The first decent size business I sold in this century was at the dawn of the century. It was a wonderful operation; it was priced right, easy to run, a money spinner, recession proof, Rand hedge… all the good things. But the seller really needed to move on in his life. He was living to an emigration timeline.
We’d had several interested buyers traipse through the factory, drink coffee, ask lots of questions, and move on. In our very respectful way, we had been careful to space the potential buyers far apart so that they never ran into one another, and we gave them lots of time to ask questions… Always the same questions. Always the same answers.
Then my seller had to go overseas for ten days. During his time away I arranged to see at my office, as many new potential buyers as possible. For three days I saw one buyer per hour. It would have been murderous if the documentation wasn’t so well prepared. On the fourth day I arranged a factory visit at 4pm, as everyone was knocking off for the weekend. There were close to twenty different potential buyers present.
I addressed them all to the effect that this was a site visit only. I would answer questions to do with processes, markets and opportunities. All financial questions had already been dealt with, and there would certainly be no discussions about price and terms of the sale in such an open forum. These rules were mostly adhered to by all present. We walked through the factory together. They sniffed the air, they ran their toes through the dust, they kicked some tyres.
At the end of the visit, everybody was quite clear that they were not operating in a vacuum as a single buyer. In other words, they all knew that we had options.
The following week I was able to present four offers to my seller. He took a clean deal which gave him about 50% more than he had originally wanted.
If you have options you are likely to have control of situations. If options exist, you as a negotiator can get up from the table and walk away. Options yield results.
Those options begin early in the cycle and continue through it, with options for:
- Knowing what the value of one’s business is. This knowledge gives options as to what to do to increase value if necessary, put selling plans on the backburner for a while, or in fact selling the business now.
- Knowing that it is safe to sell a business either as an asset deal or an equity deal, because the legal framework is in place to do either deal.
- Taking a business to many different potential buyers, willing and able to do a deal. Having only one buyer places unnecessary pressure on a seller to do any deal that offers itself. Buyers know this. Turn the tables.