InSight

Exit and Growth Strategies for Middle Market Businesses

I’m Selling My Business – I’ll Find the Buyer Myself

By Gerald W. Lindsay | Sep 09, 2011

I know everyone in my industry; I’ll call them up and work out a sale.

Selling Business Myths – Part 4

Industry buyers are great buyers! They know your industry and already have the logic behind why it would be a good deal. They may even be actively in the acquisition mode and have a few done deals under their belt. They may even want to motivate you to stay with the company post sale. So, how do you get this scenario to work out just right for you?

Money BlocksMany business owners think that the best approach is to pick up the phone and begin a conversation something like, “Hi, I am thinking about selling my business.”  After all you probably know each other through competition over the years and in passing at tradeshows. This seems like a good approach. However, below are a few reasons that a licensed Investment Banker should make the first contact on your behalf, even with acquaintances:

• This shows the buyer that this is will be a serious professional process. Having an Investment Banker screen buyers will eliminate tire-kickers. If they are just interested in testing the waters or seeing what’s happening in the industry, this process can waste valuable time and energy. If they have a serious interest, they will readily deal with a professional.

• It indicates that they are one of many who will be presented with this opportunity. This creates a competitive environment for the sale.

• It reduces the risk of the “low ball” offer. They will be working with experienced parties that know the value of the business and low offers will not be taken seriously.

• It provides confidentiality. All buyers are required to sign a Non-Disclosure Agreement (NDA) prior to receiving any information on the company. After all, these are your competitors; you must protect your business information.

• The deal could quickly turn into a securities transaction. Federal and state mandates require that M&A Intermediaries who facilitate transactions involving securities (stock sales) be Registered Representatives sponsored by a Registered Broker-Dealer.

 

Posted by Gerald Lindsay.


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