The 12 Components of Selling a Business That You Must Consider
The process of business acquisition can be a confusing one for the seller. By considering these twelve components, you can get a better idea of whether an acquisition is right for you as well as be better prepared at each step of the process.
The value of your company can be determined by several factors and you may not have the same price in mind as the buyers do. This can lead to negotiations and even an “earnout” clause in the contract.
Taking between four and six months for an acquisition to finalize is not uncommon because you must go through the phases of marketing, negotiating and closing.
Buyers will dig into the financial and legal history of the company to make sure they know what responsibilities they are going to end up taking on after the acquisition is finalized.
Buyers will also thoroughly vet your financial statements and predictions. The finer toothed comb they go over these things with, the better informed they will be when bidding on your company. This can hep you get a better bid if everything is in order.
Multiple bidders will give you the best deal. Setting up an auction-like atmosphere can help keep you from exclusivity clauses as well.
You need a good legal team to deal with business acquisition legalities. This means an attorney or firm with a strong background in this legal field.
An investment banker can help you go over your books as well as your bids to make sure that you are presenting the strongest possible company and getting the best bids.
Intellectual property issues may include concerns such as the licensed property used by the seller that the buyer will need to pay for, computer programs for example, and any intellectual property that the seller developed and wants to hold on to.
Not properly drafting your letter of intent may get you stuck at that stage. This is where the help of an experienced team can come in handy.
The definitive acquisition agreement should be worded to protect the seller as much as possible.
Employment and benefit issues are going to be a sensitive topic of discussion, but it is necessary to let everyone involved know who is doing which job in the future.
The more you understand the negotiation dynamics, who has the upper hand in the talks, the better deal you can get for your company. This can involve who wants the deal more and how many bidders you have.
Business acquisition is a tricky process with lots of things to consider. The more help you have in understanding the process, and the more bids you have, the better your outcome will be.