Executive Summary
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Advisers advise, principals decide. Advisers may not understand industry-specific risks and are therefore badly placed to make judgments on some risk issues. Be prepared to debate with your own advisers and to overrule them if your knowledge is superior, no matter how much they are being paid.
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Don’t buy a dog and bark yourself. Corporate sales are complex and risky. Appoint experienced advisers and get them to manage the process under your control.
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Information. The importance of information cannot be overemphasized. Buyers are motivated by fear and greed: The quality, tone, and flow of information critically impact both motives.
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Valuation. Agree what the walkaway price is with your advisers before starting a process, review it constantly, and be prepared to walk away if necessary.
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Competitive tension. The best deals are achieved where more than one buyer with cash (but not an uncontrollable host) wants to purchase a business. Use this rivalry to maximize the bids received and to eliminate risks that might prevent the buyer from delivering the deal.
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Blunderbuss versus rifle shot. Most businesses have a limited target population of buyers who may pay a strategic premium. The approach when marketing needs to favor those most likely to pay the best price.
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Financial bidders are active. In the past 20 years more businesses worldwide have probably been sold to private equity firms than any other type of acquirer. Use them to create competitive tension.
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Auctions have to be managed. Theory and practice suggest that many tactics in auctions are counterintuitive. Think through what you are going to do and clearly communicate it to potential purchasers.
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Say nothing. There are always matters that are uncertain in any deal. Staff are always unsettled by uncertainty. It is best to say nothing at all to them, but if you do decide to explain what is happening, you must be completely honest. But remember, any ambiguity is interpreted negatively.
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Only the fittest survive. Transactions are long and often tedious. Do not let boredom, fatigue, or lack of patience deflect you from your final goal, especially when the winning line is near.
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The one that got away. The world is full of people who nearly did the best deal ever. To achieve success, you need to give and take; it is not a war, it is a negotiation.
Introduction
All corporations seem complex to those looking in from the outside. The cocktail of relationships, contracts, and assets coming together to generate value is different in every company, and the process of realizing the value embedded in that cocktail requires planning, foresight, and pragmatic judgment. Failure to sell a business that has been publicly put up for sale can destroy huge amounts of value. Each situation is unique and no text can provide a comprehensive guide, any more than you could write the complete guide to sailing in all weathers. This article will deal with general principles and strategies, not technical details. Furthermore, it will address the question of how to sell a business, not why you should sell a business.
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