This can result in a lopsided negotiating arrangement- the amateur versus the professional.
Louisville, KY (PRWEB) September 20, 2012
The majority of business owners sell a business only once in their lifetime. The same can be said for someone buying a business...they typically only do it once. But, a strategic, corporate or equity buyer, is likely to have been involved in quite a few transactions - some that worked and some that did not. What does this mean for the seller? It means buyers that express interest in buying a business may have a team of mergers & acquisitions advisors helping them. “This can result in a lopsided negotiating arrangement - the amateur (the seller) versus the professional (the buyer),” warns American Fortune Mergers and Acquisitions CEO, Brian Mazar. To help business owners protect themselves in this situation, Mazar released today his top tips for evening the playing field.
1. Selling a business is not like selling real estate. Confidentiality is, in all cases, critical. A seller does not want employees, suppliers, and customers/clients to be aware of a possible sale. Go to great lengths to protect the confidentiality of your information. When potential buyers inquire about a business, the seller should error on the side of sharing too little information rather than too much.
2. The sales process also cannot distract the owner(s) from managing the day-to-day operation of the business. Sellers should plan ahead on how to sell a business and manage their company at the same time. Delegate tasks if necessary. It is safe to assume selling a business could easily consume 20% of a seller's typical work week.
3. Some deals come unraveled late-stage because a buyer "thinks" they have adequate financing only to have that not be case when they try and obtain the proper funds. Sellers should ask early-on for proof of financing and make sure they are comfortable with the buyer's arrangements. All acquirers should be able to show the seller they have the financial resources to make the deal. Unless the company is a large and successful company where acquisition funds are not an issue, the buyers financial statements should be made available. A credit report is also important. Buyers that are financially capable of making the deal should not have difficulty supplying this information.
4. Although due diligence is typically initiated by the buyer’s business brokers, it's important that sellers do their own due diligence. Is the buyer a good fit? Do they have experience in your industry? What are their goals in purchasing your company? It is extremely important the buyer be screened as much as the seller. Since a potential buyer will likely employ qualified business brokers to assist them with their due diligence, it is important that the seller do the same. Sellers should hire professional help (such as a mergers & acquisition advisor or business intermediary) to insure their business's best interest is protected & considered adequately. Sellers should also retain legal and accounting professionals.
5. A seller should also check for information about any prior purchases the buyer might have been a part of. This would include any previous financing contacts. Talking to a previous seller can reveal how their deal went; how the acquirer was to work with; whether they did everything they said they would; etc. Talking to managers of previous acquisitions by the buyer can tell a seller how employees were treated, etc.
6. Chemistry between a buyer and a seller is important. Do you communicate well? Is information comfortably shared? Are questions openly asked and answered by both parties? If the seller is staying with the company for an extended period of time, it's also critical that he/she is comfortable with not only the buyer, but also with the new management team.
American Fortune Mergers and Acquisitions, LLC is a nation-wide firm that provides growth-to-exit planning, mergers and acquisitions services and business valuation services for businesses with revenues between $3 million and $100 million. American Fortune was founded by industry veteran Brian S. Mazar who developed a unique process that is sell-side driven. This process makes American Fortune different from most merger & acquisitions advisors.
Advisors at American Fortune are not business brokers, they do not represent both sides of a deal and they refuse to follow industry standards just “because.” Their results are different too. Those who learn how to sell a business through American Fortune receive better terms, higher selling prices and a true advocate when they sell a business. Due to this, American Fortune successfully sells their businesses at an average of 98% of the listed price.