Five Things to Consider When You Receive an Offer to Buy Your Company
Decide if you really want to sell.
Expect to spend a lot of time and potential expense if you decide to investigate the offer further. And not everything will go your way, so you need to be committed before you engage the process.
Get good counsel.
Make sure to get good advice from professionals like transaction attorneys, accountants, investment bankers or business brokers if you decide to entertain the proposal. While these services aren’t free, they typically pay for themselves with higher multiples or other favorable transaction terms.
Get to know the buyer.
Learn their strategy, culture and history regarding similar acquisitions. Many business agreements require management to stay on and operate or grow the business. This could include earn-out provisions where a portion of the sale price is determined based on performance after the transaction. Be sure that the buyer is a firm or company that you would feel comfortable partnering with.
Get prepared for an exhaustive review of your company.
During the due diligence, the prospective buyer will scrub customer and vendor reports, financial records, legal agreements, meeting minutes, employment contracts and more to thoroughly understand the business’s historical and future performance. Although it may seem like an invasion of privacy, let the process work as designed and be honest about past warts and how your company has managed through them.
Stay focused on operating your business.
The sale process can be extremely long, with numerous starts and stops. Don’t become so distracted by the process that you forget to improve and grow your operation. If the transaction falls through, you’re left with a business that is better at the end of the process than it was at the start.