DILEMMA: An overseas buyer has made an outrageously high offer for my company, but says it wants exclusivity for a fixed period. How should I respond?
ISSUES: Your first instinct may be 'Where do I sign?' Don't. You need time to think things through properly. No serious buyer will walk away just because it doesn't get exclusivity up-front. Don't allow the offer to distract you from your business and be careful about giving away sensitive information.
Your decision to sell depends on a mix of financial and personal factors, and your fellow shareholders' wishes. Now may not be the best time to sell; there may be others (including your management team) who would be a better fit or might pay more.
Who do you consult and when? You have a director's duty to inform shareholders and board of a genuine offer for the company. Otherwise it's up to you.
Don't be surprised if your united group of shareholders, colleagues or family start behaving differently. The sale may be financial nirvana for some but a disaster for others.
You'll need to weigh the potential of your company against cash today.
If you don't sell, competing against a 'spurned gorilla' in your market may adversely affect your company's future but, if you take cash today, the buyer may drive down the price during due diligence. Having an alternative reduces your risk.
Who is your buyer? Does it really have the money? Will the consideration be in the form of shares? Is it proposing earn-outs? If so, how much control will you have over results? Are your advisers' costs underwritten if your buyer walks away? If you want a continuing role, how will things change? Talk to others who have been through this.
If not, what will you do with yourself - retire, take on various part-time posts, start up again or do a buy-in?
- As key decision-maker, stay cool and consider all the options.
- Get the input of professionals and shareholders.
- If you decide not to sell, minimise the danger of a spurned buyer.
- If you decide to sell, clarify the sales process.
- Minimise the risk of giving away sensitive information by getting a proper sales memorandum prepared.
- Get an auction going and limit access to the business.
- Don't forget to consider all the tax and pension issues.
- Assume and prepare for it to leak - it almost always does.