There are times when an owner of a business will be approached by a potential buyer, and be given an unsolicited offer to sell the company. Sell your company? It may have been in the back of your mind from time to time, but you really haven’t given it too much attention. So while you may not have been thinking that this is the time, you do become curious about a few things. And your expertise is running your company, not selling your business. Some questions that may go through your mind are things like, what is my business worth, is this the best buyer, should I sell my business and how do I protect my business if I decide to explore further.
When you do receive an offer to sell your business, there are a number of factors to consider.
Why would I want to sell
- This needs to be considered early on. Am I ready to retire, or do I want less stress, can I continue working but at a different pace, or maybe I just want to offload things I don’t like to do.
- This is very important to buyers and it should be even more important to you to have an honest and reasoned self-assessment as to why you would want to sell.
- Your reasoning could also play a big role in how a good offer is structured, as well as the value a buyer will put on the business.
- Have I been proactively preparing a business for sale? You may have received an offer to sell but is your business valuation the highest it could be?
Confidentiality
- If you have any interest at all in having discussions with this buyer, protecting your business must be foremost in your mind.
- Most importantly, you do not want competitors, customers, employees or vendors knowing that you are considering this. It is critical that you protect your company’s interests in case you decide not to go forward, at any point in the process. How do you protect your company in working directly with this one buyer: require confidentiality and follow a methodical process.
- Often buyers will request to talk with employees and customers. Sometimes but not always, these could be legitimate and necessary requests, however, generally access to employees and customers should be limited and controlled.
- When I give this buyer information, like bank records, taxes, employee information, how are they handling it, and who is looking at it. I haven’t sold my business to them yet. And what if they are already in my industry and know my customers.
- Determining what is appropriate to share, what to avoid talking about, and how information is exchanged is critical to protecting your business and makes for a better and smoother process.
Value
- How do you determine what an appropriate offer is for your company. For example, what have other companies in your industry sold for, including price and terms. Is your buyer’s offer competitive? Does the advice you are getting from your advisors reflect real market knowledge and conditions.
- How do I know if my business is in the right condition to sell? What are the most important things to consider for maximum value.
- Should I talk to more potential buyers just to be sure?
- How capable is this buyer of funding the purchase. How will they fund it, how well capitalized are they, will they share their financial information.
- What are the tax implications of the offer structure? This can be critical to how much you end up with.
- What are the terms of the offer? Terms can be more important than price.
- What happens to the working capital? This can vary depending on several factors including an understanding of historical fluctuations and the negotiating tactics of savvy buyers.
Managing the Process
- How much of my time will this take? How much do I have to give this, given I have to run my business day-to-day. It could become a distraction given all the detailed information the buyer may ask for.
- What are the proper steps so I keep control of the process? Is the buyer pushing too fast, are they asking the right questions, am I asking the right questions.
- Who do I talk with if I come across something that I don’t understand or a problem I can’t resolve, or there is a disagreement? How do I know when to keep going, or when to stop? Some things are customary and necessary, and some are not.
- Could I possibly get multiple offers and pick the best one for me. That may be a better option if I am serious.
- How do I involve my management team or CPA and attorney, and when should I get them involved. They are important to the process, but at what additional cost in time, money and distractions.
If your business is set to sell, or if you aren’t sure, it may help to speak with an experienced M&A Advisor and ask them the questions above. Of utmost importance is maintaining confidentiality throughout the process, getting maximum value for your business, and protecting the legacy that you’ve built. You want to work with buyers that are qualified, have the financial means, and can get the deal closed. Otherwise, you could end up spending a lot of time and energy, and end up back where you started.
Using an experienced M&A Advisor can provide critical business consulting and guidance throughout the process and answer all the questions that arise when considering how to sell a business. If they have the proper credentials and experience, they can help solve a lot of issues along the way, find good buyers, and then guide you through to get the very best offer. An unsolicited offer gets you, one buyer. By talking with many buyers, experienced M&A advisors can provide you the guidance you need to get more than one good offer and get the price and terms that will be the best for you.