Once you decide to sell your business, you will encounter a roller coaster of emotions fueled by anticipation and frustration. With each piece of the process checked off, such as signing the Letter of Intent, completing due diligence and agreeing to the purchase agreement, you inch closer and closer to completing the sale. Yet the dark side of the selling process, in most transactions, is the frustration that comes with needless delays.
Oftentimes, the main culprit with Mergers & Acquisitions (M&A) delays is a result of hiring the wrong advisors. Too often, I see either the seller or buyer or both, select the wrong attorney. They might have a family connection, or they interviewed many attorneys and decided to go with the best price. You want to hire an attorney that understands M&A transactions, is efficient and realizes every deal has some give and take.
Another way to slow down the process is to have the buyer engage with a bank that is not versed properly in financing the sale of small businesses. Maybe they are not SBA preferred, or they are inexperienced, or they are just overwhelmed with clients.
There is a very popular saying in the M&A world and that is “Time Kills Deals.” This is so true. If enough time lapses for both the seller and the buyer, only a negative outcome will result. With too much time, the buyer may have second thoughts and could decide they don’t want to make such a large commitment, or possibly a key employee finds out you’re for sale and leaves, or a major competitor starts spreading the news that you are for sale and as a result you begin to lose major accounts and your buyer reconsiders.
When selling your business, follow these tips to ensure a speedy sale:
- Hire an experienced broker and lawyer that have reputations for closing deals quickly. Ask for referrals.
- If engaging with a strategic buyer, ask what other acquisitions they have done and talk to the previous owner that was acquired. Ask them to share their experience with your buyer. Did they move quickly or were there delays?
- Make sure you have a speedy and organized CPA that is able to churn out multiple reports at the last minute. Slow financial reporting can disrupt the sale.
- Check to see that your buyer has hired a reputable banker known for financing transactions promptly. This can be somewhat out of the seller’s control as the buyer is selecting their bank, yet you can ask if their bank is SBA preferred (if SBA is involved). An SBA preferred lender will be quicker.
In all transactions, momentum is the key. You want the process to continually move forward. Once the Letter of Intent is signed, a good broker will make sure you and your buyer are meeting weekly to discuss the process. If something is slowing things down (such as the PA has been sitting on an attorney’s desk for over a week) your weekly meetings should remedy such issues.
Remember, Speed Will Sell Your Business!
This article was written by Sam Thompson. Sam is the president and owner of Transitions In Business, a Minnesota based M&A firm that specializes in selling healthcare, business to business, transportation, manufacturing, distribution and construction/trade services companies. Sam is a Merger and Acquisition Master Intermediary (M&AMI) and a Certified Business Intermediary who has successfully guided countless business owners through the sale or merger of their company. Prior to becoming an intermediary, Sam was a successful CEO and business owner for 29 years before selling his $16 million business.