Jun 7, 201810:24 AMExit Stage Right
with Martha Sullivan
Why you should kiss lots of frogs
(page 2 of 2)
No chaperone: How many of us let our inexperienced daughter go out with a boy for the first time without a chaperone or way to verify that things are on an even keel? Not many of us. We usually take determined, and sometimes quite creative, precautions to protect our kids the best we can. (One dad I know used to be “coincidentally” cleaning a shotgun when the young man came to pick his daughter up for their first date!)
However, when it comes to selling a business, and especially with a sole suitor, too many owners try to go it alone. They don’t hire advisers experienced in buying and selling businesses, relying instead on the attorney that may have drafted their will or the accountant that only does their taxes. In that case, they are that novice without a chaperone.
This is one of most important times to stay focused on running your business. Selling it yourself all but guarantees that you will be distracted. Finding potential buyers (assuming you take the time to create competition), courting, entertaining proposals, and enduring their negotiation and due diligence demands is time-consuming. Going it alone significantly increases the risk of taking your eyes off the ball, as well as missing the potential consequences of a more-experienced suitor’s moves.
Even in a sole-suitor situation, it’s important to have someone else manage the conversations and process. Experienced advisers see the parts of the deal that may not meet your objectives or could backfire on you. They know the “moves” and have seen the consequences. While they do their job, you can concentrate on doing yours.
You’re in a very lonely spot when selling your business due to its highly confidential nature. Your adviser provides you with someone experienced and objective to talk with about the deal, especially when your emotions spike — and they will spike. There’s tremendous value in having them there to help you sort through the issues, pros and cons of the situation, and facilitate your decision making.
Mirage of more money in your pocket: In a sole-source deal, brokers fees may be avoided, which further encourages business owners to go it alone. It’s true that when you work with or are approached directly by a single suitor or do it yourself, you will likely save on broker or investment banking fees, but that does not mean that you got the most cost effective or lucrative deal.
Your chances of leaving money on the table go up significantly without an experienced adviser working for you and creating competition. Further, legal and other fees may spiral out of control because of the lack of support, direction, and negotiation experience. Worse yet, if the deal turns out to be difficult to enforce or worse, the cost of litigation can quickly escalate. The money “saved” in broker fees is often only a mirage of the pond.
The moral of this story is that you should not simply settle for and talk with a single potential buyer when looking to sell your company. Nor should you do try to do it yourself. Engage your advisers to support and guide you, bring multiple suitors to the table, and leverage their experience to find your prince or princess.
Otherwise, you may end up with an ugly toad.
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