Contact Us

Be Objective About Your Business If You Want To Complete A Sale Of Your Company

Values_honesty_integrity2
An agreement to sell your company is likely to fall apart in due diligence if you have exaggerated the strength of your company to secure a better offer price. Buyers invariably figure this out in due diligence, and either reduce the offer price, or withdraw from the process.
 
How Can Things Go Wrong?
 
A couple of years ago we were engaged to sell a small but fast growing business that had built a fashion brand around party clothes for teenage girls. The owner is one of the most engaging and charismatic entrepreneurs we have ever worked with.

We found the ideal buyer and negotiations over the sale started positively, before ending in disappointment for both sides when the deal fell apart in due diligence. The reason – our client had oversold the strength of his customers’ commitments to future volumes. To be fair to Paul this is his standard mode of operation. Reach for the sky and at least make the top of the mountain. Unfortunately this approach just didn’t work with a knowledgeable buyer – and especially her conservative professional advisors.
 
How Do You Create An Environment Of Trust?
 
The breakdown in the deal set me thinking about the importance of creating the right environment to maintain trust during the 2-3 months it takes to get from an offer to a completed sale. One thing is crystal clear – if you want to get a sale through to completion it’s critical that you are objective about the business from the start. This is not something that comes naturally to many sellers. It is very tempting to put a positive gloss on future prospects to justify a higher selling price. The problem is that an experienced due diligence professional will almost always get to the truth in the end. If it comes to light that you have exaggerated prospects, or hidden important risks, the sale may well fall apart. If you are caught being less than honest on one issue, a buyer will wonder what else is being hidden.
 
What Are The Lessons For Your Company?
 
What does this mean for how you present information when selling a business? By all means present the strengths of your business, and the opportunities available for expansion, but be open about the challenges you face as well. Buyers will want to understand the risks associated with their investment, and the steps you have taken to keep them under control. The more a buyer feels they understand your business, the more likely they are to see a sale process through to the end.

 

If you are interested in finding out more about these and other issues relating to the sale of a private company one of our business sale experts would be delighted to talk to you in complete confidentiality. Click CONTACT ME to book an initial phone conversation or call us on 01604 432964

 
We welcome comments on posts, and questions from our readers. Use the “Leave a Reply” box below. We answer all reader questions within 24hrs. If you would like to be informed about new posts on the theme of selling a private company click the “Subscribe” button at the right hand side of this page.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

* Copy This Password *

* Type Or Paste Password Here *

20,580 Spam Comments Blocked so far by Spam Free Wordpress

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

back up ↑
UA-35460329-1