As a business owner, selling your company may be one of the biggest financial decisions you ever make. It is no small undertaking. With those two things in mind, it is best to do it right the first time. That means reaching out to as many potential buyers as possible to find the best fit. In other words, hiring an advisor to run a competitive process will typically yield the best outcome. Unlike their publicly traded counterparts, private businesses are much less liquid. Public companies' stock is traded daily on an exchange through order books that track bid and ask prices to match up buyers and sellers. In a competitive M&A process, advisors are hired to create a market for the private entity being sold. Benefits include:

1. Price Maximization

At Lutz M&A, we have worked with a number of clients who have received unsolicited buyout offers. Some decide to entertain these bids as a path of least resistance. Others chose to engage our team to run a process. In those cases, the financial results were vastly different. In one example, a Lutz M&A client sold for over 70% higher than a competitor’s unsolicited bid.  

2. Eliminating the “What If” Factor

Selling to the first buyer that comes along without entertaining other offers can leave an owner wondering what may have happened if additional suitors were involved. After all, unsolicited bids are submitted for a reason. Buyers that see an attractive opportunity are most likely trying to acquire the business at a below-market price or on unfavorable terms.  

3. Talking to More Than One Buyer

Most owners are concerned about the business and their employees’ well-being post-transaction. Having more than one buyer involved allows sellers to select not only the best price but also the suitor they feel most comfortable selling their company to. In a lot of cases selling shareholders remain owner-employees post-transaction, so selecting someone they can work with for the next handful of years is critical. Lutz M&A has had several clients choose buyers based on “fit” over price.  

4. The Safety Net

It is not entirely uncommon for buyers to back out of a transaction in the due diligence phase and/or attempt to renegotiate the purchase price. if issues that lead to the rise of these events are not able to be resolved, having other buyers that showed strong interest earlier in the process to go back to can save time and money compared to starting back at square one.

At Lutz M&A, we have been able to salvage transactions for clients by going back to other interested parties after the initial buyer backed out. Competitive processes for selling businesses involve many steps and much time and work. For the reasons mentioned, we feel the cost-to-benefit trade-off of using an M&A advisor weighs heavily in the seller's favor. If you have any questions on this topic, please contact us.