“The fool doth think he is wise, but the wise man knows himself to be a fool.” As You Like It, Act V, Scene I
What do you
think is the biggest mistake most sellers make when they decide to sell their
company? There are a lot of candidates:
- Handling the process yourself instead of hiring an experienced financial advisor and investment banker.
- Failing to negotiate the principal terms in the Letter of Intent … because it’s non-binding, right? Good luck. Try renegotiating those “non-binding” terms when you are working on the definitive agreement.
- Not having complete and accurate books and records – and getting surprised in the due diligence review. Or worse, in a post closing adjustment to the purchase price or indemnity claim!
- Not signing an appropriate Non-Disclosure Agreement before starting the due diligence process (or earlier).
- Or my favorite – not hiring experienced M&A Counsel
But probably the biggest mistake most sellers make is not appreciating the commitment of time and energy that it takes to sell your business. Gathering and organizing the documents for due diligence review by the buyer (or by your investment banker if you’ve been wise enough to hire one); management meetings with prospective buyers and responding to requests for additional information all take an enormous amount of time and attention. And you have to keep up appearances and run the business “in the ordinary course” while you do the foregoing. It’s a lot of work and not to be undertaken on a part time basis.
In addition, you need to remember the cardinal rule in selling a business: Time is the enemy of all deals. So all that work needs to be done as quickly as possible. Which means that you should catch up on your sleep and personal life before you undertake the sale of your business – and hire an experienced M&A counsel (I told you that was my favorite).