If someone makes an offer for your business, it can be an exciting time—but caution is key. Selling a business can be one of the most challenging tasks a business owner will face. Before engaging in discussions with buyers, you need to ensure you are truly ready to sell, otherwise you may be in an unpleasant state of worry and regret.
If an unsolicited offer to buy your business is made, think strategy— not stress. This could be a perfect opportunity, but one that often doesn’t afford much time to consider. B2B CFO® recommends taking these steps if you are approached by a potential buyer.
Give yourself enough time to think about how motivated you and your family are to exit. Waiting too long, or not planning in advance can cause many business owners to miss their window of opportunity. The length of time for M&A transactions can span over months or years. That’s why long-term planning is key to a successful business sale.
Know your value:
It’s nearly impossible to evaluate an offer without clarity around what your company is worth. For private, closely held companies, consider enlisting experts to conduct a business valuation. An investment banker and business advisor can incorporate their knowledge of market conditions and recent transactions in your industry to give you a more accurate view of your company’s value so you know how to evaluate an offer.
Keep sound records:
Keep updated records, a detailed business history and sales portfolio on hand. Accurate and timely financial information is important in determining value. This includes current performance relative to last month, the last twelve months, and your budget all influence the value of your company.
Rely on experts:
Most business owners spend a lifetime working in their business, but many do not know the intricacies of a business sale. It’s an emotional and daunting process. Determine who can help you professionally (M&A attorneys, B2B CFO®). Unsolicited offers come in a variety of forms, from a simple inquiry to an actual purchase offer. It takes an expert set of eyes to understand what’s really being offered and if it is a solid offer.
Do your homework:
Due diligence is key with a M&A deals. Thoroughly scrutinize your potential buyers. First, ensure the potential buyer can pay. You want to know that the buyer has the financial capacity to close the transaction. Check the buyer’s credit and get a confidentiality agreement signed before you deal with them or give them any information about your business. Beyond the numbers, is the buyer a good fit for your business, culture and operating philosophy? A bad fit and culture can sabotage a business sale.
Negotiations should, in most cases, be kept confidential for as long as possible. If the rumor wheel starts spinning, the impact on employees of even considering a sale of the company can have negative impacts. If word gets out prematurely, it could tarnish your reputation and relationships with your employees, customers, vendors and lenders.
Seize other opportunities:
Could there be other possible acquirers? There may be multiple offers out there, in addition to the unsolicited one. If you are truly interested in pursuing a sale, widen the circle of potential buyers, not just approaching known competitors. B2B CFO® can help you seek other interested buyers that may match your company’s needs more.
Consider your employees:
Employees are what makes the business strive. Protecting your employees during a sale should be a top priority. Arrangements can certainly help to discourage attrition and layoffs. Know the difference between institutional investors and strategic buyers and how the transaction would impact your current managers and employees’ job security.
Typically, a business sale transaction can take months or even in some extreme cases, years. So, if you choose to proceed, be prepared to be patient and to keep your business financially fit throughout due diligence. Keep the business flourishing and employee and team members motivated.
Plan your post-merger integration:
The secret to post-merger integration success is planning early and staying focused on the strategic objectives of the deal, synergies, value drivers and the integration plan as a whole. Having clear exit criteria helps integration teams know what must be accomplished and when.
Pull the plug:
The temptation to grab a bunch of money when it is waved in front of you is hard to refuse. However, seller’s remorse is very real, and owners should strive to avoid it. Don’t be afraid to walk away from an offer if it’s not the right terms, time or buyer. Not every deal is a good one. Sometimes even attractive transactions can turn sour over the course of negotiations, or as market conditions change.
B2B CFO® is ready to help.
Developing relationships with seasoned business advisors at B2B CFO® now, can make sure that you maximize whatever opportunities come your way in the future. Collectively, we have closed more than 1,600 sales & acquisition transactions with a combined value of $51 billion.
Our award-winning book, The Exit Strategy Handbook, was written to help business owners with their business transitions. Contact us today to learn more about our experience and expertise we can provide.
Our award-winning book, The Exit Strategy Handbook, was written to help business owners with their business transitions. Contact me today- ArtBottoms@B2BCFO.com to learn more about the experience and expertise I can provide.