Selling your Business:
The Emotional Side
Throughout my career, I’ve had the privilege of meeting and working with passionate entrepreneurs from a variety of sectors — oilfield service, logistics, manufacturing, health care and more. Many of these owner-operators started thriving businesses, sometimes from inception, or in other instances, from a foundation established by previous generations. Almost without exception, entrepreneurs are deeply invested in their work, having dedicated an enormous amount of sweat equity to their companies. They are always thinking about how to improve, grow and innovate. It’s not a nine-to-five lifestyle.
When it comes time to sell their business, an owner can sometimes let emotions take control and stand in the way of sound decisions. Individuals who spent a lifetime building their company may not find it easy to step back and truly assess what the future holds for the business and when a transition of ownership and management of the business is needed. Whether it is a transition to family or management or a sale to a third party, it’s extremely difficult for most entrepreneurs to hand over control.
Selling any business, of course, involves two parties with different goals. Sellers want to maximize the value of their business and ensure that the things they care about most — the company’s future, its staff, its clients — are in good hands. Buyers are looking to minimize what they pay, in some situations using the due diligence process to look for shortcomings or flaws to reduce the purchase price. For a seller whose entire life, family members and ambitions have been inextricably linked to the business, this can come off as insulting — so much so that they may back out of a good deal.
An experienced advisor can prevent that from happening. Skilled advisors understand how to manage the emotions that can derail these difficult transactions. They will strategize, plan, guide and problem-solve. They act as a buffer between buyer and seller and be the guide the seller needs to properly execute a lengthy and detailed process. Along the way, advisors will handle requests for confidential corporation information, controlling the flow of information to protect the seller’s business.
Identifying the Right Buyer
MNP Corporate Finance advisors focus on finding deals where we believe there will be chemistry between buyer and seller — we believe a transaction isn’t just about swallowing a business and scooping its customer list. Our advisors have completed over 200 business transactions in the last 10 years and know the market and have access to potential buyers that may be out of sight to owner-operators.
We also recognize that emotion can stand in the way of sound business decisions, as in family businesses that transfer the company to a younger generation that isn’t ready, or those that hold on to a company for too long so that it stifles its growth. And we help the seller to look for buyers that have the talent and capital to take the company into the future — legacy matters, even if it means the price isn’t maximized.
This means paying close attention to the nature of potential acquirers. In some cases, the investor is a private equity group or a professional buyer, mainly looking to add assets to a portfolio. But in other cases, the buyer may be a long-standing competitor who is well known to the seller. These kinds of deals raise questions about sharing confidential information. An advisor can interpret tough questions on behalf of the seller, parsing out why a buyer is so inquisitive while determining what company information is fine to share and what needs to be guarded in the seller’s interest. Skilled advisors know how to hold a seller’s ground into the final stages of the transaction.
“We can never take all the emotion out of selling a business — passion is a great thing, after all — but advisors can mitigate and manage interactions to achieve the best outcome."
Going Beyond Price
The flashpoints in negotiations often involve details that have nothing to do with price: the fate of long-standing employees who’ve been at the owner’s side since day one, or relationships with loyal customers that have seen the company through thick and thin. Advisors can help protect interests such as these that are determined to be truly valuable to the company’s future success.
Then there’s the delicate matter of the company’s name and the transitional role of the existing management. All business owners are intimately familiar with the culture and personality of the companies they’ve built from scratch, which is why the negotiations over such details have as large a role in the dynamic as the financial details.
Looking at the Long Term
Rarely do we see a transaction where the seller gets to walk away on close. In most situations, the owner will need to stay on and transition the business over time. In some instances, they will be asked to carry equity in the business through that transition period. It can be very difficult to flip the switch from a heated negotiation one day to business partner or employee the next. An advisor ensures that although transactions can be very contentious, when handled well, the seller is protected from some of the most difficult negotiations so that they can start their next chapter on the right note.
If you need assistance in selling your company or want advice to take some emotion out of a pending transaction, contact me anytime to set up an opportunity to start the conversation.