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5 ways to make your business sale go smoothly
SOURCE: GREEN BAY PRESS GAZETTE December 9, 2007
By Scott Bushkie, CBI, M&AMI
Time kills all deals. More than purchase price or structure, time is the most likely reason a business sale will fail.
Time breeds frustration and fatigue. From irascible attorneys to disorganized brokers and licensing issues, many factors can bog down a deal. As the sale drags on, the owner is left in an uncomfortable state of flux.
The buyer may get frustrated, too, as attorney fees mount. Sooner or later someone gets fed up and rationalizes, “It wasn’t meant to be.”
Based on national data, the average business sells in nine to 12 months from start to close. Once you have a signed letter of intent, the final due diligence and closing process usually takes 30 to 90 days. Once a letter of intent is signed many deals won't go past four to five months. Here are five tools to keep the process moving:
Attentive Intermediaries:
Your business intermediary should have a limited client load so he/she can give you time, energy and resources to focus on your deal.
Look for an office with an assistant dedicated to closing details or question your intermediary about his/her organization. You need someone who can cover minute details, looking weeks and months in advance.
Transferring licenses, ordering environmental investigations, obtaining appraisals and title work, all these and many other items are needed to finally close a transaction, for best results they should be done with someone knowing what falls where in the sequence so no unnecessary delays are caused. Your business intermediary and his/her staff have a lot to coordinate, and just one missing detail will delay the closing.
Transition Specialists:
From your intermediary to your accountant and lawyer, this is the time to hire specialists in business transitions.
Inexperienced advisors tend to be overly conservative to protect their liability. That sort of activity drags out negotiations and is a big source of frustration for the other parties. You don't have the time or money to pay to educate your advisors on the M&A process.
Comprehensive Overviews:
Your advisor should spend the time packaging the business up front. We recommend a comprehensive business review that answers 80-90 percent of a buyer’s questions.
This helps both buyers and their lenders make decisions faster. It also saves you time because your intermediary won’t be requesting pieces of information as new buyer questions come up.
Seller Preparation:
Prepare yourself to move forward from an emotional and a financial standpoint. Sellers foil their own deals when they haven’t made plans for the future or have unreasonable financial expectations from a sale. An ethical advisor will be up front about what the market can bear and won’t let you go to market with an inflated price.
Buyer Screening:
Finally, your intermediary should screen all buyers to ensure they have sound motivations and the financial wherewithal to move forward with a transaction. You don’t want to waste time with buyers who simply can’t afford a purchase.
Selling your business can be an emotional rollercoaster. This is the time to work with deal makers and specialists who will minimize the stress and help everyone move forward with a timely agreement.
Scott Bushkie is President of Cornerstone Business Services, a lower-middle-market M&A firm with offices throughout the upper Midwest. Reach him by telephone at (920) 436-9890 or by e-mail at sbushkie@cornerstone-business.com.
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