Acquisition Advisors | Mistrust, Fear Cause Missed Opportunity
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12 Jan Mistrust, Fear Cause Missed Opportunity

By David L. Perkins, Jr.

Well, that just burns me up.

I just ran into a longtime acquaintance who manages a sizeable company. A couple of years ago, the owners of his company – two gentlemen in their mid 60s – began talking to me about helping them sell their business. After a series of discussions, however, I concluded they were “skeptical sellers.” That is, they didn’t want to lock in with a single M&A firm. Instead, they’d say, “Just send me a buyer.”

Rather than being willing to commit to a firm and thereby gain the skilled representation they need, their fear corners them into doing it themselves. The result? Suboptimal for everyone.

Why? First of all, business owners are busy. Selling a business the right way is time-consuming. There is no way a business owner can give the project what it needs AND continue to run the business effectively.

Second, business sellers who try to peddle their own businesses lose credibility. And when they tell the buyer, “This is a great business,” the buyer thinks, “Ah, uh-huh. Of course.” But when a credible representative says, “Hey, I’ve represented a lot of companies and this one is a gem for these reasons …,” for some reason, the buyers listen (and the sellers don’t lose credibility by tooting their own horns).

Third, to sell a business in a timely manner for maximum value, one must work all the best buyer candidates simultaneously. Do-it-yourself sellers don’t have the necessary time, energy or contacts.

Fourth, time kills deals. Do-it-yourself sellers have a hard time moving swiftly. This is because if the seller gets impatient or demanding, he’s a jerk, or is being manipulative, or there’s something weak in the business. And the need to move fast and be efficient and screen the buyers and ask tough questions and put your foot down conflicts with another deal-making imperative: the need to like the seller. The way win-win deals work is the seller is Mr. Nice Guy but has hired an M&A advisor who is, well, good at doing his job. The M&A advisor is supposed to push, set time limits, ask tough questions, demand better terms, etc.

Fifth, business sellers just are not objective and, amazingly, often lack the knowledge and/or confidence to dictate terms without losing something in the process. And here is where we get to my friend. He said the owners did not involve him in the sale. They did it without him knowing. Or, at least without him being a part of it. And he’s the president of the company!

I can assure you, the sellers did not get maximum value. Management is too important. The sellers did not grant the buyers access to the president. The unexplored risk of buyer and president not getting along resulted in a lower price. The sellers should have “sold” the quality management team. They could have done more for themselves and probably done more for the management team.

You know, most business owners DO care about their loyal employees, and DO want good things for them, but unless the owner-sellers seek and accept advice, there’s no hope for a transaction that maximizes the benefits for all.

How great would my friend’s owner-sellers feel right now if they had secured a great sale price and terms AND promotions and ownership for a few of their loyal, tenured employees?

Finally, the confidentiality issue gets in the way of a lot of this. Business sellers are often scared to death about the world finding out they wish to sell. So what do these owner-sellers do? They don’t use an M&A advisor. Of course, this is crazy in that the M&A advisor can talk to and screen buyers all day long without revealing who the client-seller is (and thus screen out 98% of the buyers without revealing identity). But for the do-it-yourself seller, every time he or she picks up the phone and talks to a buyer, the identity of the seller is revealed.

Okay, my ranting here has not helped me feel better. I’m still mad about my friend, the owner-sellers, and that a little trust (at least that’s how I see it) could have resulted in a better deal for all: Buyer. Seller. Key employees.

2 Comments
  • Dee Replogle
    Posted at 07:27h, 28 August Reply

    Very thoughtful and well written article, David. It’s also accurate. Nice job.

  • Brett Benton
    Posted at 14:59h, 28 August Reply

    David,

    As our company deals with many owner-sellers as we seek to expand through acquisition, we run into these issues all the time, some times all five of them in the same transaction! When we begin a conversation about acquisition, we know the process will have a higher likelihood of success if the owner if professionally represented.

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