Tainting the Marketplace; have a Proper Exit Plan in Place, Before you Embark Upon a Sale

home care marketplace

The market place - where buyers and sellers meet.

So, you’ve decided to sell.  Enter the “low hanging fruit”–the single buyer.  You are not putting your best foot forward with this sale unless you have 1) prepared your company for sale, 2) a thorough, professional confidential offering memorandum, 3) exposed the company to all interested  buyers simultaneously, possibly creating a buying frenzy, and 4) recruited experts to assist you with the sale–experts like those the buyer is already using.

Hypothetical Case Study

Stan Adams owned an agency in a large niche market that was growing and included several bigger players.  Stan decided it was time to sell, but after several months spent haggling over price with one of those bigger players, the two parties walked away.  Unfortunately, this was not the first time he had entered the market unprepared.  On two prior occasions he had been approached independently by other players on the market.

In each case, Stan took the position that although he wasn’t really trying to sell, he would for the right price. Belatedly, Stan realized that this approach was inefficient and ineffective. Without a methodical approach to the marketplace, his business was unlikely to sell on the terms he desired. It took Stan three failed negotiations to learn that there’s a better way to leave a business in style.

Finally, Stan sought advice from an industry mergers and acquisitions advisor who helped him prepare properly to sell his business. In their preliminary market analysis, however, both firms discovered that the sales territory had already been covered. The likeliest buyers had already seen and heard about Stan’s business—from Stan.

Stan had failed to realize that his hit-and-miss approach of talking to the likeliest would-be buyers had tainted their impressions of his company. These buyers simply were not interested in taking a second look.

An effective and lucrative way to sell a business is to present it, in its best possible light, to all qualified buyers simultaneously, providing each with identical information. This information includes the certain knowledge that their competitors are also looking at your business.

Stan was not willing to sell his business for less than full value, but by going into the market unprepared, he had undermined his ability to do so.

Buyers are a wary group. They may not want to look again at a business they have already rejected. They justifiably wonder: Why is seller coming back? Is something wrong, seriously wrong, with the business? Has it suffered setbacks? Would you go back to an automobile dealership to look at the same car you decided was too expensive or didn’t fit your tastes the day before?  Not likely. The only thing that will bring you back into the showroom is a significant price reduction. That’s the situation Mr. Adams faced.

The solution to Stan’s problem is obvious.  Do not taint the marketplace.  The temptation to talk to potential buyers may be difficult to resist, but you must keep the big picture in mind. Having proper exit planning in place, before you embark upon a sale, you can avoid Stan’s mistakes. Don’t begin the sale process in a half-hearted manner, feeling your way along. By doing so, you may forfeit your best opportunity.

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About Risa Baker

Risa is Managing Director of PARTNERS 31. Her natural enthusiasm and years of industry experience will successfully guide your business, whatever its size or specialty, through every aspect of exit planning, from strategy to sale.

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