How to Sell Your Business, page 16

Competitors, continued

Clearly, competitors are among the most dangerous buyers to talk with. If they don’t finalize the transaction, they may have learned enough about your company and how you do things to be a more formidable competitor. Your must make the judgment call whether the possibility of landing a competitor as an acquirer justifies the risk.

In the case of technology and Internet companies, competitors (loosely defined) are likely the only purchasers. Technology developed for a particular industry is probably only of value within that industry. The trick in making this kind of sale is to first make sure that your core engineering team remains on board. Next, be slow and cautious about what you reveal, showing enough to retain interest, but not so much that the inner workings of the technology are revealed.

Researching Potential Buyers

You can be sure that a potential buyer of your business will research you and your business in every way possible. You should return the favor as a potential purchaser starts to get serious.

First, it’s important to qualify the prospective acquirer, meaning to make sure that he or she has the means to do the deal. This is a legitimate concern since it is very common for buyers to exaggerate. (First time buyers may also be naïve about what it will take to get bank financing on a deal.) You don’t want to waste your time on buyers who cannot finalize a deal, and you shouldn’t open your kimono without good evidence that the buyer can.

Investigating potential buyers should also give you some sense of what the buyer is looking for—and help you adjust your sales pitch accordingly.

If the buyer has come to you through an intermediary, the intermediary should help with the process of pre-qualifying the buyer.

All this implies that you should have a good idea of the minimum financial profile on the part of the buyer that it will take. You can’t effectively determine if a buyer is qualified without this information for comparison.

Beware of the buyer with a history of many near misses (check with the intermediary to determine this). These near misses may be the buyer being careful, but they are more likely a buyer with resistance to actually finalizing a deal.

Continued next page

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