Being approached by another company or an investor who wants to buy your business can be a very exciting, flattering and/or scary thing. But it shouldn’t be something that overwhelms you, just follow these basic principles that will help you get the best out of any approach.
1. Don’t Panic!
The first and most important principle is not to panic. It may be the only approach you have had, but don’t let that rush you into making commitments you are not ready for. We would suggest being non-committal in your initial response. Thank them for their interest and suggest to them that you will need time to properly consider the approach and will come back to them in a couple of weeks.
Give yourself time to properly consider if this is the right time for you and the business. You may find the idea grows on you as you think about it, or that what initially seemed like a brilliant idea seems less desirable after giving it some thought.
Remember, turning this approach down doesn’t mean you won’t be able to find an interested party later down the line when the time is right.
2. Don’t be dazzled
It is really easy to be flattered by an approach – in fact any decent approach will be aiming to do exactly that – especially if the approach is from a well-known company. But remember that flattery is cheap, and too often in these situations it can actually become costly when it is the driving force behind negotiations.
A company or investor approaching you is a really strong indication that your business is an attractive proposition. If it coincides with your desire to sell or even triggers that desire in you, then it should be the catalyst to take it to market properly and not be caught in the headlights thinking you only have one option.
Only having one option and getting caught up in the flattery of an interested party will lead to concessions being made in negotiations that do not need to be made.
3. Do seek advice
Unless you are well-experienced in buying and selling companies, you will more than likely be at a disadvantage. Companies and investors who make approaches like this will typically be making multiple acquisitions every year – it is certainly very unlikely to be their first.
So make sure you have an experienced company like Entrepreneurs Hub on your side, to ensure you are fully prepared to maximise the value and terms of the deal.
4. Do introduce competition
Even if you fully intend to sell to the company or investor who approached you, it is essential to introduce an element of competition. This is not a disingenuous tactic; it is part of any sensible company sale strategy. There are three reasons why you need to introduce some competition.
- Going through the exercise is valuable as it will help you to fully understand what is attractive about your business, there may be some areas highlighted that you hadn’t thought of and put a different complexion on the offer you received.
- It is important in the negotiation phase to know, and for the acquirer to know, you have a plan B. It’s an incentive to do a good deal and not to stall.
- You might just uncover a better option – someone who is willing to pay more and offer better terms
If you have been approached and would like some guidance on how to develop this interest then why not take advantage of a free, confidential meeting – with no obligation of course. Even if you haven’t had an approach you can still get in touch and we would welcome the opportunity to do a review with you to assess saleability and potential value range.
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If you have any questions call us now on o845 0678 678