The Delicate Balance of Running Your Business While Completing a Transaction
Understand that a transaction process is dynamic, and may or may not turn out as planned. The most important thing is focusing on the strategy and the operations of the business and, as a result, you will yield the best outcome.
Looking back, there are a few things I wish I’d known prior to embarking on the sale process. So, whether you are creating your investment memorandum now or just planning for years down the road, I hope these experiences will help make some of the decisions around selling your business a little easier.
When we decided to look at doing a transaction we made several assumptions:
- We knew who the likely buyer was since they had proactively reached out to us.
- The process would be fairly quick and efficient.
- Our primary job as a management team would be to coordinate limited due diligence requests of the buyer, most of which would be of a financial nature.
Here is what actually happened:
- We spent over twelve months in a painful due diligence and negotiation process with the likely buyer who was then acquired by another company during the process and lost the ability to do the deal.
- Things that neither of us could control derailed a process that had looked very promising and created significant expectations.
- We then had to start a similar process from scratch with a new market-leading buyer, however this process took almost another year to finalize the details and get to a closed deal.
- Key strategic initiatives were put on hold during the cumulative two year process so that the future owner’s considerations could be taken into account.
- Competitive forces learned about the transaction and tried to take advantage of our unstable ground and required quiet period by disrupting our sales pipeline and our stable base of existing customers with attacks and rumors.
Lessons we learned:
- Be careful of putting all your eggs in one basket. Even though things look good with a buyer, things change.
- Do not overcomplicate offers with unnecessary contingencies or diligence in an effort to generate a larger valuation – trust your advisor who has an objective viewpoint and your best interests at heart.
- Make sure things are buttoned up on the diligence front before receiving requests from buyers. This will allow for a more proactive and strategic approach to the sale process.
- The buyers are going to take as much of management’s time as you are willing to give them – let your advisor manage the scheduling and timelines.
- Understand that a transaction process is dynamic, and may or may not turn out as planned. The most important thing is focusing on the strategy and the operations of the business and, as a result, you will yield the best outcome.