What to do when approached to sell your business

Author - Chris Mitchell, CA , Divest Merge Acquire - Synergy

What to do when approached to sell your business

Our overriding advice is this: The single most influential factor over sale ability and price is the creation of a market of strategically motivated, financially strong buyers. Whatever you do, don’t compromise this. Don’t ever enter a negotiation without alternatives. Having alternatives is essential and could be worth millions to you.

Being approached by someone wanting to buy your business may be irresistibly attractive, whether expected or not. An unsolicited offer could come from an industry player, private equity firm, a friend or even a competitor.

The attraction of a one-on-one process promises to be simpler, faster, less stressful and more confidential. However, you should resist the temptation to deal exclusively, and carefully consider all the ingredients of a successful transaction before committing to go one-on-one.

Many clients test their network to see if there is any interest and often engage advisors with one or more buyers already in tow. Sourcing a potential buyer is important, but a higher priority is to ensure you attract the most suitable buyer on favourable terms and have a capable team to manage the process alongside you.

You may have owned the business for many years, even decades. The best possible sale process should ensure you are set up for the optimal outcome and adequately rewarded by potentially adding hundreds of thousands or even millions of dollars to your overall sale outcome.

Every buyer values each business differently according to their resources, appetite, investment criteria and how well the business fits with their business or their future strategies.

Without a range of strategic buyers, you are unlikely to fully capitalise on your business’ value drivers to achieve the best outcome.

A one-on-one process usually favours the buyer as the buyers have alternatives. Without competition and choices, the seller may be disadvantaged.? Owners often waste months and even years on these one-on-one processes before abandoning them.

The positive pressure of a competitive process with multiple strategically focused, committed buyers is the best way to ensure all buyers stay focussed, put their best foot forward and drive the price higher.? Effective targeted marketing can generate many interested parties while maintaining confidentiality.

Most business owners don’t know what they don’t know about selling a business.

Buyers are often much more experienced at buying and selling businesses than the seller.

Your advisory team must be able to match the skills and experience of the buyer’s team to avoid being exploited by the many intricacies and highly technical elements that a transaction comprises.

Experienced advisors understand tactics buyers use to achieve a better outcome for themselves and can pre-empt issues and offer solutions to maintain control of the process.

Negotiating can be time consuming, emotional and become personal. M&A advisors provide stability and momentum, acting as a cushion or circuit breaker between buyer and seller to keep the process on track.

Chris Mitchell: [email protected]