It’s a fact: if it can go wrong, it will.I have successfully completed literally hundreds of corporate finance transactions on behalf of numerous clients. A handful have gone through without any hitches. But that’s very rare. I’ve seen the same problems repeating themselves like a bad case of food poisoning! The common problems:
1. Buyer can’t get fundingSolution: Well, you should have asked for proof before you started and definitely before you gave them an exclusive position. But, assuming this is a genuine problem, you have a number of choices which largely depend on how keen you are to do the deal and your appetite for risk: a) You can abort the deal b) Sell part of the business c) Provide the buyer with a loan for the balance
2. Buyer changes his mind about doing the transaction at allSolution: First check this isn’t calling your bluff. Sadly there are lots of brinkmanship games in this business but if they are serious if you have had a wise adviser they will have kept the door wide open for the runners up to get back in the game, if not you are back to square one.
3. Your market position takes a tumbleSolution: If this was a genuine surprise (and it will have been becoming evident through the process), the buyer is almost certainly going to want this reflected in the price. To manage this, change the deal to an earn out.
4. Your market position goes into ascendanceSolution: If you have done the deal on a balance sheet adjuster completion, then any increased profits made throughout the negotiation process will be reflected in theses final accounts. However, if that’s not the case, or you can see that your market position will only get better and better, you can, of course, withdraw or renegotiate. But be careful: I have seen these wished for profits be a one swallow situation too many times.
5. Your key staff resignSolution: Frankly, if they were integral to the deal, you should have planned for this and tied them in with some sort of phantom share scheme based on business value achieved (payable post deal). If you haven’t done this, then you can try and buy their loyalty for the process but inevitably this is going to cost considerably more than a pre-planned exercise and it will be you that pays out of your own consideration.
6. Word gets out that you are sellingSolution: Vendors are paranoiac about this from the start. My advice is to remind them that your business is always for sale – you are just waiting for the right value to be offered. Brazen it out on this line, as denial only increases speculation.
7. You change your mindSolution: I have seen multiple reasons for this, many of them based on sentiment for the business which is entirely understandable. So long before you go down the sales route plan what you will do with your time and money and visualise a new name over the door, if it leaves you cold then don’t do it.
8. Buyer tries a last-minute chipSolution: Write a list at the start of the process (no more than half a dozen items) that you will not compromise on no matter what. Keep it in your wallet at all times. When something like this happens, check the list and if the chip is not acceptable you must walk away. If you don’t do this, it will be the start of a whole load more unacceptable actions.
9. Due diligence throws up an issueSolution: This shouldn’t happen. At best, you should have had a pre-sale due diligence exercise done on your business which would have uncovered this. I can tell you for certain that no-one goes into a due diligence process to increase value. However, if this has happened, you can accept it and renegotiate a deal. Or you can walk and wait.
10. None of the offers are what you wanted for the businessSolution: Are you being realistic? The market is challenging. Just with property, the value of your home can sound very attractive until it’s sold. A business is worth what you will sell at and what a buyer will pay. If no-one is biting after six months, you can either accept a lower value or take the business off the market and start making improvements that will lift the barrier. Jo Haigh is head of FDS corporate finance services. Jo can be contacted on 01484 860 501/07850 475 878 or firstname.lastname@example.org
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