Many owners face this scenario during their business lives. The conversation is sparked by a fax from a stranger or a letter from a competitor. The owner enters into a conversation with the buyers representative and before long his lawyer is negotiating a deal with them for an amount of money more than the owner ever dreamed of.
GREAT, RIGHT?
Not necessarily.
My investment banker friends tell me that after the business is properly packaged for sale and other prospective buyers are asked to bid on the business, the final sale price could be 2 or3 times in the initial unsolicited offer (if not more.)
Remember these few tips if you get a solicitation to buy that you are curious to explore:
- Don't make the call yourself. Have an attorney, investment banker, consultant or other trusted advisor make the call on your behalf.
- Don't talk price. Whoever mentions price first loses.
- DO NOT send any financial information. They might say the worst that can happen is you get a free valuation. Not so. You have just put your financial data in the hands of a competitor or someone who will be buying a competitor.
If you are getting to a point in your business life where one of these unsolicited offers to sell might be welcome, there are things you should be doing to the business today to make it more valuable in the eyes of the buyer. This exit planning process will add value and improve efficiency when the M&A firm takes over.
You never know when that call might come.
The best thing to do is to get an expert to explain what is going on. A business lawyer is the best person, he knows the ins and outs of the law. Think about it thoroughly before you decide on any action. This could be the big break you've been waiting for.
Posted by: Matthew Engquist | September 15, 2011 at 08:50 AM