Many business executives wait for a buyer to show up someday, never stopping to think about the flawed logic of accepting an offer and selling the company to whoever gets there first. Is this the best buyer? Is this the one who can pay the most? It will be a remarkable coincidence if it is. It is much more likely that it is not. Also, since they are the only buyers, their bargaining power is far superior to yours.
The importance of research
If you want to maximize sale value, you, or the advisors you hire, must go through a rigorous process of finding the best buyers or investors. Buyers will be those who have the best synergies with your company, who are the strongest financially and who recognize the strategy—the value of your company (wherever they are). Then, you will have to make them compete to increase the price.
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Price is not one-dimensional
Price is an essential aspect of any negotiation, but the likelihood of closing the deal also lies in who we give exclusivity to for due diligence. We may receive an excellent offer from someone who has little hope of obtaining financing or who is known to negotiate hard at the final stage after due diligence.
Therefore, before accepting an offer, it is good to study the buyer’s actual financial capacity and acquisition history. By studying how he has performed in previous acquisitions, you will learn a lot about his behaviour. Once you grant exclusivity to a buyer and tell other potential buyers that you have accepted another offer, it will be more challenging to go back to them and get them interested again.
Enrique Quemada, president of ONEtoONE Corporate Finance, has written this article.
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