Selling Your Business Successfully (part 7)
Because the sale of a business is usually an emotional
experience, it is best to involve a trusted adviser (wealth manager,
CPA, lawyer, investment banker or consultant) who has been through
this process many times before.
It is difficult to make rational, logical decisions
in an emotionally charged atmosphere and it can be helpful to
have a third party involved as a facilitator as you work out the
details of the deal structure.
| Key
building blocks:
• Begin your process
by developing your vision for your dream ending.
• Strategy, culture and expectations are the three
main reasons deals fail.
• Be prepared to walk away from the transaction if
it no longer fits your goals. |
We cannot emphasize enough the importance of the
deal structure. Many CEOs go through the process of identifying
buyers and even negotiating the purchase price, but fail to consummate
the transaction because of an inability to agree to terms.
Even when the terms are agreed to, if they are not
considered carefully, a deal can be put together that is ultimately
unsuccessful because it is not affordable for a buyer or neglects
to address critical issues for one side of the transaction or
the other.
Once preliminary terms have been agreed upon between
you and a potential buyer, you should elicit a letter of intent,
which outlines what you have agreed to on a preliminary basis
in terms of price, structure and the transition process.
The letter of intent is not generally a binding
agreement, but provides a framework for going forward. It could
also include a "breakup" penalty if the buyer decides
to walk away. If the letter of intent was binding, it would be
as legal and enforceable as a purchase agreement.
Once you close the sale, the real work begins for
most CEOs. The buyer will likely have some expectation that you
will help facilitate the transition.
Brace yourself emotionally for this experience.
The sale of a business is usually emotionally difficult for the
CEO, particularly if he or she has devoted sweat, tears and years
to building the business.
It is also likely that your employees and customers
may have an emotional commitment you will underestimate. Your
gain in selling your business is their loss. The success of your
ability to transfer these relationships to the buyer will in large
part depend on your ability and preparation to honestly help employees
and customers understand "what's in it for them" in
this change.
Commit to this transition process with as much vigor
as you did when building your business to ensure that the legacy
you leave with your customers, your employees and your professional
community is how you want to be remembered.
Mergers and acquisitions of businesses fail for
three primary reasons:
- No clear strategy as to why the parties should complete the
deal.
- Cultures and business philosophies are incompatible.
- Expectations of the parties are unrealistic.
You must be prepared to walk away from the transaction
if it is no longer within your realm of reasonableness or aligned
with your exit strategy.
These steps are based on "Exiting
Strategies: The CEO's Seven Critical Steps To Cashing- Out Of
A Business, Managing and Preserving Wealth."
Christopher G. Snyder and Haitham "Hutch"
E. Ashoo are principals of Pillar Financial Services in Walnut
Creek. Contact them at 925-356-6780.
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