BEFORE ACCEPTING AN OFFER, STUDY THE BUYER
Many business executives wait for a buyer to appear someday, without stopping to think about the poor logic in selling the company to whomever comes first. Is this the best buyer? Is this who can pay the most? It would be a huge coincidence if it were. It is much more likely that it is not. Also, by being the only buyers, their bargaining power is much superior to yours.
The importance of research
If you really want to maximize the sale value, you, or the advisors you hire, must perform a rigorous search process for the best buyers or investors, those who have better synergies with your company, who are stronger financially, and who recognize the strategic value of your company (wherever they may be). Then, you will have to make them compete to increase the price.
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Price is not one-dimensional
Evidently, price is a very important aspect of any negotiation, but the probability of closing the deal also lies in who we give exclusivity to for a due diligence. We might receive a very good offer from someone who doesn’t have much hope in getting financing or who is known for negotiating hard in the final stage after the due diligence.
Because of this, before accepting an offer, you should study the buyer’s real financial capacity and his acquisition history. By studying how he has acted in previous acquisitions, you will learn a lot about his behavior. Once you give exclusivity to a buyer and you tell other potential buyers that you have accepted another offer, it will be harder to go back to them and try to get them interested again.
This article was written by Enrique Quemada – President of ONEtoONE Corporate Finance.
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