Selling Your Business Successfully (Parts V & VI)
Sizing up your situation
One of the most important things you can do as a
CEO is to ensure that your exit plan is current. Your plan should
examine where you are now and where you need to go to realize
your financial goals. It should also identify the gaps you need
to overcome.
It's important to recognize that it is very difficult
to be good at all things. Because most of us are not wired, from
an emotional standpoint, to effectively develop and maintain our
exiting strategies, you may want to consider working with a qualified
financial adviser. One major survey of affluent CEOs found that
90.2 percent of them want to work with financial advisers.
CRITICAL STEP FIVE
Preliminary discussions give the buyer the opportunity
to communicate his strategy and how he sees your company fitting
into that strategy. You, as the seller, should have a clear understanding
of why the buyer is interested in order to be as positively engaged
in this process as possible.
The initial discussions should also deal with the
issues of philosophy, culture, expectations of customers, and
other "intangible" issues.
While these can be difficult issues to put your
hands around, you will want to start building your understanding
of the other party immediately as the intangible issues may be
more vital to the success of the deal than the financial numbers.
The preliminary discussions will give you insight
and firsthand observations about how the buyer philosophically
runs a business and the buyer's operations style. Be prepared
with questions about the buyer's business, acquisition strategy
and planned implementation approach.
This is where you will discover how prepared and
logical your potential buyer actually is. What the buyer says
should be in line with the buyer's proposed strategy. If the potential
buyer is a pair or group of partners, watch how they interact
with each other. You should gather enough information from this
meeting to know if you want to continue discussions.
The buyer's urge to get right down to the "brass
tacks" of price and terms can be overwhelming. Resist this
temptation.
Discussion of the pricing and terms of the deal
raises the tension of the discussions and often narrows the flow
of information. Don't discuss price and financial details until
you are comfortable with the compatibility of businesses. In discussions
with a potential acquirer, keep your strategy in focus at all
times.
Ask prospective buyers to sign a confidentiality
agreement before you show them any detailed information. Confidentiality
agreements may be difficult to enforce but they act as a serious
psychological commitment for most buyers. Those buyers who are
not willing to sign, or wish to make numerous changes to, the
confidentiality agreement should be regarded with caution.
Please note it is important to obtain independent
and qualified legal counsel to draft agreements specific to your
situation. In addition to the economic considerations, buyers
and sellers must evaluate how their values, philosophy and business
culture will fit with those of the other party.
Remember that you are emotionally attached to your
business – allowing your professional advisers to handle
the preliminary discussions may be a wise idea.
CRITICAL STEP SIX: DUE DILIGENCE
Once you and the buyer agree there is a good match,
the buyer will begin the due diligence process. For you, this
is invasive. At this point, you may need to disclose to your key
employees that you are negotiating to sell or merge your business.
You should put together a detailed list of financials
and documents well before you enter into this stage of negotiations
so as not to delay the discussions. In addition, by doing your
own internal due diligence early, you will have had the opportunity
to clean up any problems and outstanding issues.
Read
Part 7»
Christopher G. Snyder and Haitham "Hutch"
E. Ashoo are principals of Pillar Financial Services in Walnut
Creek. Contact them at 925-356-6780.
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