Approached to Sell

It is very common for business owners to be approached by an outside party to ask them whether they want to sell the business. While at first glance this might be a “bird-in-the-hand” situation, it is not without complication. One of the main challenges a business owner has is how to evaluate any offers put forward to them if that is the only offer that they are going to receive.

Common mistakes include:

• Not getting legal advice and / or having a suitable confidentiality agreement in place.
  Its your business so our best advice is that you get your own legal advice and certainly legal input on any documents that the other party may provide to you. Yes lawyers cost money, but good lawyers are worth their weight in gold and an early conversation with them is critical.
  
  
• Providing too much information too early.
  It is essential to provide enough information to the other party to enable them to make an informed decision about their level of interest in, and the value of their offer for, your business. However, that does not mean that you should provide all the information at once and certainly not information that may be commercially sensitive without serious consideration. We are often guiding clients through this process to get the balance right and assist to provide enough information to find out whether the party is serious, but not so much to risk damage, should a transaction not progress.
  
  
• Not having an understanding of business value beforehand.
  The best outcomes come from leading a transaction, not relying on other people to tell you what they want to pay. By providing a business appraisal we help our clients to better understand of the value of the business before discussions advance too far.
  
  
• Not having an understanding of the wider market.
  Dealing exclusively with one party has advantages, but it does mean that you are not running an open market transaction, which is ultimately the best judge of business value. We can provide advice and expertise to help reduce this gap in knowledge and also to run a secondary or concurrent process to the wider market, if necessary.
  
  
• Not understanding the potential demands of a transaction.
  While initial approaches can be straight-forward and not very time consuming, ultimately there is a point where you will need to throw significant resource at the process to get the job done. A transaction can be a significant distraction to a business that does not have the necessary expertise and manpower. We can provide resource and experience to help you get a successful transaction, while enabling you and your existing management team to continue to run the business successfully in the meantime.  

Our philosophy is to take a positive approach to any option that presents itself, even if the approach doesn’t ultimately succeed. Done in the right way these approaches can be good learning processes that can add depth to how business owners view their business and what it might be worth. It also helps to validate the reasons that you continue to own your business and on what terms you would like to ultimately exit.

 It’s therefore essential to get experienced transactional expertise right at the beginning, even for the most innocent and casual of approaches from potential purchasers.