As a successful business owner, the chances are that you will have received an approach (or perhaps many) to buy your business. This can be both flattering and intriguing and you will be understandably tempted to follow up. An increasing number of sellers are entertaining a targeted bilateral or one-party sales process.
How do you separate the real opportunity from the potentially damaging major distraction?
Decide on your objectives
This might appear a very obvious step but you need to make a clear decision whether now is the right time to sell, both personally and commercially. If not then the response should be a polite decline (even if you are curious about the possible valuation). If you are considering a sale in the short/medium term, be clear on what you want/need in terms of outcome, then explore further, but with caution.
A common and understandable objective is to achieve sufficient net funds to ensure that you do not have to work again unless you want to – consider getting some help in determining “your number”, the amount needed to achieve your objective.
The key is to focus on strategy and understanding the various routes and options available to you. Remember that you are in control – it is your business – so you should consider all options rather than only being reactive to an approach.
Dealing with one party is often attractive due to reduced confidentiality and commercial risk and may lead to an easier process. However, you would have to accept not knowing if you have achieved the best possible outcome as the market has not been fully tested through a multiple-party controlled auction.
Strategy not stress
Many owners find dealing with one or more unsolicited approaches stressful. For example, they can force owners to address personal and business issues they have tried to avoid or delay and the initial pricing may be substantially below expectations. The key is to keep focused on what you want and the best strategy to achieve that objective.
Assess the seriousness of approach
It is important to distinguish between a random mailshot and a serious approach. There has been an increase in random mail shots over recent years and owners should, quite rightly, be cautious.
Tailored approaches from professional advisers should be taken seriously but only if they are indeed tailored and the identity of the potential buyer is established early on in the process.
Private equity has generally been increasing deal origination activities over recent years and, with significant funds available, those approaches should be taken seriously.
A tailored approach from a strategic buyer could be ideal and should not be discounted, however, it is important to hold back commercially sensitive information until there is more evidence of their intention.
Take your time
An unsolicited offer might be exciting and intriguing but take your time before taking any steps – avoid a knee-jerk reaction.
For example, immediately telling family and colleagues might be premature without thinking through the impact which is likely to be de-stabilising and introduce uncertainty.
Let the potential curiosity wear off before sharing the news or replying to the buyer. Have a plan in mind before responding.
Do not divulge too much information too soon
Any response to an unsolicited approach will often result in a request for information from you. It can be very damaging if commercially sensitive information is released too early in the process.
An unsolicited offer might be exciting and intriguing but take your time
Get some help
You will only sell your business once and have one chance to get it right.
No two transactions are the same and an off-market purchase from an unadvised seller is the ideal position for any buyer – do not let them take advantage. Determine who can help you both professionally (advisers who specialise in this type of transaction) and personally (such as family, trusted advisers and colleagues).
There is value in talking through the approach and alternative options with a professional. This can help you determine what you really want; what any offer really means to you and whether other options might be more appropriate. In fact, there is a real benefit in reviewing options now so that you are well prepared and equipped for when the time is right.
Learn about the process and potential pitfalls so you are better informed. There is no such thing as a standard offer and the devil is in the detail, which you need to review carefully with your advisers.
Research the potential buyer and understand their objectives and commercial rationale.
You should be alive to the potential impact this process will have on your business – the trading performance of businesses will often drop during a sale process, exactly the trading period which comes under a disproportionate amount of scrutiny during due diligence.
In short, do not react too quickly, be clear on your objectives and strategy, assess the seriousness of the approach, do not divulge information too early, understand the process options to sell your business and get specialist advice.
Had an unsolicited approach or simply want to know more? For clear, practical and commercial advice please contact one of our experienced team
- David Browne +44 7879 431343
- Sally Saunders +44 7876 200840