“You may be running your business for years without any thoughts of selling and then suddenly receive an offer to buy your firm. It could be from a private equity group, a competitor or a key customer or supplier.”
Forbes’ recent article entitled, “What Should You Do When You Receive An Unsolicited Offer For Your Company?” suggests that it’s important to follow a structured three-step process to make certain you make the right decision and get the most successful outcome.
Is it the right time to sell? You need to see if this is the right time to sell your business. Examine your company and your personal readiness. Determine if the business is performing at a high level and is poised for rapid future growth. Look for any unaddressed issues that might harm value. On the personal side, think about whether you know how much you need to receive to fulfill your financial obligations and secure your future. It is also important to make sure that you have done needed tax and estate planning, so that you do not overpay taxes.
Is it the right buyer? If you are still thinking about selling, next determine if this is the right buyer. Think about what they will do with your company after the acquisition, and whether they will retain your staff or combine it with other operations. Will you have an ongoing role? You must also determine if the buyer will pay the best price and whether it is all cash or if you will retain equity in your company or the buyer’s company. You should also ask if there are earn-outs that depend on the future performance.
Do you have a strong advisory team? Some business owners prefer to use their business attorney but consider using an experienced mergers and acquisitions attorney who knows “market” terms, where to advocate strongly and when to agree to the other side’s requirements to move the deal ahead. An inexperienced deal lawyer may negotiate hard on terms to “prove value,” which may, in effect, only obstruct the deal. The deal might go south, if an inexperienced lawyer makes you hold fast on terms the buyer needs to get the deal done. An experienced M&A attorney can also frequently move to a good deal in less time, by clearly setting parameters and getting buy-in on early drafts rather than a continuing series of drafts back and forth.
Reference: Forbes (May 11, 2021) “What Should You Do When You Receive An Unsolicited Offer For Your Company?”