I am sure you have often heard the legend – no it really is a myth, no more than that, it’s a fantasy …. – about the business owner who met someone in a pub who offered £1m (or any other aspirational number) to the owner to hand over the keys and walk away. I have yet to meet that buyer or that business owner. Nevertheless, what should you do when you are approached to sell your business?
Businesses on the acquisition trail, will have a carefully thought out strategy of what they want to buy and where it will fit in with their long term growth plans. They will research the market for suitable targets. Once you have popped up as a potential target, there will be many reasons for considering your business as one to talk to. The most common reasons are to acquire: a new product line or service stream to sell into their customers, a customer base to sell their own products into, specific skills or geographical coverage. You need to find out what the acquirer’s reasons for considering you and your business because this will be a significant issue that will determine the value your business brings to them.
So there are the five initial things you should do which I will deal with in these in five successive blogs.
Step 1 – Meet and exchange information, research the acquirer
- Meet them by yourself and preferably principal to principal.
- Sign a Mutual Non-Disclosure/Confidentiality Agreement before you meet.
- The purpose of this meeting is simple. You want to “break the ice”. Do you like the people involved, given time could you trust them, do you understand their business and do you understand where you and your business would fit in with theirs?
- You are not there to give away anything about your business that is not already in the public domain (i.e. available on your website, in the press or at Companies House), but do talk about how you started, why you are succeeding, where you would like to get to – broad vision stuff with no specifics. DO NOT LIE OR EMBELLISH THE TRUTH. Rather say NOTHING.
- If they are a competitor, do not talk specifics about any customers, suppliers, margins, prices, staff (even if they know who the names of some of these). Get them to give you some information about them.
- If the acquirer is publicly listed there will be a lot of information that is readily and publicly available. If it is a private company, find out as much as you can from the web and Companies House.
- Be prepared to agree to carry on or not – but it is OK to say you want to think about it.
- Most importantly, judge whether you can trust the acquirer.
More to follow next time. Please feel free to get in touch with me at email@example.com or on 07904 766230, or for more information, please check out my websites at www.klopartners.co.uk and www.peterkroeger.com