Read time: 4 min read
Even during difficult economic times, strong SMEs remain in demand and are often subjected to unsolicited approaches. Knowing how to start a negotiation and what are the major factors to be determined in the negotiations to buy a business can help you secure the best offer.
Malcolm Murray, Managing Director of the corporate-finance firm Entrepreneurs Hub, discusses the main points to keep in mind if someone makes an offer for your company.
Before you do anything…
Ask yourself if now’s the right time to sell. If it is, you need to determine if your business is ready to be sold. If it isn’t ready, you could end up going to the due-diligence stage with a good offer only for it to fall through, costing you time and money.
Don’t be rushed
If you’ve got a strong company, you can expect a knock on the door at any time, which is a positive thing. It’s a good sign that you run a business that someone is interested in buying.
When you’re approached by a buyer, don’t feel rushed into making a decision. Buyers may try to speed things up, but if it’s a serious offer, request they sign a non-disclosure agreement and start asking them questions. These could include:
- How do you value businesses when you buy them?
- What sort of deal structure do you prefer?
By asking these open questions, you can establish if it’s an opportunity worth pursuing.
Don’t be dazzled
There are various ways in which an offer might be made, but it will often come from a serial acquirer with a business model that depends on buying new companies for growth.
Serial acquirers approach lots of people. Always remember that being approached doesn’t mean you’ve got a deal. Some people get excited and spend a lot of time focusing on the approach, without realising that there’s a high chance they won’t get acquired.
Even so, it’s flattering to receive an offer. Bear in mind that the goal of an acquirer is often to ‘romance’ you by telling you that you’ve got a great business that would be a perfect fit for theirs. The aim is to tie you down into talking to only one potential buyer, which is a risk. As soon as you’ve got just one person in the process, you’ve lost control.
Don’t put a price on the business
This is critical. Always turn it around and ask the potential buyer what they think your company is worth – let them place a price on it. As soon as you tell them a price, you cap it.
Create competition
We see a range of offers on each company that goes to market – and the highest can sometimes be as much as three times greater than the lowest. That’s only possible if there’s a competitive process.
You might think you have a good offer if you’re approached out of the blue, but someone else could come along with a much better proposition. You won’t know if there’s no competition. A good offer is always a good offer until you get a better one.
By creating choice, you can drive value and provide yourself with a fallback option if things break down with one buyer. When we work on deals, we’ll look to approach up to 150 potential buyers to gauge their interest. That will then be whittled down to about ten who will look seriously, then we’ll have between four and eight meetings with potential acquirers.
Seek advice
Knowing how and when to push back can improve your offer. Advisers can also help you to focus on what’s important. Selling your business will be a major distraction if you’re not working with somebody because there’s so much documentation to deal with, along with unforeseen challenges.
Keep your emotions in check
For most business owners, selling your company will be one of the most emotional times of your life, but if you become too excited, the buyer can tell and is in a much stronger negotiating position.
Understand the highest offer isn’t always the best
Different offers will have different structures that you’ll need to evaluate. It won’t always be the highest offer that’s the most attractive. You might not feel comfortable on a personal level, particularly if you have to work with the buyers after you sell.
It’s not just about the offer, it’s also about the terms. For example, there could be more money offered upfront or the promise of instalments based on performance.
Talk to us
If you’re considering selling your business, contact us today and we can explore your options with you.
Read time: 4 min read
Even during difficult economic times, strong SMEs remain in demand and are often subjected to unsolicited approaches. Knowing how to start a negotiation and what are the major factors to be determined in the negotiations to buy a business can help you secure the best offer.
Malcolm Murray, Managing Director of the corporate-finance firm Entrepreneurs Hub, discusses the main points to keep in mind if someone makes an offer for your company.
Before you do anything…
Ask yourself if now’s the right time to sell. If it is, you need to determine if your business is ready to be sold. If it isn’t ready, you could end up going to the due-diligence stage with a good offer only for it to fall through, costing you time and money.
Don’t be rushed
If you’ve got a strong company, you can expect a knock on the door at any time, which is a positive thing. It’s a good sign that you run a business that someone is interested in buying.
When you’re approached by a buyer, don’t feel rushed into making a decision. Buyers may try to speed things up, but if it’s a serious offer, request they sign a non-disclosure agreement and start asking them questions. These could include:
- How do you value businesses when you buy them?
- What sort of deal structure do you prefer?
By asking these open questions, you can establish if it’s an opportunity worth pursuing.
Don’t be dazzled
There are various ways in which an offer might be made, but it will often come from a serial acquirer with a business model that depends on buying new companies for growth.
Serial acquirers approach lots of people. Always remember that being approached doesn’t mean you’ve got a deal. Some people get excited and spend a lot of time focusing on the approach, without realising that there’s a high chance they won’t get acquired.
Even so, it’s flattering to receive an offer. Bear in mind that the goal of an acquirer is often to ‘romance’ you by telling you that you’ve got a great business that would be a perfect fit for theirs. The aim is to tie you down into talking to only one potential buyer, which is a risk. As soon as you’ve got just one person in the process, you’ve lost control.
Don’t put a price on the business
This is critical. Always turn it around and ask the potential buyer what they think your company is worth – let them place a price on it. As soon as you tell them a price, you cap it.
Create competition
We see a range of offers on each company that goes to market – and the highest can sometimes be as much as three times greater than the lowest. That’s only possible if there’s a competitive process.
You might think you have a good offer if you’re approached out of the blue, but someone else could come along with a much better proposition. You won’t know if there’s no competition. A good offer is always a good offer until you get a better one.
By creating choice, you can drive value and provide yourself with a fallback option if things break down with one buyer. When we work on deals, we’ll look to approach up to 150 potential buyers to gauge their interest. That will then be whittled down to about ten who will look seriously, then we’ll have between four and eight meetings with potential acquirers.
Seek advice
Knowing how and when to push back can improve your offer. Advisers can also help you to focus on what’s important. Selling your business will be a major distraction if you’re not working with somebody because there’s so much documentation to deal with, along with unforeseen challenges.
Keep your emotions in check
For most business owners, selling your company will be one of the most emotional times of your life, but if you become too excited, the buyer can tell and is in a much stronger negotiating position.
Understand the highest offer isn’t always the best
Different offers will have different structures that you’ll need to evaluate. It won’t always be the highest offer that’s the most attractive. You might not feel comfortable on a personal level, particularly if you have to work with the buyers after you sell.
It’s not just about the offer, it’s also about the terms. For example, there could be more money offered upfront or the promise of instalments based on performance.
Talk to us
If you’re considering selling your business, contact us today and we can explore your options with you.
Read time: 4 min read
Even during difficult economic times, strong SMEs remain in demand and are often subjected to unsolicited approaches. Knowing how to start a negotiation and what are the major factors to be determined in the negotiations to buy a business can help you secure the best offer.
Malcolm Murray, Managing Director of the corporate-finance firm Entrepreneurs Hub, discusses the main points to keep in mind if someone makes an offer for your company.
Before you do anything…
Ask yourself if now’s the right time to sell. If it is, you need to determine if your business is ready to be sold. If it isn’t ready, you could end up going to the due-diligence stage with a good offer only for it to fall through, costing you time and money.
Don’t be rushed
If you’ve got a strong company, you can expect a knock on the door at any time, which is a positive thing. It’s a good sign that you run a business that someone is interested in buying.
When you’re approached by a buyer, don’t feel rushed into making a decision. Buyers may try to speed things up, but if it’s a serious offer, request they sign a non-disclosure agreement and start asking them questions. These could include:
- How do you value businesses when you buy them?
- What sort of deal structure do you prefer?
By asking these open questions, you can establish if it’s an opportunity worth pursuing.
Don’t be dazzled
There are various ways in which an offer might be made, but it will often come from a serial acquirer with a business model that depends on buying new companies for growth.
Serial acquirers approach lots of people. Always remember that being approached doesn’t mean you’ve got a deal. Some people get excited and spend a lot of time focusing on the approach, without realising that there’s a high chance they won’t get acquired.
Even so, it’s flattering to receive an offer. Bear in mind that the goal of an acquirer is often to ‘romance’ you by telling you that you’ve got a great business that would be a perfect fit for theirs. The aim is to tie you down into talking to only one potential buyer, which is a risk. As soon as you’ve got just one person in the process, you’ve lost control.
Don’t put a price on the business
This is critical. Always turn it around and ask the potential buyer what they think your company is worth – let them place a price on it. As soon as you tell them a price, you cap it.
Create competition
We see a range of offers on each company that goes to market – and the highest can sometimes be as much as three times greater than the lowest. That’s only possible if there’s a competitive process.
You might think you have a good offer if you’re approached out of the blue, but someone else could come along with a much better proposition. You won’t know if there’s no competition. A good offer is always a good offer until you get a better one.
By creating choice, you can drive value and provide yourself with a fallback option if things break down with one buyer. When we work on deals, we’ll look to approach up to 150 potential buyers to gauge their interest. That will then be whittled down to about ten who will look seriously, then we’ll have between four and eight meetings with potential acquirers.
Seek advice
Knowing how and when to push back can improve your offer. Advisers can also help you to focus on what’s important. Selling your business will be a major distraction if you’re not working with somebody because there’s so much documentation to deal with, along with unforeseen challenges.
Keep your emotions in check
For most business owners, selling your company will be one of the most emotional times of your life, but if you become too excited, the buyer can tell and is in a much stronger negotiating position.
Understand the highest offer isn’t always the best
Different offers will have different structures that you’ll need to evaluate. It won’t always be the highest offer that’s the most attractive. You might not feel comfortable on a personal level, particularly if you have to work with the buyers after you sell.
It’s not just about the offer, it’s also about the terms. For example, there could be more money offered upfront or the promise of instalments based on performance.
Talk to us
If you’re considering selling your business, contact us today and we can explore your options with you.