Business owners, who receive unsolicited interest in acquiring their business can find themselves wondering how to respond and gain some measure of control over an unfamiliar process.
Here are five key considerations that we advise business owners in this situation to reflect on:
- Is the business in good shape to be sold? Is the business well-structured or are there issues to be fixed in the near-term that a buyer would otherwise use a leverage to reduce the price.
- Is the market timing right? It is always better to be selling when the business is growing and has good visibility of forward sales. We have come across many businesses in cyclical industries where the owners were thinking about a sale but left things too long and found that once the sector slowed, the interest in acquisitions evaporates.
- Is the party who has approached you, the best ‘new owner’ to take the business forward? It takes time, effort and good people to build a great business. Most of the business builders we work with share a sense of stewardship and in addition to a personal pay-day payoff, they will want to see the business move forward and provide their staff with security and a great future. So if the interested party doesn’t seem like a good future steward of the business; then who is, and why aren’t we working out how to sell to them.
- Is this a full sale or an earn-out? In situations where the on-going involvement of the current owners is important to the business then the deal is likely to involve a combination of upfront cash and deferred consideration. In the case of deferred consideration, it is critical to think through the implications of positive and negative scenarios to ensure that deal-structure doesn’t provide hidden opportunities for the buyer to artificially diminish the deferred component.
- Are we being offered fair market price? Getting the ‘right’ price and deal structure for your business requires both a deep knowledge of the market and of comparable transactions. In our experience, sellers do best when they create a competitive environment between buyers.
If you are interested in discussing how to respond to any unsolicited offers for your business, or how to prepare your business for sale, please contact one of our team of experienced professionals or Kent Aughey, General Manager 0408810299.