Selling a business isn’t always 100% about the price. It is not like selling a house where, typically, the most important factor is who places the highest offer. In the end, if the seller is to achieve the optimum results, there are other variables that should be considered.
Competitors or Financial Buyers
Many business owners find the idea of selling to a competitor attractive. After all, a competitor understands the business and can, theoretically, understand the business’ value better than an outsider can. But selling to a competitor comes with risks. Selling means disclosing a great deal of confidential information, and that could be damaging if the deal falls apart.
A second avenue sellers will often explore is selling to a financial buyer. A financial buyer is not likely to be a competitor, but a financial buyer may be unwilling to pay the seller’s price. It is important to remember that a financial buyer is considering buying the business with the intention of selling it for a profit within a few years.
The highest selling price may come from a strategic acquirer. But this doesn’t necessarily mean selling to a strategic acquirer is the most prudent course of action for a seller. A strategic acquirer may not have the best interests of the company at heart. When a strategic acquirer takes ownership, key employees and management may be replaced. The company may even be moved. Many owners are unprepared for the shock that may come along with a strategic acquisition.
Is your business exit ready?
If you’re planning to exit your company in the near future, you may find EastWind’s Exit Strategy Playbook helpful in developing your own exit strategy, making your company more sellable.
There are other potential buyers, many of whom are frequently overlooked, who may be the optimal fit for a particular business. It is possible that the best buyer for a company could be one of its employees. However, this option comes with risks as well. Key employees and management may leave if the deal falls through, because they will know the company is for sale.
Finding overlooked buyers is what merger and acquisition advisors do best. Matching the right buyer with the right business is both a science and an art. Teaming with the right M&A advisor can open up new avenues and help a seller reach the kind of buyer that is as close as possible to the perfect fit.