If you have been following along and completed the initial steps for managing that unsolicited offer; by obtaining a valuation, researching your potential buyer, and assembling a team of professionals, you know what comes next… Now you need to develop a strategic plan. And the first thing you need to do is decide that you want to do with your company. There are essentially three options in how you can proceed:
1. Sell to the company that provided the offer
You have done your research and are committed to moving ahead to the due diligence and negotiations stages. At this point it is important to work closely with your legal or investment banking advisors and set a precedent for the rest of the process. This team will help establish expectations including a sale timeline, financial objectives, and key terms. Recognize that without alternatives, you may be negotiating from a defensive stance and that the buyer may take every opportunity to whittle pricing and terms. Developing your expectations, being upfront about them, and employing a team to help you establish and maintain pricing and terms can save you a lot of time and money in the negotiations.
2. Run a competitive process and expand your buyer set
After obtaining your valuation you realize that your company has significant value and want to mitigate the risk of leaving value on the table, so you choose to run a competitive process. Your investment banker will be essential in helping you organize an efficient and effective strategy. Develop your “go to market” strategy, seller expectations, and prepare to devote extra time and resources to this process. While this option can be more costly, and time consuming it is likely that it will result in you receiving the most value.
3. Don’t sell and continue to manage your business
You have decided that now it not the right time to sell. And there are many logical reasons for why you do not want to sell: You may want to work a few more years; or you could want to grow and optimize your company, increasing its value, before a future sale; or you may have determined that the buyer is not an optimal fit for your company’s future. Whatever the reason make sure you take this opportunity to plan for the future by drafting an exit plan. A sale may still be years down the road, but knowing where you want your business to be and developing a plan on how to get there will help you when the time to sell comes.
Regardless of what you decide it’s imperative that you don’t allow this to affect your business. Selling your company takes a tremendous amount of time and energy. With your focus being split it’s wise to consider getting extra help during this time. It’s also important to keep plans confidential: sale rumors can affect key relationships such as staff morale and customer loyalty. The sale of a business can be upsetting to some people, and that is why it is critical that your business maintain its quality of service during this time. While the decision to sell or not can be life changing having the right preparation and knowledge will ultimately make you more successful.