Wow! An Unsolicited Offer from a Private Equity Firm!

MA Selling

Congratulations!  You’ve received an offer to purchase your business … and you weren’t even really thinking of selling right now!  Before getting overly excited, it’s best to ensure that you and your company are ready to move on.

Private equity firms may be genuine buyers, but please know that these firms are notorious for chewing up business owners’ time with ever-expanding information requests. First, they just want your financials. Next, they’ll ask for your customer lists and pricing model. Also, private equity firms look at roughly 100 companies for each one they buy. Thus, there is a very high probability that you may expend a huge amount of effort and achieve nothing, while losing focus on your business.

Think about it:  Am I likely to make it through to closing?

Approximately 50-60% of M&A deals fall apart between the initial offer (letter of intent) and closing, most often because the buyer discovers something unfavorable (or they perceive as unfavorable). Consider the following:

  • Have you identified all the critical sales, operations and financial metrics that could potentially scare off a buyer, and are they all trending positively?
  • Are your financials bullet-proof?
  • Are your customer relationships and contracts where they need to be?
  • Are all your legal documents current and aligned with a potential sale?
  • Do you have access to all the information that a buyer will likely request, and does your team have the bandwidth to respond to these requests promptly?
  • Have you taken vacations and removed yourself from key roles in the company?
  • Do you know (and understand) your tax implications…and taken the appropriates steps to minimize the impact?
  • Do you know what you’re planning on doing in the next phase of your life?
  • Is it time to move on?

For answers to these and many more transition questions, start gathering your team of advisors!  We at Delta Business Advisors and Delta Deal Team are here to assist.

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