The trend of buyers directly soliciting business owners remains strong across all industries. This strategic approach often leads to major disadvantages for sellers and significant potential upside for buyers – a trend that is not going away. Before accepting an offer from a buyer, it is important for business owners to have an experienced mergers and acquisitions (M&A) team in place. Oftentimes, sellers are surprised by the valuation a buyer may place on their business. In addition, they may struggle with understanding the details around structure, including reasonable expectations regarding how much of the offering price is cash versus a seller note or perhaps an earnout, which would be contingent upon performance going forward. Additionally, sellers may underestimate the complexities of due diligence and may even struggle with completing the diligence phase of the transaction while also shouldering the responsibility of continuing to manage the day-to-day operations of the business.
When a buyer solicits a business owner directly with the intent of acquiring the business, the buyer often submits an offer that is below market value. The buyer may assume, rightly or wrongly, that there is no other competition to buy the business at that time. With no competing offers, the business owner(s) may feel that they have no leverage to seek a higher purchase price or more favorable terms. This is where having an M&A advisor and a deal team in place is imperative.
As a business owner looking to sell, you may not know the value of your business. By running a full transaction process, you will likely see a more realistic range of values for the business and very likely, a higher purchase price. The reason for this is because running a full process could yield multiple offers from a broader buyer universe of buyers, which may include strategic buyers, private equity firms, family offices, and entrepreneur investors.
With a deal team that includes an M&A advisor, experienced M&A attorney, CPA, and wealth manager, business owners will have the confidence to properly evaluate any direct solicitations to buy their company. Further, when the due diligence process begins, with a quality of earnings assessment, working capital analysis, insurance, and environmental requests, etc., sellers can rely on their M&A team to help them navigate any complex legal issues or intricacies of due diligence that will help preserve the original purchase price agreed upon and ensure a successful consummation of the transaction.
Aberdeen Advisors is a boutique mergers and acquisitions firm dedicated to helping business owners successfully navigate the intricacies of a sales transaction. Made up of former business owners and C-suite executives who have run and sold companies, every member of our team has also personally experienced the psychological effects associated with selling a company. We pride ourselves on a successful track record of shepherding business owners through the process to ensure a successful outcome.