If you have a successful company that is attractive to potential buyers then you owe it to yourself to be prepared for the day when an unsolicited call comes from an interested buyer. You should know how to respond, and to truly understand how to maximize the market value of your company..

Running a Deal Vs. Running a Process

A business owner who tries running a deal with a single buyer finds their options severely limited.

Running a deal without first “running a process” is a shortcut that deprives the seller of choices and precious leverage. It limits the seller to running a deal with one buyer and two options:

• Do the deal with the only buyer in the picture on their terms, or
• Don’t do the deal 

That is the reality underlying our mantra: One buyer is no buyer.

In contrast, running a process involves about 1,000 hours of professional preparatory work (mainly performed by your M&A advisor and their team) that generally must be completed before you can effectively run the deal. The primary value of the process is its ability to generate interest from multiple vetted prospects. If you skip the up-front work and don’t attract multiple buyers, you forfeit many advantages that should accrue to the seller.

If you run a process, you can anticipate having multiple buyers, which affords you important choices in price and terms and in deciding which buyer will carry on your legacy. That discernment for your buyer is especially important if the terms of the deal include your staying on for a time after closing or if your ultimate proceeds depend on earnouts or future profits. Those relationships are like a marriage, as compatibility and trust are paramount.

Our Nine-Step Sale Process

Our Sale Process generally consists of nine critical steps listed below. The first five are cumulatively crafted to attract competitive offers, maximize market value, identify the “best fit” buyer, avoid due-diligence surprises and maneuvering, and achieve a successful closing.

1. Analysis: Assess your company and the market.
2. Planning: Prepare the marketing plan and related materials
3. Marketing: Make a market for the business
4. Process: Initial discussions, visits, screen offers
5. Offers: Negotiate multiple offers
6. Letter of Intent: Negotiate the best deal.
7. Due Diligence: Manage the process
8. Closing: Be a problem solver, keep it on schedule
9. Post-closing: Follow up

By completing step 5, you have a signed letter of intent, and both parties are ready to start their due diligence. At that point, you are prepared to run a deal.

What to Do if You Receive an Unsolicited Call

From a Buyer

Now that you have a better understanding of what goes into a successful deal and what distinguishes “running a deal” from “running a process,” let’s examine a situation where a business sale starts with an unsolicited call from a prospective buyer to an owner whose company is not for sale.

First, determine whether the purported buyer is a buyer and not a business competitor engaging in corporate espionage and, secondly, credible. In our experience, one out of 10 cold calls is from someone who checks both boxes; the other nine are fishing expeditions.

Second, protect your confidentiality. Confidentiality is paramount; we frequently encounter situations where the owner is so intrigued by a buyer’s offer that, when asked for “all your financials,” they provide it with no confidentiality protection or buyer vetting.

Third, if you’re interested in starting a dialogue, be appropriately evasive by saying:

• Let me get your name and number, and I will get back in touch with you.
• My company is not currently for sale, but I’ve been considering some changes. I’ve considered buying another company, merging, or selling off one of our divisions.
• I’ve got some professionals helping me, and one of us will get back to you to see if there’s a potential for more discussion.
• In situations where an M&A advisor is representing the seller, we give them similar advice, plus this punch line:

“Yes, we’re exploring all these options. I’ve hired an M&A firm to help me with this assessment. I will give your information to my M&A team, and they will contact you.”

Don’t be afraid that revealing your connection with an M&A firm will scare off the prospective buyer. In our experience, the more serious and desirable the buyer, the greater the likelihood they will find value in our representing you. We have over 9,500 qualified buyers in our database, and many of them have told us they prefer buying companies through an intermediary because the owner and the business are more prepared.

Remember: One buyer is no buyer.

Conclusion

You may think this article doesn’t apply because you don’t intend to sell your business. Or maybe you’re several years away from putting it on the market.

That may be the case. But suppose you have a successful company that would attract potential buyers. In that case, you owe it to yourself to be prepared for the day when the call comes, to know how to respond, and to truly understand how to maximize the market value of your company.

I like to talk with business owners years before a sale to answer their questions, help them recognize the possibilities, and build relationships and the trust that effectively “running a process” will ultimately deliver top dollar in perhaps the most significant transaction of their life.

Please get in touch with me if you would like to discuss the value of your business.

ABOUT US

Whether you want to sell or buy a business, Chapman Associates provides a personalized service based on our sixty-nine years of successful M&A closings and our relationships with more than 9,600 registered buyers. Chapman is one of the most respected middle-market M&A firms in the country. What makes Chapman different from the competition?



• We make a market for our clients.

• We do not charge any up-front fees.

• Our fees are based on successfully completed transactions.

• We devote senior-level attention to every M&A transaction.

• We do not delegate work to junior staff.

• We help clients set realistic goals and work hard to exceed them.

• We conduct in-depth research and rigorous analysis.

• We prepare all necessary offering materials.

• We have ten offices nationwide to serve our clients.

Mark Mroczkowski, CPA, CM&AA

Managing Director 

mark@chapman-usa.com

www.chapman-usa.com

407.580.5317