You have decided to sell your business. You have interviewed, investigated and selected a diligent, competent, professional intermediary. Now the question is, “Should you enter into an exclusive agreement with this intermediary?” Are these agreements good for the seller? The benefits to the intermediary of an exclusive agreement are obvious. Are there benefits to the seller of such an arrangement?
Absolutely… let’s examine why:
1 – Better Exposure to Qualified Buyers
You will get better exposure from an exclusive arrangement than you will by letting several intermediaries work on a non-exclusive basis. A professional intermediary working on an exclusive basis will do a comprehensive search of all the potential buyers for your business. This intermediary will present you with only those buyers who are qualified to complete the transaction. Non-exclusive intermediaries are not going to spend the time necessary to do a comprehensive search. Why should they make the effort when several other intermediaries have access to the deal and the odds of finding the buyer are low?
2 – The Intermediary Is the Auctioneer
The key element in getting a prime price for your business is to get an auction going between two or more synergistic buyers. The intermediary is that third party auctioneer who cajoles the highest bid from each buyer. The seller, being the ultimate authority, cannot play one bidder against another effectively.
3 – Best Buyer
Non-exclusive intermediaries only get paid if you sell to their buyer. This means that these intermediaries are interested in “selling” their buyer to you — not finding the best buyer for you. The result is that you end up negotiating with an intermediary who, in effect is representing the buyer, not you. (You will still pay this intermediary out of your pocket.)
4 – Maintenance of Confidentiality
Confidentiality is important to most sellers. Knowing the business is for sale may cause concern to employees, suppliers and customers, and joy to competitors. We have seen serious deterioration in profits as a result of breaches in confidentiality. When you have more than one intermediary involved, you expose yourself to loss of confidentiality in direct ratio to the number of intermediaries involved.
5 – Shopworn Deal
A non-exclusive arrangement may result in the same buyer getting information about your deal from several sources. This confuses buyers as to who is representing you and who can speak for you. In addition, the proposal becomes shopworn and buyers lose interest quickly.
In my next post we’ll look at five more reasons it makes sense for sellers to sign an exclusive intermediary agreement.