Have You Considered Every Aspect?
n cities and states with hot housing markets this spring, many home sellers were happily surprised to receive multiple offers within a week of putting their homes on the market. These types of market conditions don’t come along very often. But when they do, the seller can receive more money from the sale than they anticipated.
In hot business markets (such as labels and packaging) ,it is possible to get competing offers from companies interested in buying your business. To make it happen, here are a few steps to consider.
Don’t automatically accept the first offer that comes along. Buyers who express interest in buying your company before you have even mentioned that you are thinking of selling it would like nothing better than to close the deal quickly without any competing bids. They will try to negotiate a proprietary deal by convincing you to avoid the time and expense of testing the market.
Later, you may wonder what might have happened if you had at least tested the waters for other potential buyers.
Consider the first offer as a signal that other buyers might be interested. If you receive an unexpected offer to buy your business, it’s probably because your business offers synergies that appeal to strategic buyers. Strategic buyers see an opportunity to gain long-term strength and competitive advantage by acquiring companies with specific customer bases, locations, talent, or strong potential growth.
Engage an advisor with connections in your industry. This person can help identify and discreetly reach out to other potential buyers for your business. Unless you are a public company, it’s not necessary to let everyone know that you are now officially considering selling your business.
The industry advisor should have enough experience and connections to be able to tell you more about some of the potential buyers in the market. An industry-trusted connector can also help you answer questions about each buyer’s track record with acquisitions and post-sale integrations.
Be prepared for extra due diligence. With multiple offers, you have to assess the financial strengths and integrity of each company bidding to acquire you. Plus, the attorneys and accounts on your transition team will need to evaluate and compare the specific terms of each offer. Which deal will be better for you and your employees in the long run? Which potential deal has the best potential of closing? Which buyer is more likely to make a smooth post-sale integration?
Let the first buyer know that you have another offer. Competition is good – just keep it quiet. Determine if the first buyer would be willing to change the price or terms of their first offer. But getting more money from the sale shouldn’t be the sole reason for sparking a bidding war. Make it clear that you are committed to getting the best possible terms for future growth and the people who will stay behind after you leave. As buyers submit bids and counter-offers, you will see which buyer is more highly motivated to get the deal to the finish line.
You don’t have to start a bidding war to raise the purchase price. Perhaps you are already inclined to accept the offer from the first company that approached you about buying your company. If the buyer raises the offer or adjusts the terms of the deal, consider accepting it.
In the long run, getting competing offers can be a good thing. It forces both the buyer and the seller to clarify their expectations from the deal. And when you get right down to it: Money talks, bullshit walks.
Yes, the process of finding additional legitimate buyers for your company may add some time, effort, and expenses to the process of selling your business. But the returns can be huge – both in the final sales price and your peace of mind as you question whether you’ve made the best decision.
For more ideas about finding buyers for label, packaging, and specialty graphics businesses, call me at 561-543-2323. I have worked with executives and private equity groups in these industries for over 40 years and can share insights and advice.
Whether you have already received an offer or are just starting to think about selling your business, download our complementary glossary, Demystifying M&A Jargon, to educate yourself and be prepared for whatever comes your way.