Accredited Wealth Management Advisor Practice Exam

What advantage might Georgia realize by selling her business to her management team?

1. An insider transfer is the quickest way to sell her business.

2. She could realize greater overall income than from a third-party sale.

3. She could structure the deal to ensure she does not give up control before reaching her financial security goal.

4. Her managers are all natural succession owners since they already work in and know the business.

The correct answer is: She could realize greater overall income than from a third-party sale.

Selling the business to the management team can offer Georgia the advantage of potentially realizing greater overall income than from a third-party sale. This increased income can stem from several factors, including the management team's familiarity with the business's strengths and weaknesses, as well as their vested interest in its success. Since they are already operating within the framework of the company, the management team might be willing to pay a premium for ownership compared to an outside buyer who might see the business as a riskier investment. Additionally, management teams are often more motivated to ensure a smooth transition and maintain business continuity, which can positively influence the company's post-sale performance and profitability. Consequently, this can translate to a higher valuation of the business during the sale process. This is essential, as Georgia’s ultimate financial outcome can significantly differ depending on the buyer's perspective and the perceived risk associated with the business. While the other options may offer validity in different contexts, they do not encapsulate the potential financial benefits of selling to a group that is already proficient and committed to the business's long-term success.