Not everything goes as planned when it comes time to sell a business. You may be one of the lucky ones and find that selling your business is a process with only a few unexpected occurrences. However, most CEO’s looking to sell a business find they can expect the unexpected. Here are the top three surprises CEO’s experience during the sale process.
Unexpected Occurrence #1 – Surprisingly Low Bids
CEO’s looking to sell their businesses need to be ready for anything. Surprisingly, one of the larger surprises that CEO’s face is low bids. Don’t let low bids shock you.
Unexpected Occurrence #2 – A Huge Time Commitment
CEO’s have to make sure that everything is ready to go, from an offering memorandum to management presentation and suggestions to potential acquirers. The offering memorandum is considered the keystone of the selling process and is usually at least 30 pages in length.
Most business intermediaries expect the potential acquirers to submit their initial price based on the information contained in the memorandum. It is common to have these presentations ready before the final bids are submitted. Ideally it is best for the CEO to show the benefits involved in combining the acquirer and the seller as well as the future upside for selling the company.
Unexpected Occurrence #3 –The Need for Agreement from Other Shareholders
The CEO is able to negotiate the transaction, but the sale isn’t authorized until certain shareholders have agreed in writing. The deal is not finalized until the Board of Directors, shareholders and financial institutions, who may hold liens on key assets, have agreed to the deal. Often this legal necessity turns out to be an issue that gets in the way of a successful deal.
Sellers should not slow down or stop running their business during the time-consuming process of selling a company. This can be a serious mistake. Potential acquirers will be examining monthly sales reports with great interest. If potential acquirers notice downward trends they may want to negotiate a lower price. No matter how time consuming the sales process may be, CEO’s have to maintain or even accelerate sales.
There can be a wide array of surprises awaiting a CEO who is looking to sell a business. Avoiding these kinds of issues is often a matter of excellent preparation. However, it is vital that they keep in mind that even with the very best preparation and diligence, there can still be surprises when selling a business.