1. Not Minding The Store
More often than not in a sale scenario, the owner becomes preoccupied with the sale process and loses sight of the critical, day-to- day management issues. A sale can take anywhere from two months to two years. Hence, distraction from your business can be fatal to a deal - particularly during the latter stages. Late in the negotiation process, a buyer’s adverse reaction to negative reports of even a relatively minor problem could undermine the entire transaction.
2. The Unfocused Effort
Significant unfocused problems are more likely to arise the longer a transaction takes to be completed. The sale process will usually take some unexpected twists and turns, but for most situations, a good team of advisors and management will have contingency plans. The key is to be well prepared, confident and decisive, and to have clearly defined objectives.
3. Standing Up On The Roller Coaster
Selling your company can be one of life’s most stressful experiences. Besides dealing with the prospect of retirement, and with separation from a much-cared-for business, you must also face the inevitable scrutiny that your company and business activities will receive from every potential buyer. The key here is to keep your emotions in check. Being over-emotional is likely to lead to rash decisions, based on the heat of the moment, rather than on a rational agreement process.
4. ‘But-Your-Man-Got-More’ Syndrome
What another entrepreneur got for his company three years earlier, or what one large company paid for another, is irrelevant to your transaction. The market will dictate what your company is worth today. Ensure that your advisors do their homework to arrive at a preliminary valuation range, and then let the market do its work. Unrealistic price expectations are the quickest way to dampen buyer enthusiasm and ensure your disappointment. Inflated valuation expectations will impede you from recognizing reasonable bids.
5. Going With The Highest Bidder
When it comes to ownership transfer, the highest price bid may not be the best deal for you. A number of critical issues could override a decisive price difference among competing bids:
- Financial ability of the bidder to close the deal.
- Contingent liabilities that you must accept for some period after the sale, such as those related to environmental problems, pending litigation and the salability of stocks.
- Contingencies or ‘outs’ in the buyer’s offer, such as due diligence, environmental audits, financing, board or parent company approvals.
- Employment agreements for the seller and key employees, including length and level of compensation.
- Form and timing of consideration to be paid if other than cash, such as loan notes, shares and earn-out.
Stay tuned for the rest next week!