Being approached by a potential buyer is exciting, especially when it comes as a surprise and there’s a large price tag attached. But trying to directly negotiate with the buyer disadvantages you. Public companies are keenly aware of this, which is why they never embark on a transaction without an advisor. Take a cue from their playbook, and ensure you also have skilled representation. Here are 12 reasons to hire an advisory firm when you’re approached about a sale:
- Managing the sale diverts attention from daily operations. This can cause the company to decline, negatively impacting value. It is nearly impossible to sell your company while running daily operations, without one or both sides of the equation suffering.
- Your company may not be prepared for a sale. This can cause it to look disorganized and weak. If you don’t put your best foot forward, the valuation will suffer.
- A competitive bidding environment is always better for sellers. With M&A booming, why limit yourself to just one or two buyers. The right advisor can create a competitive bidding process that ensures you do not leave money on the table.
- Some buyers use the lengthy nature of the sale process to wear down sellers in the hopes they will accept the sunk cost fallacy and go for a lower price. An advisor ensures you are not worn down or worn out.
- Negotiations are fraught with emotion and challenges. A dispassionate and experienced approach is best. An M&A advisor divorces you from the process acting on your behalf while removing emotions from the equation.
- How do you know what a reasonable offer is? How do you know when to walk away, which terms to change, and what is standard in your industry? Your advisor offers expertise that can help you set reasonable expectations.
- The right advisor ensures your relationship with the buyer remains strong even when you engage in tough-minded negotiations. They play the bad cop so that you can the buyer can remain friendly.
- Unpleasant surprises during due diligence can result in unfavorable price adjustments. An advisor prepares you for this process, reducing the risk of negative adjustments.
- You may be an experienced business owner, but you almost certainly have not sold hundreds of companies. An M&A advisor has. They level the playing field, ensuring that a savvy buyer does not take advantage of your comparative selling inexperience.
- Transactions can stall for myriad reasons. Skilled advisors see the deal through to completion, ensuring it actually closes.
- An M&A advisor lends credibility to the transaction by showing the buyer that you are serious, and intend to undertake a professional sales process.
- Advisors have seen the most common mistakes that both sides make. This means you can learn from others’ mistakes without making those mistakes yourself.
The truth is that buyers will not see the inherent value in your company without a work—and they certainly won’t pay a premium for it. The right advisory team helps buyers see real value, without forcing you to divert your attention from running your company.