The good news is – that most likely – there is a buyer (investor group) out there that is well suited to acquire your company. Perspective is relative, and no matter how difficult and challenging your operating environment has become, the next owner of your business will have fresh ideas and energy (emphasis added) to take over the battle. The key of course, is thorough planning and ultimately communicating the opportunity to purchase your business to a population of applicable and capable investors.
Someone Wants To Buy Our Business
You have been approached. Possibly it was a mutual acquaintance, a letter in the mail, or a phone call. A contact has been made and someone wants to purchase your business.
The only question is – who doesn’t want to buy it?
The world is full of tire-kickers yet alone those who have amassed wealth and simply enjoy sitting around the club crooning over the “deals” they’re working on. Be careful. For every qualified buyer (investor group) out there, there are countless others who — from the get go — do not have a genuine interest or the wherewithal to purchase your business.
Beware of the unexpected letter from a [previously unknown] potential buyer, or intermediary who says that they have a buyer for your business. It is often a common ploy used to obtain access to you and your company.
It is important to keep information surrounding your business confidential. No information should be shared; or discussions begun; until a signed non-disclosure agreement is in place. In any event, specific customer information should not be divulged until the very final phase of a contemplated transaction.
What Am I Selling?
It seems like an innocent question, but it is one that must be sorted out before serious conversations can begin. Does the buyer expect to receive working capital with the business? If so, how much? Is the real estate included? Do I exit the business at closing, or will I be required to work with the new owner (very common)? Etc. Etc. A clear understanding in this regard is the basic foundation for continuing negotiations.
Show Me The Money
Don’t hesitate to ask a potential buyer (investor group) where the acquisition money will come from. Will it be all investor equity money infused to purchase the business (highly unlikely)? Or will bank debt be involved? If this is the case, your business will need to stand up to both the scrutiny of the buyer and that of the underlying bank. If a lender is involved, the transaction will take more time.
Also don’t forget about seller financing. It may not be on your radar screen, but any prudent buyer will have a laundry list of reasons why they expect it from you. All circumstances are different, but don’t hesitate to fully investigate the matter before you begin to share information concerning your company with others.
As lastly, don’t forget to reply on the common sense that has served you so well over all these years. If you are knee deep in the day-to-day operations of your business, the “new guys” are not going to be able to do it by coming to a board meeting once a month no matter what they say. By the time they figure it out and abandon the process — you’ll have wasted immeasurable time. Likewise, if you run a reasonably complex business like a ISO 9000 certified manufacturing complex, beware of the wealthy family who desires to install their computer-genius son into your business to run it. It isn’t going to happen.
Whether well-intentioned or not, the number of buyers, investors and/or investor groups who are suited for your business and who will actually sit down at a closing table and write a big check (figuratively speaking) is a very finite number of individuals. You need to be very careful how you go about a potential sale of your company; and how you select those with whom you choose to negotiate.