The easy route to selling a company?
There’s a really interesting blog doing the rounds about business sales. It’s a canny piece of content marketing for a new business. Its ‘hook’ is exploring the Warren Buffett approach to Mergers & Acquisitions. So you can get the flavour, here’s an extract:
“Warren Buffett is famous for handshake deals and one-page contracts… He often buys multi-billion-dollar companies after a few phone calls… he typically pays below-market prices and avoids dealing with investment bankers… so why do wealthy entrepreneurs and families sell to him?”
The author’s answer is simple: because Warren Buffett makes it easy, and business sales typically take time, effort and dedication. In the author’s words: “I’m an entrepreneur. I’m high paced. I make a decision, and I want it to happen.”
The argument is that the benefits to this no-nonsense approach (a quick deal) outweigh the negatives (lower price, lack of choice). All pretty compelling stuff, even if the piece is essentially an advertisement for this particular writer’s new business, which coincidentally, is pursuing its own Buffett-shaped acquisition strategy.
But for me – and for all the clients we represent – he’s completely missing the point.
What if the Buffett-style acquirer isn’t right for you? (And let me make it clear I am not talking about Mr Buffett or his business here!) What if you could have doubled the deal price by looking elsewhere? What if the deal structure on the table isn’t properly explored? What if you as seller are not protected from issues that may take years, not weeks, to arise?
The right professional advice is crucial. You might not have an M&A advisor, or specialist lawyer, but you can bet your last dividend that your acquirer does.
We all like fuss-free negotiation. But the facts, here at BCMS anyway, speak for themselves. Finding the right acquirer means looking far and wide – in our case hundreds of acquirers, often globally. Surely you want to be negotiating with the strategic buyer who really wants the business, rather than the bargain seeker who senses a deal? Competition drives value – not just sale price, but deal structure, which is why the highest offer we receive for our clients’ businesses is typically 2.5 times the lowest.
It means – in the words of one former client - that you can “turn down a company if you don’t like their ethic or their approach”. And crucially, selling a business is not just a commercial transaction, it’s emotional too – the culmination of many years’ hard work, and the start of a new chapter.
We think if you are going to sell a business, don’t leave anything on the deal-table. Don’t go in unadvised. And don’t sell to someone just because it sounds easy.
As a business owner, you’ll already know that success is usually the result of a lot of hard work.