Selling a company can be one of the most stressful processes imaginable. Investment bankers and merger and acquisition intermediaries will tell you they will work with you to alleviate some of the inherent stress of selling, but the fact remains that most business owners progress through nearly every possible emotion when selling the company. Selling a business ranks above many other nail-biting life events. Here are a few reasons why (and perhaps a few pain relievers through the process)
Buyers are Brutal
The most advanced buyers of companies are some of the more cerebral people out there. They are more than smart, they are trained for look for every potential hole the business may potentially have. They do this for a number of reasons. At the forefront is the age-old requirement from their limited partners to avoid purchasing a potential lemon. A close second is the desire to extract more value out of the seller by finding the imperfections and attributes that could create a bad deal for the buyer.
Due diligence is a full proctological examination. The potential buyers are looking for nearly every avenue of potential mishap or
When it comes to due diligence, the following adage is fitting: “proper prior preparation prevents poor performance.” If a company prepares early for due diligence, they will find some preliminary relief from many of the issues that occur in the typical 60 to 90 day due diligence window. Regardless of how you prepare, due diligence is typically the most stressful time in the entire process for the would-be seller. Most often, this is an unavoidable aspect of doing a deal.
Emotions Run High
The emotions inherent in selling such a large asset easily surface through the process of a business sale. The greatest emotion in the process is typically fear. The fear of the unknown of how things will ultimately settle is difficult in the early days of sourcing the right buyer. A seller may be asking at least one or more of the following questions:
Some business owners will worry more than others. The right representation can help alleviate some of the process hiccups, but many questions will remain open until after management meetings and after a Letter of Intent.
The Business Suffers
If not planned for correctly, a company may suffer as the result of an owner’s negligence or concern as the sell-side process progresses. If the business performance suffers, so can the valuation, which ultimately places an even greater stress on the owner. Thus, the vicious cycle continues. This is not a typical scenario, but one which can cause
Not all processes, owners or companies progress the same through the process of selling a business. No two deals are alike. In many cases, the relative smoothness or roughness of the process is mostly dependent on the people at the table. The right buyer/partner/investor in the deal is likely going to exude out of the seller that is necessary to calm nerves enough so that a deal can get done. The most tactful buyers can provide the right bedside manner to the seller, that many of the stresses inherent in selling the business are simply non-issues. For some, this can become a huge qualitative factor in choosing the right buyer for the business.
Ultimately, an investment banker is going to be the best support for alleviating the stress of doing a deal. He or she will be there to take the proverbial arrows in due diligence, avoid getting the seller too alerted about various offers or simply taking care of items that require immediate attention and which could ultimately further stress the seller. Investment bankers–while often spurned–are quite literally a necessary component of getting a good deal done efficiently.