Over the last ten years, there has been a dramatic increase in the interest of professional investors and large companies in the acquisition of privately held companies. Despite the difficult conditions of today’s capital markets, there are still more quality buyers than there are good companies to buy. Smart buyers certainly understand this market dynamic and they are always on the lookout for businesses that are not for sale. These buyers know that if they can find the “dream situation” where they have no competition to buy the business then they can get a much better deal. Smart sellers, obviously, should also understand this market dynamic as well. 

If you are the owner of a business, you may get letters (some types of businesses get them regularly) that say: 

 “Our organization represents a major company in your industry with significant resources.  Our client has been impressed with the quality of your operation and has asked us to inquire if we can meet with you to determine if you would be amenable to discuss a possible acquisition.”    

It sounds tempting but it is usually a facade.  As opposed to knowing your company, the letter was probably sent to all companies in your SIC code regardless of “the quality of the operation”. Even if it were not a façade, there can be numerous pitfalls for an owner who chooses to sell his company directly to someone based on an unsolicited offer that comes out of the blue.

The privately held business is often the most significant asset of its owner. Therefore, the sale of that business is probably the most significant financial transaction of the owner’s life. You and your business need to carefully prepare for this transaction in advance and not on the schedule of a buyer. As a business owner, you need to think through your own succession goals, as well as understand your own emotional, financial, and estate needs. You need to make sure that a whole range of family, ownership, operational, competitive, and risk exposure issues are addressed in advance. Furthermore, since the value of most businesses is in its future value, it is vital that the owner be able to articulate qualitatively and quantitatively the company’s vision of the future.

Even if you have decided that you would now consider selling your business, and even if you have gone through a thorough process of preparing, and even if the potential acquirer is financially qualified and sincere (a lot of ifs), you will be still setting yourself up for some big question marks.

The potential buyer will tell you that the process will be quick.  He will tell you that your customers will never know until it is over. Your employees will not know until it is over.  He will tell you that you can shortcut this emotion-filled process.  It sounds very enticing, but experience demonstrates time and again that it is the wrong way to go. Since when is “selling it quick” the objective of the sale of an established business which you have built with great effort and care and which represents a significant portion of your net worth?

In our experience, the main reason it is wrong to get involved with an unsolicited offer is that, in most instances, you will never be truly prepared and the process can be more disruptive than you anticipated. Secondly, you will very likely get less of a price than a more competitive sales process, even assuming that the unsolicited offer is from the most qualified organization to buy your business (which would be an incredible coincidence if it were). Don’t forget, despite market conditions, it is still a long-term sellers market.  Finally, even if price were equal, once you announce that you are going to sell and you become committed to a single deal without backup, you lose significant negotiating leverage. This is especially true in the vital terms and conditions of the agreement, including, perhaps, being stuck with onerous warranty and indemnifications.

At Margolis & Company, we recognize that the sale of your business is an emotional, time-consuming and technically complex transaction. Our in-depth experience in the total management of the selling process relieves business owners of much of the burdens and pressures associated with a sale, while maximizing shareholder value and bringing a seasoned, objective perspective to the entire process.

Whether your motivating factors are retirement, succession concerns, diversification of assets, expansion capital, or access to larger markets, Margolis & Company can optimize the owner’s benefits in the trade-offs of liquidity, control, succession and taxes.

Margolis & Company does more than simply act as intermediaries; we manage the total sales process - from clarifying the owners’ goals, through closing the transaction.

Comprehensive management of the process is essential to creating the largest number of alternatives for the seller, resulting in a transaction that achieves the maximum benefit for the owners. We don’t want our clients settling for anything else.

We successfully fill the gap between larger international investment banking companies who are not able to economically provide services to smaller and mid-sized businesses, and local intermediaries who can give clients only limited access to mergers and acquisitions and capital markets. We work with clients to help them achieve a timely and cost-effective placement. Also, through our affiliation with BKR International Mergers & Acquisitions Group, we can offer unique access to privately held businesses in over 80 international markets.

An unsolicited offer to buy your business may cause you to stop and think and re-evaluate where you are in your life. If you think the time is right, or will be soon, begin preparing, get advice from your trusted advisors and the perspective of experienced M&A professionals. You will probably sell only one business in your life, and, as we said before, it is probably the most important financial transaction of your life. You don’t want to mess it up.

If you think you’re ready to find out more about selling your business, our Mergers & Acquisitions Specialists are here to help. Please feel free to call us at (610) 667-6250 to speak to someone about how we can help you achieve the maximum benefits from the sale of your business – and get the most from all those years of your hard work.