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Different alternatives for business owners to sell their company

I planned to write this article when coming across, once again, various business owners and the different way in which they approach a business sale. This especially in respect to the role of an advisor. I don’t want to make this a scientific article; I just want to give some practical examples of cases we come across in everyday life. It might help business owners that need to sell their company at the day when they need to make the decision of their own on how to approach a business sale. This is the objective of this article: To prepare business owners for a business sale and to help them to get an insight to the consequences of selling a company themselves.

This is the content of this article:

  • The status quo (standard scenario, a retained sell-side mandate)
  • How committed are you, do you really want to sell your company?
  • Who is able to help in the sale of your company?
  • The costs of selling a business
  • What are possible consequences of doing a sale yourself?
  • Real life examples
  • Possible disadvantages of selling by yourself
  • Conclusions about doing a business sale yourself or with just one buyer

The status quo (standard scenario, a retained sell-side mandate)

The standard scenario always used to be that when an owner wanted to sell a company an advisor was appointed. The understanding was that it was too difficult to sell a company without an advisor. Further, it would take too much of the owners personal time, time which was needed to focus on the day to day operations of the business. As a result of this, traditionally a  business sale was managed by an outside advisor. The advisor received a fixed upfront amount and a success fee upon the sale of the business. This was at least the case in Western Europe. Might it differ for other parts in Europe (the Eastern or Southern part)? Might the economic crisis have had an effect in changing the behaviour of business owners in regards to ‘retainers’ (fixed upfront amounts)? Or is the situation still the same that a certain % of business owners just don’t want to pay ‘out of pocket’ or upfront costs for a business sale?Please give your opinion below the article.

Do you really want to sell your company?


In the event that an owner doesn’t want to pay an upfront amount, the first question an advisor asks is if an owner really wants to sell his or her company (we still see a large majority of man as business owners by the way). Of course many business owners would be open to receive an offer for their company. But if they really need to make a commitment (a fixed down payment) we often hear the answer that they are not open to do this.For business owners not willing to pay a retainer, CFIE can make a profile to test if there is interest from buyers for their company. We do this for free and place the profile on our businesses for sale section. As a business owner you have to ask yourself the question: why am I not willing to make a down payment? Do I believe an advisor only needs to be rewarded in case a business sale has been successfully closed? Am I not certain of the success rate or the capacities of the advisor? Am I not fully convinced I want to sell and just want to get an offer for my company to get an idea what it is worth? Have I had a stressful time and enjoyed the management of the company less? However, when I realize how serious a business sale project is I am not convinced to sell.Understanding your own rationale is important as it can help you to determine the best way forward for you. In the end it is a free world and any business owner should be able to choose how to deal with the sale of their company. However, it is good to know yourself and see what motivates you. In this way you know if you are really committed to selling your company.

Who is able to help in the sale of your company?

We have written an article about the different type of advisors that can help in the sale of your company. Another alternative that business owners opt for is selling their companies themselves. If you want to read more about who can help in the sale of your company please visit the page who can help in the sale of your company

The costs of selling a business

The costs of selling a business can actually be quite high. Most business owners try to keep costs as low as possible and haggle a lot. Many business owners want to pay a fee only in case of a successful sale. I don’t want to judge any behaviour, I just want to explain what we see in everyday life as M&A advisors (business sale).Selling a company is not like selling a house and has many more aspects that need to be considered (legal, tax, cross border contacts).The costs of a business sale are of course important. For more details please read this article about the costs of selling a company.

What are possible consequences of doing a sale yourself?

Business owners might decide to take a very pragmatic route and do a sale themselves, especially if an interested buyer comes along and shows interest in their company. The main consequence is often that owners talk to one buyer at the time. Either they are approached by someone or they come across an interested buyer via a different route. In many industries we are able to point out a suited serious buyer as well. We know a lot of buyers and have a database with many buyers in our core industries. Hence, in very limited occasions do sellers speak to multiple buyers at once. Speaking to one buyer only has certain risks that are described further below. If this is what a seller wants after thoughtful consideration we are happy to support and bring, an, interested buyer(s).

Real life examples of owners that “do it themselves”

Here are a few examples of transactions that I saw over the last few years where sellers did it themselves. The main consequence was that they mostly negotiated with one buyer only:

Seller A was in financial difficulty a few years ago, was open to sell but didn’t sign a mandate with an advisor to sell the company. A year later the seller began talking to an interested buyer, but later on the negotiations were stopped as there was no agreement on the deal structure (payment terms, amount and debtors conditions). At that stage the company was already under bankruptcy protection. The question now is if the bankruptcy protection will be extended or if the company will go bankrupt. Maybe the company can still find a buyer before then. Would it have been wise to follow a different strategy? I would say yes. Assigning (a modestly paid) advisor that discusses the payment structure and demands with various buyers simultaneously would have been a better choice. Only entering into exclusivity with the buyer that accepts the conditions of the seller would have been a way to get to a solution.

Seller B wanted to sell and was reasonably earlier with his plans to sell (early 60’s). He didn’t want to pay a retainer, which is a fixed monthly, or one-off, amount. Given it was in one of our key industries (the forwarding industry) I was able to bring him in touch with a buyer I knew well. I knew they were serious, but also often very busy. After some time the buyer visited the company, which was located pretty far away on the globe. During two days they agreed on the main terms of the transaction. This resulted in an agreed LOI and the buyer appointed a M&A lawyer that sent a draft SPA (Share Purchase Agreement) a few months later. Available details of the SPA were filled in by the seller and myself. Once done we provided the updated document back to the buyer. The new year came and in the start of the year the buyer was working on a different acquisition. This meant a few more months of delay. Suddenly the transaction went into a time period of more than a year with still quite some work to do. We have to see what happens, maybe it is all going to end well. The owner might, independently, also talk to further buyers. Or he just waits and we close the transaction as per the agreed conditions in the LOI.

Seller C wanted to start selling in a year or two and most likely tested the water in the past already with an advisor. After that time there was a period of quietness. At that stage he was approached by a buyer that made a very interesting offer after a limited period of time. This project is still ongoing There is no full agreement on all details of the transaction yet, but it seems likely that within 3 to 4 months there will be a successful deal for both parties.

Seller D approached us some years before the retirement age. One of our industry advisors informed him his valuation expectations were far too high. These expectations stayed high and the owner continued his business. A few years later the business owner got Parkinson disease and his company decreased in size. At that stage we still tried to help the wife of the owner by speaking to a few interested parties but no one was interested anymore. The risks of a company without the actual management of an owner that diminished in size were not appealing to buyers. The company is still in operation but with a modest number of employees and without management. It is unclear what the future will bring for this company.

Seller E we helped 7 years ago in a business sale. We received an offer from a company but it was not what the owners had in mind. Last year the owners negotiated independently again with this buyer. The proposal was good enough but the conditions were not. The buyer wanted the owner to stay and agree to an earn-out of many years (up to 5). This condition was not acceptable to the seller. Negotiating with one buyer was not a wise solution for this seller. The process had to be started again fully from scratch with various new buyers.

Possible disadvantages of selling by yourself

There is definitely some clear risks and disadvantages from managing a business sale yourself. Here’s a list of the possible risks and issues:

  • You will end up talking to a few companies at the best. Most likely you will talk to just one buyer. This will lower the chances of success and the price you might get for your company
  • Resources: the sales process takes a lot of additional time. Given the confidentiality you will most likely only use your key people. This might wear them out and the chances your best people get stressed are high
  • Valuations: do you know the current market valuations. Put differently, are you sure you have received the best value for your company?
  • Time: if you have limited time you can be dragged into a long time process needing to start over when the time is not in your favour anymore
  • If it is a cost motive (talking to the buyer that comes across so you don’t need to pay the cost of an advisor) please also take into account the costs of your own time
  • You might lose the focus on your company and your numbers could deteriorate

Conclusions about doing a business sale yourself

Based on our practical experience and the examples of above one can see that doing a business sale oneself can work. It is possible to stumble into, or come across, the right buyer. However, there are also significant risks. The safest bet is just to appoint an advisor that goes with right and detailed documentation broadly into the market. This will give you an idea of how buyers really look at your company and what your company is worth to the most suited buyers. It will give you the highest chance of a successful sale.

What is your opinion on how sellers should approach a possible business sale?

Please give your opinion here.

Nathalie Dierkens | Thursday 31 March 2016 | website:
The important point is to be prepared, whether you are alone or it is done by someone else

Clinton | Thursday 31 March 2016 | website:
Excellent article. There’s also much to be said about removing the owner’s involvement from the core negotiations as owners’ feelings and emotions often serve to hamper the agreement of a deal. It’s not strategically wise for vendors to get into potentially confrontational situations with the investors with whom they may need to continue cooperating for a fair while post sale.

Hugo Dias | Tuesday 5 April 2016 | website:
Very good article! I also believe vendors are taken more seriously if they seem to have appointed professional advisors. Overall, I think the benefits of appointing M&A advisors always outweight their costs.

Serge Pattyn | Tuesday 5 April 2016 | website:
Good summary. To manage the process yourself is not the best solution because there are Indeed too many issues to be taken into account at the same time. I have come across sellers wanting to pay if their business was sold for the right price. I do not accept that (anymore). Reality was most of the time that they did not want so sell but wanted to have an idea of a potential value/price.

Marc van den Elsen | Tuesday 12 April 2016 | website:
Good article. I think that also a lot of psychology is involved in approaching the seller. The advisor has to use soft skills to ascertain the real intensions of the seller. For the buyer the hard facts are decisive!

David Palmer | Thursday 2 June 2016 | website:
Thanks for the article. As a person who is used to sell-side transactions working as an interim manager within companies I think it is very rare that selling a business yourself makes sense. Not only does it distract management from from running the business but the price is usually lower than can be obtained by using an appropriate advisor and the likelihood of completion lower, leaving the vendor in the position of repeating the process with what may be regarded as ‘damaged goods’.

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