You own a successful business that you’ve grown through the years. You’ve just recently thought about selling. Lo and behold, another business in your industry approaches you to see if you’d like to sell. What great timing and what an opportunity, right? Wrong! If you are serious about selling your business, you need to go to market and not settle for one buyer.
If you focus on just one buyer, you’ll be going down a path with no leverage.
Here are 4 reasons why you do not want to talk to only one buyer when you sell your business:
- When your buyer knows they are the only one you are talking with they will take their time, stall and not show any sense of urgency. You will be on their schedule. Time kills deals and they may take so much time in the process, things could eventually sputter out.
- One buyer does not allow you to run a structured process. The structured process attracts multiple buyers that have an interest in your business. This type of demand solidifies interested buyers and accelerates the timeline.
- When there is only one buyer, the buyer will more than likely decide to renegotiate the price and terms that were agreed upon in the Letter of Intent. There may be legitimate reasons why the buyer wants to renegotiate, yet history has shown having only one buyer increases the chances of renegotiation.
- With no competition, you will not get the best price and terms with one buyer compared to running the structured process and engaging multiple buyers.
Instead of talking to only one buyer you want to go to market with a structured process that attracts multiple buyers. Once you sign a Letter of Intent with your chosen buyer there normally is a “no shop” clause that indicates you cannot talk to other buyers. Even though you have signed such a clause, because you’ve gone to market and have connected with multiple interested buyers, you will have a waiting list of buyers should your first choice falter.
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 IT companies. Sam is 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.