Improving Your Options and Your Odds – Part Three of Three
In Parts One (See Link to Part One) and Two (See Link to Part Two) of this blog series, we explored the importance to the business owner of maximizing both the quantity and quality of the buyer pool for their business. Below is a real life example of how implementation of these concepts culminated into a successful transaction.
We recently sold a manufacturing company that catered to a very niche market. The company had a number of very positive attributes, including a tremendous growth trend and limited competition. However, the majority of the company’s revenue was produced by three main customers. Most business buyers would deem this to be too risky. If the seller had required us to identify a buyer before providing us with critical information, odds are that the one buyer would not have proceeded once the customer concentration was revealed, leaving the seller frustrated that we were unable to present him with an offer from the buyer but also unaware that his expectations were nearly impossible for us to meet.
Fortunately, the seller provided us full access to information and engaged us to take the business to market. We wrote a “blind teaser” that did not include the name of the business or other confidential information, but provided basic high-level financial information and highlighted the business’s positive attributes, its challenges, and the seller’s preferred exit strategy. This was distributed to a large network of potential buyers, which quickly led to further inquiries from a number of buyers who found the business to be attractive, warts and all, because it was synergistic with their other business interests.
After signing appropriate non-disclosures, interested buyers received additional information and entered into discussions with the seller. Within a month of putting the business on the market, the seller had selected his buyer from the six parties who submitted offers. The terms of the accepted offer were very much in line with the seller’s preferred exit strategy and expectations, and due diligence proceeded fairly seamlessly, since the challenges had been disclosed up front. The transaction closed approximately two months after the offer had been accepted.
What’s the moral of the story? To optimize the best price and deal terms for your business, don’t limit your options to one buyer. Rather, provide full information on both the attributes and challenges of your business. Then let your Apex Business Advisor market the business in a manner that will create a buyer pool of the best and most motivated buyers for your business.
Anita Lieser
Senior Advisor
