April 13, 2021 //
Steps to Selling your Business Part 10.
When new clients sit down with us for the first time, they have often already received an offer or have a particular buyer in mind. Having a single prospective buyer in mind makes the sale process look easy. Perhaps the buyer has already suggested a number, which sounds attractive; thus, what could be an intimidating, exhausting ordeal is imagined as a simple matter of signing a few papers.
There are hypothetical reasons why an informed seller might decide to pursue a single offer, but in our opinion, the good reasons to move in that direction are scarce. Multiple offers are often better than one. We are big proponents of actively working for numerous bidders on a sale.
There’s an old piece of nautical lore that applies here. Sailors are told to take one compass on the journey, or three.
The same is true with the sale process. Three or more offers are best:
Multiple bids work for you in a few crucial ways:
We believe in the value of a well-orchestrated round of multiple bids. At Stillwater, we prioritize getting numerous offers for our clients.
Presenting a business on paper is challenging work; multiple bids make it even harder. As more interest and more eyes fall on the deal, the structures and valuations must shift and change to keep up. Running a well-executed competitive process can add a thousand hours to the operation, which is a substantial investment for you and your advisors; nevertheless, it’s the kind of work that needs to happen. Do it well, and the gains are spectacular.
If you’re working with someone else, pay close attention to your first conversations, and ask questions. Are they immediately looking at the viability of a competitive process for your company? Do they understand the process? Is it a priority? Are they able and willing to do the extra work it requires? If not, walk away (and give us a call).
Regret is a monster that is content to wait a while before it pounces. You sell your business on a single offer and feel great about it. For a time, you’re busy settling into the next chapter of your life and taking care of a thousand little details and adjustments. Soon enough, two months (or two years) later, you’ll find yourself with time to reflect. When you look back, you may find yourself wondering if you could have done better, questioning the choices you made, and that’s when regret can strike. We don’t want that to happen.
You may have regrets as you reflect on the history of your company. However, your final sale price and the work your M&A Advisors did should not be on that list.
Suppose we, as your M&A Advisors, have done our work diligently and told the story of your business well. In that case, the interplay between multiple potential buyers starts to activate the value drivers and strengths that we have laid out in your story. Some value drivers, for example, are going to take on new value as one or more buyers hone in on them as noteworthy when other potential players may have failed to pay them due attention. Suddenly those value drivers are doing twice the work they were before. A competitive process brings more value to the sale in this way, but it also has another critical function to keep that regret at bay.
This is important. It brings us back to our three compasses:
When you receive the money you deserve, leave nothing on the table, and have taken care of your family, your life’s work was seen, weighed, and found worthwhile. When that happens, there are no regrets. That’s what our Advisors work towards at Stillwater: that our clients have no regrets after the sale because they received an honest price.
It is critical that you work with exceptional M&A Advisers who see the competitive process in this way. It is work that requires expertise and enormous commitment to do well. The gains and peace of mind are worth the effort.
In our next installment, we will uncover the truth about honesty and how it is critical to maximizing your company’s value in its sale.