Many business owners are very excited to receive an unsolicited offer, often from a competitor, supplier or employees.
In theory this easy offer could be the answer to your worries of trying to figure out….
- How to retire?
- How to find a buyer to take over operation of your business?
- How to unlock the monetary value of your many years of hard work building your business?
But is the offer as good as it appears?
Often buyers see presenting an unsolicited offer as a way to get a discount on the purchase price and possibly take advantage of an unknowledgeable seller.
Transition Architects was recently engaged to help a seller review an offer brought to them from a known entrepreneur in a complementary industry. Our client was very pleased and optimistic of this potentially strategic sale, which appeared to offer a purchase price at a fair value.
But on closer review, we determined, there were a number of negative attributes of the offer which were concerning & detrimental to the sellers, such as:
- The buyer was providing very little cash up front.
- Had established conditions for future payouts which were likely unachievable.
- Were also discounting the fair market value of inventory to a value below cost, even though it was easily saleable and in high demand.
We brought this feedback to our clients and attempted to negotiate better terms on the offer with the buyer. In parallel, we started an outreach program within our network for other potential buyers.
Another interested buyer reached out to us within 24 hours and we have since been able to negotiate much improved terms; much more cash up front, achievable earn-out conditions & beneficial working capital calculations.
We are currently in the final stages of Due diligence with all discussions indicating we will have a successful close within the next 2 months.
Our client is very happy and is relieved to have found a quality buyer that appreciates the value of the business that they have built and is working fairly with them.
This example is an important illustration of the value of a good M & A advisor and how important it is to have knowledgeable representation on your team when negotiating such an important transaction!