One Buyer is No Buyer

You are here

Russ Warren,
Managing Director

An unsolicited offer for millions of dollars has you and your spouse thinking about the life after business ownership.  The offer is compelling, the buyer is credible and the buyer appears to be a good fit with your existing management team.  So why are your key advisors telling you to wait?  They keep telling you that "One Buyer is No Buyer".

As good advisors they know that a competitive bidding process is the only way to ensure that you receive the best price and terms in the sale of your business.  The old adage that "One Buyer is No Buyer" continues to be proven true by quality M&A advisors.  In a recent transaction, this fact was proven true again.  The names have been modified to protect the confidentiality of our clients.

Bill, the owner of a successful industrial components manufacturing company was contemplating the sale of his business early in 2008.  His president, Bob, who owned no stock, wanted to buy the business and was trying to raise financing to do so.  After hearing Bob's offer (limited to what a bank would loan and what equity he could raise from family and friends), Bill decided to work with a firm of M&A advisors.  EdgePoint was hired, and followed the structured process that has created value for countless sellers.
 

  • Fair market value was determined using company-specific information and current market data, and agreed with the seller as an acceptable price. 
  • A thorough buyers list was prepared, consisting of financial buyers, and an array of U. S. and international strategic buyers. 
  • "The Story" (a blind profile, Confidential Offering Memorandum and Management Presentation material) was written to consistently emphasize the value drivers for this particular business.
  • Buyer interest was obtained and orchestrated by seasoned professionals using deadlines and sequential competitive hurdles to obtain the best offer (price and terms)
  • Exclusivity was awarded only after all substantial terms were agreed upon
  • The process was "quarterbacked" and kept on track through Closing

Six months into the engagement a cash-heavy transaction closed at nearly double Bob's original offer.  (And, Bob gained significant ownership and continues to lead the business, which is adequately financed.)  The successful buyer had a strategic reason to own the business, but was unknown to the seller prior to the sale process.

The ability to have multiple buyers compete for the ownership of your business is any business owner's best interest.  In fact, if you have received an unsolicited offer for your business this is a good indication that you have a business that may have significant market demand and value. 

Often at the start of a sale engagement, the client will say, "I know who will buy my business - here is a list of the six best buyers."  Yet, for a variety of reasons (sometimes due to distractions of the moment), even buyers who have repeatedly told the owner they will buy his or her business may not make the top tier of offers.  That is why it is vital to go to the market in a thorough, yet controlled process.

Confidentiality during the sale process is at the top of every seller's concerns.  It is not good to have employees, customers and other stakeholders hear on the street that "The XYZ Company is for sale."  The competitive auction process manages confidentiality, and only those who have the means to acquire the subject business are contacted, eliminating exposure to idly curious 'tire kickers, a likely source of leaks'.

To get the maximum value, best terms and the highest certainty of close, the best potential buyers, wherever located, must be brought into a well-orchestrated competitive situation.  That is the value brought by the right firm of M&A professionals.  That is the value brought by EdgePoint.

© Copyrighted by EdgePoint.  Russ Warren can be reached at 216-342-5859 or via email at rwarren@edgepoint.com.

© 2017 EdgePoint | 2000 Auburn Drive, Suite 330, Beachwood, OH 44122 | Phone: 216-831-2430, Toll Free: 800-217-7139