Assuming that all business owners (except for those forced to liquidate) will eventually sell or transfer their companies, we often focus on what it takes to be a well-prepared seller. Setting exit objectives, planning to minimize the income taxes on the ownership transfer, building business value and selecting a skilled Team of Advisors are some of the most important items on any “Savvy Seller Checklist.”
But what about well-prepared buyers? What does one look like and why, as a seller, should you care?
First, once you put your company on the market, you must be able to recognize a “serious” buyer. No one likes to conduct an extensive courtship only to be stood up at the altar. Business owners are no different. They want a serious buyer—one who will be able to close the deal.
Characteristics of Well-Prepared Buyers
They Know What They Want.
First, owners should look for a buyer who has clearly defined objectives. Will your company be a standalone acquisition or part of an industry consolidation? Will the buyer build-and-hold or flip your company? Serious buyers know what they want and aren’t just “looking for a new opportunity.”
They Travel In A Pack.
Second, well-prepared buyers have teams of advisors knowledgeable and experienced in the acquisition process. They are too smart to attempt to fly solo through the sale process. They know that if they try to handle the transaction themselves, the probability of closing greatly diminishes. Ultimately, do-it-yourself buyers can be a waste of your time.
They Know What’s In Their Wallets.
Third, serious buyers know what kind of financing they can secure. They've already communicated with their lenders and are poised to move forward.
They Understand Win-Win.
Fourth, well-prepared buyers are not myopic. They know that the only “good deal” is one in which everyone wins.
They Are Grown-Ups.
Serious buyers have been around the block a few times. They know that the road from the initial meeting to the closing table can be full of twists, turns, peaks and valleys. They have stomachs strong enough to endure the ride.
They Run In the Fast Lane.
Once the deal process is underway, an owner can look for several other characteristics. Well-prepared buyers can move quickly to closing. Their preparation, Team of Advisors and understanding of the process eliminate many of the obstacles novice buyers encounter.
They Know Their Place.
Serious buyers understand their role in the deal process. They let their advisors negotiate the nitty-gritty deal points so that they can maintain a relationship with the seller as well as their credibility and professionalism at all times. They are well aware that today's seller may be tomorrow's key employee.
Now that you can spot a prepared buyer, don't be surprised if you have to become one. As you prepare your company for eventual sale, you may need to acquire other businesses as means to achieve “critical mass.” In other words, you may have to buy smaller (or similar-sized) businesses so that your company is large enough to attract qualified cash buyers. Before you become a seller you may have to walk a few miles in a buyer's shoes.
We are happy, as always, to assist you with all of your planning needs, including those involving the preparation of your business for a sale or a purchase.
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
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