January 7, 2022 | 4-minute read (604 words)
Entrepreneurs and business owners are constantly on the lookout for opportunities, whether to enter a new area or to exit an existing one. Serial entrepreneurs typically create something from the ground up, nurture the venture through its infancy and then opt to sell when the business has matured and is profitable on its own.
But if you receive a surprise offer for your company, how will you know if the price is fair or that it’s the right time to sell? Here are some pointers for business owners that receive an unsolicited offer to buy their company.
Does the buyer have any prior knowledge of your company?
When you receive a purchase offer, the first thing you should do is determine whether the buyer is familiar with your company. Is it possible that they are a competitor? Do they work in a relevant field? Could they be attempting to diversify their business? Is the party an investor who is approaching multiple firms to see which one accepts the bait so they can park their money? You need to consider all of these questions because they are directly related to how much you should counterbid or whether you should reject the offer outright.
Is this person one of the best?
You're probably the best thing that has ever happened to your company. If it must be sold, you want it to go to the best new owner possible. Is the person or company who wants to acquire your company capable of following through? Are they in the same business? Is it true that they are good at what they do? Is your company a strategic match for them, or vice versa? This information is crucial since it will influence how much synergy a new alliance could generate.
Are you getting a good deal?
Whenever you receive an offer, whether it's your first or 51st, always double-check that you're obtaining the full value that you consider acceptable for your company. Negotiating with a random one-time buyer might backfire and result in your company being undervalued. Before you begin bargaining, make sure they are familiar with your company, its reputation and what they are purchasing.
Are you interested in selling?
You do not have to sell just because someone comes knocking on your door. Avoid making rash, knee-jerk decisions. If you get an offer today, it doesn't imply you won't get one tomorrow. Remember that it is your hard work that has made the firm what it is, and that it is your hard work that has precipitated an offer from someone who recognizes the value of what you have created. They aren't likely to be the last. Calculate your risks, establish a strategy for your future, and go for it if your exit makes sense – but only when you're ready.
What happens after you decide to sell?
So, you've decided to sell. You must think about your company's future. Are you aiming for a complete dissolution? Is it possible that it will result in layoffs and technological investments? Are you looking for a companion or a supporting role? You'll need to respond to all of these issues and consider the other members of the company who may have similar concerns. Your co-workers and employees will have questions regarding the change, and you'll need to be prepared to respond.
Mergers and acquisitions seldom involve a random individual popping up in your driveway to offer money for your company. It’s a complex aspect of business ownership that has the potential to generate great dividends for you. Play it well after gauging all the possibilities for yourself.