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CEOs

250 Firms Want to Buy Your Company

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We recently attended a seminar for business owners and entrepreneurs who are considering selling their business. The seminar was hosted by BCMS Corporate, a member of Axial and a lower middle market firm that provides M&A services in the UK, America, and Canada.

They have been successful helping business owners sell their company to both strategic and financial sponsors. There are 3 crucial points that they made in their presentation:

Selling your Company is A Sales Process, Not An Accounting Process

Selling your company is a sales process, not just a number-crunching financial modeling process. They summed this up by rhetorically asking: “If your Accountant or CFO doesn’t sell your company’s products, why should you trust him or her to be selling your company?” Accountants are crucial members of the preparation process of selling your company (without well-prepared financial statements, business owners will have a very hard time selling their company), but BCMS’ point is excellent: selling your company is a sales process and must be handled by appropriate professionals, either within your organization or outside of it, who have the necessary skills, acumen and experience to manage a deal process, help advise the entrepreneur through the process, and help get the deal over the finish line.

Exhaustive Research of Potential Buyers is Crucial to Success

BCMS breaks out the process of selling your company into five “modules”:

  • Researching potential buyers
  • Reaching out to every potential buyer and determining preliminary interest
  • Conducting meetings between your company with your prospective buyers
  • Negotiating the terms of the sale
  • Closing the deal

If you do not do your research on the first of these modules exhaustively, then the likelihood of a successful sale decreases dramatically. On average, BCMS indicated that their prospective buyer list usually has ~250 firms that might have a strategic interest in buying your company. We discussed this topic in “How Many Buyers To Approach When Selling Your Business.” Ultimately, that list is typically whittled down to just a handful of serious buyers, but they start by very comprehensively and very thoroughly identifying all potential buyers.

The Importance of Choice

The Importance of Choice for the Entrepreneur–if the entrepreneur does not have a choice at the end of the process, then s/he is in a particularly dangerous position, as s/he must decide to either partner with one buyer and accept that buyer’s price and terms or continue to develop the business without additional financial and strategic resources. Additionally, as we reviewed in “10 Key Considerations Other Than Purchase Price,” there are many key, important issues for a business owner when selling their business.  Limited choice often leads to a sub-optimal outcome for the business owner, which often leads to a tension-filled relationship between the new owners and the founder.

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