Selling a privately held business is not like selling real estate, it is far more complicated.
And it isn’t just the sales process that is more complicated. Other business issues can arise that slow things down.
Delay may be the worst enemy of closing a transaction.
Most business owners only sell one company in their entire life. Professional corporate M&A (business development) specialists have bought and sold many of them. Some will have worked, some will not have worked. But with each, the participants’ experience grows.
What are the implications for the seller? The buyer will probably be more experienced than the seller in the sales process. The buyer will likely have an experienced team of people who have worked together on many transactions. This results in a one-sided experience level.
One big area of concern for the seller is confidentiality. The seller does not want key parties such as employees, vendors, and customers to know the business is for sale.
The seller should not allow themselves to be distracted from running the business during the process, so the company’s performance is not harmed.
And a seller should do an investigation of the buyer, to make sure the acquirer can complete the transaction should an agreement be reached. The buyer is doing their own due diligence, and so should the seller.
First, the buyer should make sure the buyer has access to the capital to finish the deal. Check this out with the buyer.
Second, check the buyer’s references. Have they acquired any other businesses and how did that work out? What is the personal integrity of the buyer? Their reputation? Did the buyer do what they said they were going to do? How were the employees of the acquired companies treated? The way a buyer treats employees after an acquisition is complete says a lot about the acquirer.
The chemistry between the buyer and seller should be good. The two parties and their teams should “click.” Due diligence on both sides can help increase the trust between the two parties, but that is not the only way to increase confidence. And the new management team (should there be one) needs to be considered also. Chemistry is hard to define but you will know it when you see it.
Millions of businesses are sold every year or two. For most, almost all, of the sellers this is the first time they have done this. That is why is critical to have professional help to facilitate the sales process.
