By Carl Pinkard
Partner
Aldrich Wealth, LP
Aldrich Capital
Advisors, LP
As a business owner, you likely receive unsolicited, or altogether random, calls and emails from potential buyers looking to get a few minutes of your time. The caller seems nice enough. They pay you a compliment and mention they are looking for a business “just like yours.” If you’re not interested in selling, the conversation may end there. But for owners who may one day sell their business, this outreach is a good reminder to start planning for the day you do take that call.
What do you do when a potential buyer reaches out to you?
First, be nice. Appreciate that someone thinks highly enough of you and your business to approach you to buy what you have worked hard to build. You never know if the person on the other end of the call may be a future partner or lifeline in tough times.
Ignoring the inquiry is fine, but many professionals will keep reaching out, which may compound the annoyance. A simple response is fine; if you aren’t interested in any circumstance, inform the inquirer of your position and acknowledge and appreciate their inquiry.
Even if you are in an aggressive sales mode, reply with caution and be somewhat guarded. Think of this like dating. Take it slow at first, and don’t start planning the wedding on the first date!
Assembling your team
At this point, if you are interested in having further conversations, pause, and get your professional team in place.
At a minimum, your team should be “comprised of:
- an investment banker or M&A advisor;
- an M&A attorney;
- a wealth advisor; and
- a tax accountant.
Creating competitive tension
Once your team is in place, your investment banker or M&A advisor can help you think about the inquiry. Understanding the marketplace is crucial to negotiating the best deal on your behalf. The key is to create competitive tension in the market for your business. To use an old military catchphrase, “two is one, and one is none.”
Key points to remember:
- Don’t get too deep with potential buyers who contact you regarding intriguing deals.
- Don’t try to go it alone on broad M&A processes—they are a lot of work, and involve many pitfalls, especially if you haven’t previously navigated numerous deals.
- Don’t sign an LOI until you get an M&A advisor or investment banker’s advice on valuation and other LOI attributes.
- Do reach out to your advisors ASAP if you are considering further conversations.
- Do respond—but keep it short and sweet
For more information, please go to www.aldrichadvisors.com