As a business owner in today’s landscape, you’ve likely experienced a growing trend—an influx of inquiries and offers from potential buyers interested in acquiring your company. These offers, while intriguing, can carry significant implications for your company’s future..
The Changing Landscape of Business Offers
The rise of private equity firms looking for their next acquisition and an increase in the capital they have available to deploy has significantly increased the number of offers many businesses receive. These firms bring substantial financial firepower and the skills to craft compelling narratives that make their offers even more appealing. Strategic acquirers have also become more active in the market, each with varying familiarity with your company and industry.
It’s essential to recognize that these offers, while enticing, are often distracting and expensive when one considers the opportunity cost of exploring every offer one might receive. Therefore, Objective advises business owners to consider a three-part strategy before determining whether to act upon any business purchase offers. For additional tips on how to not waste time on unsolicited offers, read this article.
1. Determine Your Number
Before entertaining offers for your business, it’s vital to determine the financial goal you’ be seeking from the transaction. That number should be the after-tax cash proceeds you’ll receive after finalizing the sale. Objective works side-by-side with your wealth manager to help you determine your ideal number based on financial modeling.
Objective also understands that landing on a number that feels good isn’t just about dollars and cents – it’s a reflection of your personal and professional goals. Our process helps you better understand how this number will impact your life in the short term and down the road. On the contrary, it’s also important to consider the potential extra income and benefits you could gain by waiting to sell in a year, two years, or even three years.
2. Consider Your Non-Financial Goals of Selling
While the financial aspect is undeniably important, it’s vital to recognize that non-financial objectives sometimes outweigh the financial ones. Think beyond the balance sheet and consider how the sale will impact your identity as a business owner and the mark you leave on your industry. The timing of the sale and the buyer you select will also significantly impact your employees and customers.
We recommend using a “2 AM solution” to guide the process. Imagine yourself in the quiet of the night, two years from now.
Ask yourself the following questions:
- Will you feel content and confident about the decision you made regarding the sale of your business?
- How did the buyers treat your employees and customers?
- What do you do with your time now?
- How did the sale impact your legacy?
- How does the sale and buyer affect the company’s legacy?
Thinking about how the deal will feel after the initial excitement wears off is crucial to the decision-making process. At Objective, we understand that gaining this level of clarity on your own is challenging, which is why our mission is to help you navigate this intricate journey confidently.
3. Understand the Risk of Responding to Offers without Guidance
Engaging in conversations with potential buyers can be time-consuming, often spanning 6-9 months, and there’s no guarantee of a successful outcome. It’s not uncommon to find business owners disappointed after investing significant time and effort into these discussions.
The cost of engaging with an interested buyer, dedicating three months or more to entertaining their offer, and divulging confidential information can be substantial. This expenditure isn’t merely monetary. It diverts focus from your business during this period, potentially reducing growth and earnings. The opportunity cost of lower profits due to the diversion of attention can translate into a significant loss of shareholder and company value.
In short: dead-end conversations are distractions. Objective’s experienced advisors will help you weigh the pros and cons of responding to and entertaining potential buyers.
The Benefits of Leveraging Objective’s Expertise
At Objective, our thorough process is designed to determine the true value of your business and negotiate the right deal based on your unique situation and goals.
We facilitate conversations about financials, as well as post-sale integration, early in the M&A process to help both parties align their expectations and goals. Our unique approach leads to a more transparent and fruitful negotiation phase as buyers become more confident in the financial contribution the new company can represent. This level of clarity enhances negotiations and sets the stage for creating substantial shareholder value, often exceeding initial projections.
Objective’s commitment to quality and alignment, even before the Letter of Intent (LOI) stage, ensures that only buyers genuinely committed to your business’s potential are engaged, ultimately leading to premium valuations and informed decisions on the buyer’s part. Although this process typically unfolds after the LOI stage, we invest the time upfront to disqualify less serious buyers, in turn saving you time and ensuring that the negotiations are driven by well-informed parties willing to recognize the premium value your business brings.
Our role doesn’t end with the sale. We also facilitate post-acquisition conversations and help you navigate the complexities of integration, ensuring promises made during the acquisition process are fulfilled.
What to Do When You Get an Intriguing Email from a Buyer
Whether you’re driven by the desire for financial security, the legacy you’ll leave, or a combination of both, having clarity on your number and goals is essential.
If you find yourself receiving emails from potential buyers and are unsure about your next steps, remember that Objective is here to help. Our team of experts can guide you through this intricate journey, from determining your number and goals, to making informed decisions, to negotiating premium values, and facilitating post-sale integration.
Reach out today to schedule a call with Objective.
Managing Director, Investment Banking
Trever has 20+ years of investment banking, acquisition, and strategy experience advising middle market companies on transaction execution and strategy. Mr. Acers has a MBA from the UCLA Anderson School of Management with a finance concentration and a bachelor’s degree with high honors in business administration from the University of San Diego.
The above testimonials may not be representative of the experience of other customers and past performance is not a guarantee of future performance or success.
This news release is for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. While the information provided herein is believed to be accurate and reliable, Objective Capital Partners and BA Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Securities and investment banking services are offered through BA Securities, LLC Member FINRA, SIPC. Principals of Objective Capital are Registered Representatives of BA Securities. Objective Capital Partners and BA Securities are separate and unaffiliated entities.