I have received a cold approach about buying my company, what should I do?
Building a successful business takes patience, knowledge, diligence and a huge amount of energy. Ensuring you receive maximum financial recognition for all those years of hard work (as well as finding a good home for the business) usually requires detailed planning and execution. But what should you do if you receive an approach out of the blue?
The initial approach
It can be very exciting to receive an unsolicited offer or approach. Whilst it can feel like all your hard work may have finally paid off, the truth is that so far as completing a sale of the business is concerned, it has only just begun. There will be many positive thoughts about the future for you and your family, but these need to be put to one side while you seek professional support to maximise your chances of success.
Take a moment
The potential buyer will be in ‘sales mode’ and will want to tell you all the good news and leave the more difficult and less appealing aspects of the deal until later. How much do you really know about them? Do they have a history of delivering on offers they make? Can they afford it? What is the risk of their offer being “chipped” later in the process or, even worse, them pulling out the deal completely? Do they really understand your business or have you presented them with limited information? How do you know they are going to offer the best deal for you personally? What will happen to the company and staff in the future? Will you be leaving a responsible legacy? There are many matters to consider and addressing these at the right time and in the right way is going to be critical to closing a potential transaction.
As with all critical areas of your business it is vital you employ the right team of experts to assist you. A good advisor will pay for their fees many times over in the value they will add to a transaction. Completing a transaction is an intense process, so ensure you also select someone you feel you can build a strong personal rapport with. Make sure you also involve them as early as possible in the process.
Maximise the offers then assess the softer issues
Whilst many deals are successfully completed without running an auction process, it is impossible to completely test the market if you only speak to a single buyer. If not handled carefully an early negotiation with a solitary interested party can have a detrimental effect on the overall outcome. Whilst it may be appropriate for you to hold an initial meeting without an advisor present, it is always a good idea to take advice in advance.
Whether you decide to progress matters with a single interested party, or run an auction process, you should focus on getting the maximum offer(s) from all interested parties before then assessing the softer aspects of the potential deals. This will ensure you do not make a hasty decision based on imperfect information.
The perception of competition can be almost as valuable as actual competitive tension. Simply engaging an advisor is likely to result in an immediate change of perception in the eyes of the potential buyer, as it introduces the possibility that there may be other interested parties.
Avoid direct conflict with the buyer
A good relationship with the potential buyer both pre and post deal is often vital to success. Using an advisor allows negotiations to be run robustly without having an adverse impact on these relationships.
Selling a company is a complex process with many obstacles to be overcome. A deal with a buyer is never complete until it is fully executed. Terms can change, and the buyer’s mind can change. It is a negotiation that needs careful and well informed management from first contact up until the signing of the legal agreements.
Selling your business will probably be the most important business decision you ever make for both the company and your family. Utilising the resources of an expert corporate finance advisor will significantly increase your chances of completing the right deal on the best possible terms. Get professional help early and ensure that you receive the financial recognition that your years of hard work deserve.