In The Deal Leader

Having engaged with hundreds of entrepreneurs over the years, one thing has always resonated with each and every business owner… and that is the need to have control. Control over their business, their cash flow and their growth. This makes complete sense and speaks to why the thought of having to work for someone else sends shivers down their spine.

I am fascinated why a different set of standards is applied when it comes to selling his or her business. Let me paint an ‘all too common’ scenario that many of our clients have experienced.

One day, out of the blue, you are contacted by a ‘would be’ acquirer who is interested in buying your business. From the very moment that you entertain this approach you have lost control. Why is this you may ask? From that moment, the potential acquirer will define the hoops that you need to jump through before they even put a serious offer on the table. They will insist on a full due diligence before submitting a detailed offer and will no doubt leave you feeling overly exposed for an extended period of time.

Then, at the eleventh hour, they will put a ridiculous offer forward underpinned by all of the ‘risks’ that they identified in the due diligence. Forget focusing on the embedded value and future growth potential that your business will offer them. From their perspective, it is all about the negative stuff. Another alternative is that they finish their due diligence and walk away. You end up standing at your business entrance, watching them drive away, with nothing to show for it except an elevated blood pressure and asking yourself the question ‘what the hell just happened?’

Control is critical when selling your business.
I am not talking about ego and arrogance.  I am talking about taking an approach that is calculated and structured. An approach that drives a process on your terms and according to your agenda.

An approach that protects your confidential information along the way and doesn’t leave you feeling exposed at the end.


Always have a plan

Whether you are proactively going to market to find an acquirer or strategic partner, or someone comes knocking on your door, always have a plan. This will encompass the timeline, the terms and rules of engagement between the acquirer and yourself moving forward. By putting the plan in place, you take control of the process.


Interrogate the acquirer

Before doing anything as far as process with an acquirer is concerned, interrogate them to truly understand the following:

1.  What are their motives to look at buying your business?

2. Have they bought business before?

1. If they have, can they give you details on who they have acquired?

2. Insist on speaking to those business owners that have been acquired by this acquirer to hear from the other side what working with this company is all about.

3. Find out how they valued and structured those deals?

3. Find out how they would value your business and equally importantly, how would they fund the acquisition?

1. You want the valuation formula upfront so that you are both working on the same basis.

2. If the acquirer has to raise funding, then insist on speaking to the funder to make sure that there is a commitment from their side and to make sure that their valuation methodologies are aligned to what the acquirer is saying. If not, then you need to engage with the funder as their valuation will be the one that counts.


Always get an offer before due diligence

Always make sure that the acquirer puts forward a non-binding offer before commencing with the due diligence for the following reasons:

1. This will give you comfort that they are serious.

2. It will identify where they see the value and what the risks are.


Always agree the terms of the due diligence

Make sure that the terms of the due diligence are defined and reconcile back to the offer. A due diligence must confirm where the acquirer sees value and identify risks. Don’t let the due diligence list (which is often made up of hundreds of requirements) drive the process. Let commercial reality and practicality guide your process.


Always have a timeline

Always ensure that you are driving the process with a timeline. You must define the milestones and the deadlines for the acquirer. Remember your time is valuable and the acquirer must respect that.


Andrew Bahlmann, MD, Deal Leaders Africa

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