm). Although Sutton claims that he never said the quote, he appropriated it to help sell one of his books, and even used it in a television commercial ' it fit the perception he wanted to create, first of himself, and later of those who hired him. The e-commerce firm planning an exit strategy of selling itself for private equity money should consider, early in its life, becoming the firm that such a fund wants to buy, and plan its growth accordingly, so that it can make the best deal for itself.

Entrepreneurs have traditionally dreamed of creating family businesses that would last for generations. Certainly, everyone has seen the stickers and other marketing testifying to a firm's and its founding family's decades of service, and their stability and track record.

But in today's constantly changing e-commerce world, a business often must reinvent itself several times in one generation, much less plan to last for several.

With such a close horizon, the exit strategy has become a key part of the initial business plan ' why invest the time and energy to create a working firm if you can't see how to get your money out when you can still enjoy it or invest in another business? (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1639, registration required.) Indeed, knowing your exit strategy will usually affect how you run and grow the business, even in initial planning. As e-commerce entrepreneur (and occasional athlete and celebrity) Yogi Berra once said: 'You got to be careful if you don't know where you're going, because you might not get there.'

Of course, some exit strategies are better than others. Anything beginning with 'Chapter' ' as in of the U.S. Bankruptcy Code ' is generally not a good choice. Let my heirs sort it out leaves little work for you, but can create an expensive mess for those left behind. Passing the business on to children requires that they be interested in running the business ' but many do not have the dedication of their parents, especially if the parents' success has made the children wealthy.

Private Equity Purchases: A Path to Consider

Instead, many plan for the eventual sale of the business, even as part of the initial business plan. (See, 'Punk Rock and the Sale of Your e-Business,' in the January edition of e-Commerce Law & Strategy.) With that goal in mind, no business seller today, regardless of size or type, can ignore the private equity ('PE') fund as a potential buyer. As the well-known bank robber Willie Sutton is reported to have said (but did not, as discussed below), he robbed banks 'because that's where the money is.' According to a study by Dealogic reported in a Wharton School publication (http://knowledge.wharton.upenn.edu/article.cfm?articleid=1639#, registration required): 'Nearly a third of the dollar value of all U.S. acquisitions (in 2006) involved private equity firms.' Another Wharton study reports the opinion of private equity kingpin Steven Schwarzman of The Blackstone Group that: 'Private equity has jumped from the backs of financial journals to the front pages of mainstream newspapers.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1661 ' registration required.) A Wharton professor noted the PE funds' interest in smaller companies: '(E)ven large investment firms are willing to take on small, seed and first-round financing. That's very good news for innovation in the United States. These top-tier firms used to not want to do small deals. Now they are willing to do them just to get their foot in the door.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1639, registration required.) One private equity firm's Web site, www.altassets.com, even chronicles the private equity markets as the self-appointed 'private equity industry's leading information source.' Entrepreneurs contemplating a sale of their company today, therefore, must look to private equity markets for the same reason that Willie Sutton focused on banks. (See, www.people.hbs.edu/jlerner/info.html, and www.library.hbs.edu/guides/venture, for a list of resources for locating such funds.)

By private equity fund, I mean the closely held entity, typically a limited partnership or LLC, that invests substantial amounts in businesses with growth or profit potential, typically in conjunction with acquiring significant input, if not control, over management. Many definitions are available online (see, e.g., http://www.answers.com/topic/private-equity-fund?cat=biz-fin, www.allbusiness.com/glossaries/private-equity-fund/4953793-1.html or http://en.wikipedia.org/wiki/Private_equity_fund), but no universally accepted one exists ' and why should one? From the perspective of the recipient of the investment, the investor's money is welcome (and control disliked) whatever it may be called. Typically, however, private equity funds do not build equity value in themselves (although they obviously want equity to build up in the companies in which they invest, often called their 'portfolio companies'). As profits are generated from the sale of portfolio companies, the proceeds are generally quickly distributed to investors; such distributions frequently are required by the terms of the investments in the PE fund. (As will be discussed below, private equity buyers typically do not have retained earnings available for payments ' other than earnouts ' or future indemnity claims by a disappointed seller, which will affect how a seller negotiates a sale to a PE firm.)

As Schwarzman's comment notes, a casual search of the business press will reveal many recent sales to PE funds, from such well known firms as Chrysler, to nuts-and-bolts firms of all sizes. The seller of an e-commerce company faces the same landscape. A Wharton School analysis of the market for private equity purchases of certain types of e-commerce firms reports on the growth in funding of so-called 'Web 2.0 companies.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1787&CFID=34335163&CFTOKEN=73985713&jsessionid=a83029861dc8176a5207, registration required). Indeed, PE buyers ' who traditionally may have looked for more stability than what is found in a typical e-commerce firm ' today are behaving much more like the venture capitalists who underwrote the growth of Silicon Valley e-commerce in the 1990s. According to Wharton management professor Saikat Chaudhuri, 'the rush to fund private equity is blurring some of the lines that were once drawn between venture investment, hedge funds and leveraged buyout companies. Hedge funds, which once focused mainly on public companies and had a short-term horizon, are now also delving into privately held firms and even small venture-type investments that may require patience.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1639, registration required.)

Doing the Deal

But how does an e-commerce firm sell itself to a private equity fund? What do the private equity funds want? Although it may seem so to outsiders at times from the volume of reported deals, there is no PE Web site with a 'SELL NOW!' button to facilitate such sales. Instead, the e-commerce owner must first understand PE funds' goals, and market to a similarly minded firm. (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1661, registration required, for a general discussion of the different types of PE buyers.) Some ' like more conventional firms ' are financial buyers. Those firms typically need to acquire certain financial characteristics, such as a particular earnings or revenue stream, to complement their existing operations. Because such buyers want 'more of the same,' they are less likely to replace the target's management, and will look for definite plans to convert the asset back into a more liquid form, in a relatively short time. Unless the e-commerce firm is well established, with a record of performance that can be expected to continue, it might be less attractive to such financial buyers. A PE buyer looking for predictability would be less likely to dabble in a volatile marketplace.

In contrast, a strategic buyer typically has a more distant time horizon, and hopes to profit from rapid, if not exponential, growth of the target. Often, the strategic buyer already has an interest in a business similar to that of the target, or is assembling a portfolio of similar companies, so that the target may receive guidance and support, in addition to money (http://knowledge.wharton.upenn.edu/article.cfm?articleid=1722, registration required). Under these circumstances, the PE investor might have knowledgeable industry management available, if not handpicked. Because a growth spurt from the target is desired, existing management (that presumably had not generated that level of profitability) is expendable. Indeed, this perception can hinder PE deals. As one PE operator noted in a Wharton study: 'A lot of managers don't want to meet with private equity firms because they think we will come in there and fire them all.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1722, registration required.)

In my experience, a management team whose company had been taken over located a series of PE investors to back their bid to return to the business through a new firm, so that their target's existing management would have been superfluous after a brief transition. As a result, a key planning point for our client, the target of the new firm, was negotiating severance for the existing team to keep them involved in the deal. Management of the e-commerce firm seeking a strategic PE investor, therefore, must prepare itself for the natural consequences of the investor's goals, unless it can convince the investor that the team will be crucial to future growth. On the other hand, departure of the e-commerce seller's management is not inevitable. The target's management may have industry knowledge that the PE fund lacks, and can lead the PE fund to other sector opportunities using that knowledge. According to one PE investor: '(P)rivate equity investors are teaming up with entrepreneurs they have already financed to find new deals,' using the target's contacts in an industry, to join in the target management's future deals. 'The private equity firm would love to come in side by side in some of these other investments, because the entrepreneur knows what's going on. If a private equity firm is smart, it can turn its investments into future investment partners.' (See, http://knowledge.wharton.upenn.edu/article.cfm?articleid=1722, registration required.)

From the PE investor's perspective, in contrast, whether strategic or financial, the e-commerce firm may present a different profile than more conventional target firms. Since many e-commerce firms remain the product of entrepreneurial founders, the investor may find that decisions are made based as much on emotion and intangible qualities as from purely financial motivations. In other words, the proverbial 'offer you can't refuse' may well be refused if the changes in control are perceived as too great, even if it means less money in the business owner's pocket ' because he or she gets to 'keep' his or her own business. Similarly, the e-commerce owner who remains as an employee, even a very well compensated one, may demand greater levels of control or autonomy, or both, than the PE investor typically allows, because of this owner's identification with the business. Resolving these conflicts during the business sale negotiations, rather than after the fact in a courtroom, can smooth post-sale operations ' or end deals destined to fail.

When considering an eventual sale of the e-commerce business then, the seller should examine whether the company will fit better with a strategic or financial buyer, and develop the business accordingly. Of course, whichever type of buyer is deemed most suitable, the seller must also realize that another sale is likely ' PE funds legally obligated to distribute profits to investors must address exit planning even more than entrepreneurs must (www.news.com.au/business/story/0,23636,22586756-5012428,00.html). According to one PE advisor: 'What owners must understand from the outset is that private equity has an end-game: an exit strategy. This is to sell the business at some point down the road, meaning the owners must sell their share too.' Says another: 'It takes a family-run business a little while to get their head around that ' they've got their kids in the business or whatever the situation is and sometimes it doesn't work. We want to be able to sell 100% at the end ' if you get to $20 million or even assets to $40 million, people aren't going to want to buy 50% of it; they're going to want to buy all of it at that size. The way we approach it is effectively saying, 'We're going to sell in this period of time and you're coming along for the ride,' and once they agree to that we're OK.'

Issues to Consider

Of course, negotiating to sell an e-commerce business to a PE fund isn't just about long-term planning. The nuts and bolts of doing a purchase agreement can take on very different dynamics, even for someone experienced in buying and selling businesses.

Management Matters

For example, as mentioned above, the role of existing management (and, often, ownership) must be addressed. Operation of the business during negotiations can become difficult if key employees are uncertain about their future, or leave (which could decrease the PE fund's interest in buying the company).

Control Issues

Similarly, control issues can cause friction ' especially if the e-commerce firm was closely managed by its founders from startup. While operational control after a sale has always been a deal point, and from long before the growth of PE funds, today the typical PE investor might apply an enhanced version of the traditional 'golden rule,' that the one with the money makes the rules. '(T)he perception that private equity wants to seize absolute control puts some business owners off. (But) there's no doubt that private equity players want to have a say and make sure that everything's being governed well because they've got money at risk.' (See, www.news.com.au/business/story/0,23636,22586756-5012428,00.html.) As in any sale of a business, e-commerce or otherwise, the investor will demand ultimate control. While the level to which the investor intervenes in day-to-day operations will depend on its familiarity with the industry in which the business operates, certainly major decisions will be subject to the investor's approval.

Nipping Negotiations

PE investors might also strongly resist making changes to their acquisition documents, unlike deals with more conventional buyers. If the PE fund is assembling a portfolio of companies, then it often will try to standardize its acquisition terms so that it needn't invest time in reviewing the terms of each deal as it moves forward. A relatively uniform set of acquisition documents makes it easier to package and sell the entire investment portfolio of companies more easily, which is the ultimate goal of any PE fund. Of course, the e-commerce seller will be told that limiting negotiations is the cost of getting what often can be a generous purchase price.

Representations, Warranties and Covenants

Also, representations, warranties and ongoing covenants by the PE fund often will be severely limited. This position reflects the reality of selling to a PE fund: Should a claim arise, 'there's no there there' from which to recover. And because PE funds are just conduits for investment by their financial backers, they will generally try to sell their portfolio, and do not keep large quantities of assets on hand ' funds are collected for future investment or distribution to investors, rather than for paying out indemnity claims.

Of course, that position doesn't work both ways. Since PE buyers have great leverage ' the purchase price they are willing to pay ' they can demand aggressive protection from sellers in the form of indemnification, with very limited caps, if any, and extended statutes of limitation. The PE buyer needs these protections to make the portfolio company more marketable on resale. An e-commerce firm selling to a PE fund, therefore, should expect a very limited opportunity to modify the buyout deal. While the rewards may be generous, the seller should also expect to retain more risk of giving money back to indemnity claims than may be possible in a sale to a seller that will operate the business itself.

The Right Fit

Knowing that reality of the PE market, therefore, the task of the seller ' and its advisors ' will be to find the fund most likely to be interested in the business, and, to the extent that deferred compensation (salary and earnout) is used, to grow it before a second sale. In other words, an e-commerce seller that has decided to sell ' a critical decision discussed in the January issue of this newsletter ' should pick the most lucrative deal, and target the fund likely to pay the most. Private equity funds with an interest in the seller's field will likely be most willing to consider a purchase, and make the best deal.

From that perspective, the true story of Willie Sutton's celebrated 'that's where the money is' supposed quote reveals that how one appears (to a potential buyer) can be more important than the reality (www.banking.com/ABA/profile_0397.htm). Although Sutton claims that he never said the quote, he appropriated it to help sell one of his books, and even used it in a television commercial ' it fit the perception he wanted to create, first of himself, and later of those who hired him. The e-commerce firm planning an exit strategy of selling itself for private equity money should consider, early in its life, becoming the firm that such a fund wants to buy, and plan its growth accordingly, so that it can make the best deal for itself.