A company is sold once in a blue moon. If an entrepreneur decides to do so it is because they have thought carefully about it, in other words, they have compared pros and cons. They consider that they are going to make a profit after the sale.
In order for this profit to be achieved and for the entrepreneur to be able to fulfill their expectations, it is very important to be well advised and to set up the right structure for the transaction, as any type of mistake made will have direct consequences in the course of the process.
Below, Baker Tilly lists the 10 mistakes that will ruin the sale of your company:
Negotiating with one investor is not the same as negotiating with several. Holding parallel talks with several investors is of crucial importance to gain negotiating power and thus ensure that the maximum price is paid for your company.
If you are not the only partner or shareholder in the company, it is important that the interests of the shareholders are aligned. Likewise, it is key that these interests are shared by management and employees. On a large number of occasions, misunderstandings, arguments and differences between the shareholders of a company have frustrated its sale.
When it comes to contacting investors, it is important to contact those who have the power to make decisions. In many cases, the wrong person is contacted and investment opportunities that could be interesting for a potential buyer are lost because the right person is not contacted.
This mistake is often made if the investor profiles are not understood and known.
It is advisable to enrich the knowledge about investors: their investment capacity, previous acquisitions, growth strategies, etc. Having staff with expertise in these processes and a good database helps to identify the investors who are most likely to acquire and who can pay the best price.
In any sales process, the buyer will try to negotiate in his favour. Therefore, it is recommended that the seller is well advised to understand at all times what the buyer is proposing, to make sure that the offer he decides to accept is the best one and to avoid entering into agreements that are not desired by the seller and that benefit the buyer.
A decisive phase in the process of selling a company is the due diligence phase. As a general rule, the Due Diligence of the company to be sold is carried out by the buyer with the following objectives:
Once you have researched potential investors, it is key to qualify those investors in order to make a very targeted process to those most likely to invest. If this process is not done properly, it will lead you to contact a very large number of contacts, lengthening the deadlines and consuming a lot of time.
One of the keys to achieving the maximum price in the process of selling a company is to know how to guide all investors to make a good offer to buy, so that the seller can opt for the best one. A lack of negotiation and investor management skills can ruin the process of selling a company.
Ego, greed, or arrogance can ruin a sales process. The fundamental key to the process is the building of trust between the buying and selling parties. The form is as important as substance. In addition to being consistent with the information provided, we must also be consistent in our communication and personal approach.
Business sales processes are not processes that are completed in 3 months. They are long, complex processes that can tire the entrepreneur. Knowing how to deal with frustration and fatigue will be key to not giving up and getting the best offer for the purchase of your company.
The 10 mistakes that we have analysed in this post are due to a lack of knowledge of the process, therefore, it is recommended that if you are thinking of selling your company you seek the help of an M&A advisor.