The First Offer to Buy Your Business May Be Tempting, but It’s Seldom the Best You’ll Get

Your business has been your life for 30 years. To make it successful, you’ve sacrificed more time with your family and friends than you even want to think about. You’ve plowed every spare dollar back into the company.

And now, when it might not be quite as fun as it once was, when thoughts of life after your business seep into your mind more and more often, you get a call. It’s a fellow you’ve known for years. He’s in the same business. He’s done well too. And he blurts out that he’d like to buy your company for X million dollars.

How’s that for serendipity? You’ve been thinking about selling. He’s obviously been thinking about buying. And low and behold he’s made an offer that could make your dreams of a worry-free retirement come true.

But hold on. You’re talking about the most important business transaction of your life. Regardless of whether you sell to the guy on the phone, or whether you hire expert investment bankers, it’s going to take several months to sell your company. Why commit to a price without context?

Do you really know how much your business is worth? Does the guy who offered to buy it? Do you know anything about the M&A process? And now the biggest question: Who do you think has the advantage in this “quick-offer” scenario, you or your “friend” who called you out of the blue?

Before you even think about signing a letter of intent, you need to sit down with an experienced investment banker. He or she can explain the ins and outs of the sale of your company, and after examining your financial records, tell you what it’s worth in today’s vibrant M&A marketplace. And the banker’s estimate won’t be the last word because he or she will invite buyers in to bid on your firm, which almost always drives the price even higher.

Feel better? You should.

If your friend’s call has prompted you to actually see what kind of price your company might attract, then he’s done you a service, not a disservice. The time to sell is always when your company is operating smoothly and generating profits. That’s when it’s worth the most. And in today’s continuing bull market, with potential acquirers holding an estimated $2.5 to $3 trillion in cash and interest rates hovering near historic lows, the stars are certainly aligned in your favor.

If your friend’s call spurs you to take action now, when most experts agree that we have another year or two of a bull market, then he really is your friend – although perhaps not in the way he intended.

You still have time to act to get a premium offer for your business. But the clock is ticking. It can take the better part of a year to complete an M&A transaction.

My counsel is to get the facts now. If you miss this window, it may be a few years before we see anything close to the favorable market conditions we have today.

At Allegiance Capital, we want you to know what you’re getting into when you sell all or part of your business. We view educating prospective clients as one of the most important things we do.

We like to begin our process by offering a free book called Street-Smart Moves for Selling Your Business by Joe Aberger.  This small book addresses 29 topics that are critical to selling a business like yours. Be sure to Sign Up Now.

And, in the meantime, if you have questions, feel free to call me at 214.217.7732.

About the Author

David J. Mahmood
Founder and Chairman
Phone: (214) 217-7750