How To Sell Your Company

HOW TO SELL YOUR COMPANY

In selling a company or business, the owner wants to realize the maximum possible price. Unfortunately, inexperience and following the agendas of others often cause selling owners to realize far less than they possibly could. Our engagements to help identify buyers for companies typically have resulted in the sellers receiving much higher prices than they envisioned.

Some constant principles must be practiced to realize the highest possible price (or total benefit) for the seller:

• Never represent yourself or negotiate directly in your own behalf. Always engage a competent intermediary.

• Insist that the engaged intermediary shares your goals and has an incentive fee/reward structure congruent with your goals.

• Initiate the sale process while you still have a growth or improvement story to sell. Many, many sellers wait too late to begin the process – commencing when they are on the peak of a market cycle or when all is going right for the business.

• Recognize that fear is the most powerful human motivator – determine which potential buyer has the most fear of losing the deal. Remarkably, this potential buyer is usually not the rationally-determined maximum value buyer.

• Understand that most “potential buyers” are only sophisticated “lookers” seeking competitive information and bidding experience. Prioritize your attention on identifying, qualifying, and helping the few serious potential bidders.

• Always have or develop more than one buyer. Competition always drives values higher.

• Explicitly identify values of the potential buyers. Actively seek matching values, and respect what’s important or valuable to each party. Identify values differences to prevent wasted time and effort.

• Never disclose the price you’re willing to accept. Always take the position that markets determine price as will the potential buyers in your sale. Virtually every potential buyer will undercut-bid any price you ask. By not setting an asking price, you have the possibility of exceeding your (undisclosed) expectations.

• Make sure your engaged intermediary has top-notch negotiation skills and experience.

• Negotiate; don’t bargain. Bargaining is about price; negotiation is about maximum possible total benefit using other “currencies” in addition to price – big difference. Be flexible to work with the buyer’s needs and use alternative currencies to achieve a “win-win” outcome. We put ourselves in the buyer’s shoes and identify what the buyer values highly that the seller can give at low cost.

• Never negotiate or agree to separate single terms of the deal considered alone. Talk through the entire package of the offer and negotiate the package of terms and conditions.

• Always help the buyer believe he got a great deal; there is no place in today’s world for “win-lose”. By emphasizing and executing “win-win”, we have never had a lawsuit or conflict from any transaction we have undertaken.

Strict compliance with these simple principles, which have been proved over and over again, will help you realize the best possible deal for your company or business.

Richard Bird
September 1998