Don't let your future company sale be negatively impacted
There is an adage in the M&A world and that is if you’re an acquirer, you don’t want to be the first one to make an offer to a seller that has never sold a company before.
The reason is simple. The first offer often offends the seller because first time sellers often have inflated values in their mind regarding what their company is worth. So the acquirer who makes the first offer is often viewed as the bad guy and gets turned away. And secondly, the acquirer’s due diligence can shock first time sellers who aren’t familiar with what is involved in the deal process and sellers have been known to back out of a deal due to the stress and time consumption.
When the day comes you want to sell your company, you want to attract as many suitors as possible to run a competitive bid process. To do this, you’ll want to convey to potential suitors that you are an educated seller. Here are some preparation steps for you to take ahead of time so you can make these types of statements to the potential suitors:
- We engaged with a deal professional a while ago (an investment banker or broker and/or an exit planning professional) who is providing us guidance about the sale process so we have become very familiar with how it works and what to expect.
- We have done work to identify the valuation range of our company so we have the ability to compare any offers we receive to that range.
- We conducted a due diligence dress rehearsal over the past year so we know we are ready to support an acquirer’s process.
- We have engaged with seasoned M&A legal counsel and not planning to use our regular business lawyer to represent us in this transaction.
- I/we are committed to selling this company for the right offer and to the right partner, we won’t get cold feet at the last minute. We’re prepared both personally and professionally given the planning that we’ve been doing.
Improve your likelihood of having a euphoric exit event one day by being able to convey to potential acquirers that you are prepared to support a smooth deal process. Doing so could give them confidence to pursue your company without fear that working with you as a first time seller won’t cause them to incur an unnecessarily lengthy and costly deal process.
