Every owner selling his/her company asks us how we find the “ideal” buyer for the business. The answer is that there may be no perfect buyer. However, within our process we are diligent in assessing the best fit for both parties.
Selling a business involves managing the expectations of each party involved. Of course, that is easier said than done. We have experienced situations where the smallest, most insignificant issue quells a transaction. Or the personalities clash during the final stages of due diligence.
Our initial intake and continuing assessment of personalities and key “wants” is summarized below. While not all encompassing, the primary issues follow:
Seller
- What is the price expectation and why? Also, what is the minimum “line in the sand?”
- Will the owner stay in the business and for how long? Can part of the purchase price be rolled over into a sizeable equity participation?
- How unique is the working environment or culture? Is that continuation a deal breaker?
- While “cash is king,” will he consider an earnout?
- What does he envision for the company growth that he could not accomplish without a large treasure chest?
- How open and transparent is the seller? Does he have “sacred cows” in his firm, such as a software system he created or modified, and insists on using?
- What is his level of patience or sense of urgency? Is it misplaced or a detriment, such that it may be off-putting to the buyer(s).
- Will he listen and heed our advice, within reason?
Buyer
- What is their reputation for renegotiating or re-trading deal terms?
- How does our seller fit within their hierarchy or will this transaction be a “one-off”?
- How does their modus operandi mesh with the sellers?
- Will they stretch and increase the price at the end to stay competitive?
- Are they comfortable with all cash buyouts? Will they consider a minority investment?
- How will they manage the business if the seller stays involved? How has this process worked with prior buyouts?
- What are their key value drivers that we can emphasize for the seller? Is the seller’s niche or industry a critical part of their portfolio?
- Can the buyer’s participants close the deal or do they need to sell it up the chain of management?