Almost all of our company sale clients care deeply about the price that we achieve for them during the sale of their business. And why shouldn’t they – they’ve built an amazing company, worked incredible hard and deserve to get paid a wonderful price at the point of exit. However, time and time again, we observe that the price received for a business never makes or breaks a deal – there’s always more to it. Below we’ll explain why.
Looking After Loyal Staff and Customers
For many of our clients, their staff and customers have been there for them through good times and bad. Without them, the business would not be as successful as it has become, and on that basis many of our clients want to ensure their customers and staff are looked after post-sale.
It is not unusual for company buyers to look at implementing strategies post-sale in order to increase the return that they get from an acquisition. Sometimes however, it pays to work closely with prospective business buyers to understand exactly what their strategy in this regard is and how they will execute it. Plans that involve significant cuts to a company’s labour force, moving a company’s headquarters a long way away from its current location, cutting service levels or increasing prices are often seen as red flags to business sellers and may make them question whether they wish to proceed with selling their business to certain buyers.
The Risk of Damaging the Business
Sometimes, the future plans of a buyer may lead the selling shareholders to develop strong beliefs that the ongoing success of their company will be damaged. Shareholders who have built up a fantastic company often wish for their legacy to be maintained by the successful acquirers, and buyers who have future plans that may damage the company are often viewed with suspicion.
Even more concerning are situations where a buyer wishes to make radical changes to a business however wishes the sellers to commit to extended payment terms such as an earnout or retention agreement. The combination of these two factors means that sellers may have their purchase price bound to the success or failure of the plans put in place by the buyers. In circumstances where sellers are not convinced of the merits of a seller’s future plans for their company, such deferred payment options will often cause them to attempt to renegotiate terms or find another buyer more suited.
Fixing These Issues
Although the issues described above can create hazards for some business sellers, there are solutions. We advise our clients to give careful consideration to what it is that they really care about when it comes to the outcome of their sale – is it just price, or are there other factors at play. From there, it is invaluable to ensure that a competitive sale environment is generated when completing the transaction to ensure the company’s shareholders have choice when it comes to selecting a buyer and negotiating terms that not only maximise the sale price, but ensure the non-price factors make sense for them.
Find Out More
At Quinn M&A our expert team of company and business sales advisors can help you with planning for the sale of your business and undertaking the sale of your business. Contact us today for a no obligation discussion with one of our team on 1300 784 667 or info@quinnma.com.au.
