Myths can do damage where your money is concerned. In a Divestopedia article entitled “Crazy M&A Myths You Need to Stop Believing Now,” Tammie Miller explores five big merger and acquisition myths that can cause you problems. Miller points out that many of these myths are believed by CEOs, but that they have zero basis in reality.
The first major myth Miller explores is the idea that the “negotiating is over once you sign the LOI.” The letter of intent is important. However, this is by no means the end of the negotiations and it is potentially dangerous to think otherwise. Negotiations are not concluded until there is a purchasing agreement in place. As Miller points out, there is a great deal that can go wrong during the due diligence process. For this reason, it is important to not see the LOI as the “end of the road.”
Another myth Miller wants you to be aware of is that you don’t have to take a company’s debt as part of the purchase price. Many M&A advisors, like Miller, recommend that buyers don’t take seller paper.
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The third myth Miller explores is a particularly dangerous one. The idea that everyone who makes an offer has the money to follow through is, unfortunately, not true. People will often make offers without securing the money to buy the business. This wastes everyone’s time and, as the business owner, it could derail your progress. It could actually prevent you from finding a qualified buyer.
Another myth is built around the notion that sellers don’t need a deal team in order to sell their business. Again, this myth has no real foundation in reality. While it may be possible to sell your business without the assistance of an experienced M&A attorney or advisor, or business broker, the odds are excellent that doing so will come at a price. According to Miller, those working with expert assistance can expect, on average, 20% more transaction value!
Additionally, there are other dangers in not having a deal team in place. An M&A advisor can handle many of the time-consuming aspects of selling a business, so you can keep running your business. It is not uncommon for business owners to get stretched too thin while trying to both run and sell a business, and this can ultimately harm the business’ value.
Miller’s final myth to consider is that you must sell your entire business. It is true that most buyers will want to buy 100% of a business, but a minority ownership position is still an option. There are many reasons to consider selling a minority stake, so don’t assume that selling your business is an “all or nothing” affair.
Miller lays out an exceptional case for the importance of working with a merger and acquisition advisor when selling or buying a business. M&A advisors have the experience required to separate myth from reality and help you achieve the best possible outcome in the sale of your business.