Create a Bidding War When You Sell Your Business
Bryan Ducharme
Merger & Acquisition Advisor | Consultant to Business Owners | Co-Founder of Venture 7 Advisors
Have you ever wondered why some businesses have buyers competing to acquire them while others sit on the market for years? The difference is often related to how those businesses are prepared and marketed. The best way to achieve a successful sale is often through an auction process.
What is an Auction?
An auction is a structured process that reaches out thousands of potential buyers over a short period of time to pit different buyer types against one another to see who values the company the most. An effectively managed auction means a better sale price, better deal terms, more leverage during due diligence and the ability to choose the buyer that best meets your financial and legacy goals.
Auction Advantages
Competition
Serious buyers respect a well-organized auction process because they know the seller is prepared and won’t waste their time. When they know that other buyers are interested in your company, it validates their interest and their fear of “losing out” drives them to their best offer.
Urgency
A business sale without an auction has no deadlines and no pressure. One buyer negotiating with a seller has very little motivation to move quickly. Auctions, on the other hand, have set dates for submitting offers and bidders are always at risk of losing the deal. This creates buyer urgency and pressure to submit a strong offer early in the process.
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Leverage
Without a competitive process, buyers have most of the leverage during negotiations and due diligence. In a competitive auction, however, leverage shifts to the seller. Buyers never know exactly where they stand until their offer is accepted or rejected. And even when an offer is accepted, the buyer knows that there are other possible buyers waiting in the wings which discourages unreasonable demands during the due diligence process.
When Auctions Work Best
Auctions work best when a company is large enough and profitable enough to attract a wide variety of strategic and financial buyers. Auction candidates have:
·??????? at least $1 million in EBITDA
·??????? a staff that isn’t overly dependent on the owner
·??????? a business that is scalable
·??????? an industry that is attracting investment.
The full article describing how Auction work can be found here: The Best Way To Sell A Business is an Auction Process.
Merger & Acquisition Advisor | Consultant to Business Owners | Partner at Venture 7 Advisors
5 个月Business valuation studies are a great way to get started.?But ultimately the market will determine the amount your business will command and how that value will be paid to you.?Bryan’s done a fantastic job outlining how the auction process, and proper pre-market preparation, help to maximize potential value and proceeds at closing.?An important read for any business owner – even if you’re not contemplating a sale right now.
Partner at Venture7Advisors LLC & Serial Entreprenuer
5 个月Great piece Bryan!
M&A Advisor: assist business owners to prepare, maximize value, & navigate the sale process with confidence.
5 个月Business owners planning to sell their companies would do well to click through to the full article. It outlines a strategy that has the potential to achieve a better outcome for the seller. Great stuff.