One Buyer = No Buyer [Part 2 of 2]
Do You Want to Get the Best Deal or Just Save the Fee?
The ability to have multiple buyers compete for the acquisition of a business is in every business owner’s best interest. If you receive an unsolicited offer for your business, you may save a fee, but you have no idea if the offer is a good deal for you. A competitive bidding process (*) is the only way to ensure that you receive the best price and terms for the sale of your business.
Confidentiality during the sale process is at the top of every seller’s list of concerns. It can be dangerous to the seller to have employees, customers, and other stakeholders hear that “XYZ Company is for sale.” And, the competitive auction process manages confidentiality. The business is only “presented” to those who have the means to acquire the subject business, and after signing a confidentiality agreement, eliminating exposure to idly curious “tire kickers”, a likely source of leaks.
To get the maximum value, best terms, and the highest certainty of closing, the best potential buyers, wherever located, must be brought into a well-orchestrated competitive process. That is one of the benefits brought by an M&A professional.
Special Circumstances: An M&A advisor agreed to represent a seller who was in the final days of a buyout – and begin working through the process. The seller was told to convey to the buyer “We’ve retained an M&A Advisor and he’ll be in touch with you in a couple of weeks once they’ve begun their process.” The seller was nervous because their signed letter of intent was set to expire in two business days. The buyer was so concerned about the involvement of the M&A Advisor they countered by raising their bid for the company from $6M to $8M – if the seller would close immediately!
The following day, while reviewing the M&A Advisor’s engagement documents, the seller says: “We haven’t even signed the deal to work with you yet, and we’re already getting $2M more just because of your involvement. You’ve already paid for yourself!”
The Process: After two weeks of evaluation using the M&A Advisor’s process, the seller was informed his business was found to be worth $10M, not the $8M offered by the single buyer originally involved.
The Outcome: Nine months later, the M&A Advisor succeeded in helping the seller get $10M for his business, $4M more than the original purchase price proposed. The time-tested M&A process gives you the peace of mind that you won’t leave money on the table! Having skilled, professional advice gained the seller 66% more than originally offered.
(*) A competitive bidding process can be achieved in two ways in the M&A industry:
On large deals [over $25 M], a significant number of potential strategic buyers can be identified and contacted about the opportunity. Those who are interested are given all the material needed to make a decision, and given a timeline to make an offer – similar to an auction. The seller then selects the best offer from all the bids.
On smaller deals, where size and location significantly reduce the number of potential strategic buyers, the M&A process involves sharing the opportunity with a large group of buyers – both financial and strategic. While there might not be a stated timeline for submitting an offer, the buyers know many other buyers are also looking – and they need to act quickly with an attractive offer. While this process is not like a true action, the seller will probably get multiple offers within a reasonable time-period, and thus, can be reasonably certain of determining the best offer.
For more information, click Competitive Process, to read about our process, click Our Process, and click True Story to read more about what actuallyhappened.
The Summit Acquisitions Group — Business Brokers and M&A Advisors — specializes in the sale, appraisal, and financing of privately owned companies ranging in valuation from $750,000 to $25,000,000. Contact their offices in Atlanta, GA or Charlotte, NC for a free consultation.