- Author Chris Hadjiyianni
- Year Date 2019
- Location Winnipeg
- Category Business
This white paper describes 10 deal pitfalls (in no particular order) that each have the capability to derail a deal, some more effectively than others. All of these pitfalls are fairly common, although some owners are prone to fall into more pits than others. As you examine this list, you will notice that all of the deal pitfalls are owner failures. It is rare that a financial or legal glitch is so significant that it can not be overcome by an owner’s transaction advisory team .Before and through out your Exit Planning Process, refer to each of these pitfalls to assure that you don’ t fall in to them.Avoiding these pitfalls will allow a smooth exit on your terms.
The process of deciding to sell a business—a business that an owner has created and nurtured—naturally involves some level of indecision: Is this the right time to sell? What will I do after I sell? If I wait, will I be able to get more money for the business? Will I be able to get as much money as I can by selling today? These are questions that an owner must answer, usually with the help of his or her advisors.
Given all of the uncertainty surrounding a business sale, some owners are tempted to stick a toe in the market to test the waters. They enter the market in an effort to determine what their businesses are worth. This seems logical, but the results can be disastrous.
These owners often go into the market unprepared. They have not gathered the information that buyers need to make an offer
that reflects the true value of the business. Usually, they have not assembled a team of professional advisors. As a result, buyers either make no offer at all or they make an offer that is significantly lower than what it could have been had the seller possessed all of the pertinent information. Sellers typically reject these deflated offers and pull the business from the market. Unfortunately, this false start does not end the process. In fact, it often damages the business’ future salability.
Ultimately, these sellers return to the market. Usually, with the help of their advisors, they return better prepared. However, they return to a marketplace that has been tainted. The market’s new perception of the business, rightly or wrongly, is either that (a) the seller is flighty, unable to commit to the sale process, or (b) there is something inherently wrong with the company for sale. If not, why didn’t it sell the first time the seller put the company on the market? Thus, these perceptions must be overcome by a seller’s investment banker and attorney when they could have been avoided completely with proper planning.
Don’t create potential roadblocks. Don’t go to the market unless and until you are committed to completing the sale process. The best way to prepare yourself is to begin assembling your Exit Planning Advisor Team today. Otherwise, you may taint the marketplace and damage your company’s salability years in the future.