Ever received an Unsolicited Approach To Buy Your Business?
It is not uncommon these days for a business owner to receive an approach from a third party wanting to know if they are prepared to sell their business to them.
Aside from it being very flattering, what are the sorts of things you should be considering?
Are they credible?
Any sale process can be very demanding on your time and distracting. Significant time spent away from the business could end up potentially damaging the business temporarily so you don’t want to be wasting time with someone who is not able to fund the deal and move quickly. Don’t be afraid to ask probing questions. Any credible buyer would be prepared for this, particularly in relation to any questions relating to funding and timetable.
How much information should I share?
The potential buyer will want you to share lots of information about your business. This will help him verify what had attracted them to the business in the first place, but be very careful with what you share and when you share it.
At the beginning of the discussions, avoid disclosing any more than what is already in the public domain. That way you can protect the business from those less scrupulous parties who are just on a fishing expedition.
The buyer will expect this and is likely to offer to sign a confidentiality letter or a non-disclosure letter but be careful about the form of letter you are being asked to sign up to. Sometimes confidentiality letters may grant the buyer an exclusivity period, during which you are not able to talk to other potential buyers. This should be avoided if this is an ad hoc unsolicited approach because the deal may not happen for some reason and you would be barred from finding another buyer until after the exclusivity period had expired.
The best way to handle the process is to take professional advice from your solicitors/accountants who are used to managing transactions, as they are there to protect you and the business.
How do you get to a fair price for the business?
There are several ways a business can be valued but its not just even about the sale price itself. Factors such as when the cash is paid, is the price based on an earn out or a deferred basis, when will the tax be crystalised and payable, all have to be taken into account in weighing up whether this is a good deal for you or not.
Whether or not the price is the best price you are going to get is never 100% certain, so its best if you get professional advice from your solicitor or accountant who are practiced in such matters. You only sell your business once, so better to do it the right way with the benefit of professional advice.