Surprises CEOs Face When Selling Companies #1
Selling a business is a complex process and as such can bring owners or CEOs a plethora of surprises (both positive and negative). Let’s take a look at a few surprises that might be lurking in the sale.
1. Substantial Time Commitment
Selling a business through a professional intermediary starts off with a quiet period of waiting for potential buyers. Once the broker presents a few options, CEO steps in and is required to supply a considerable amount of information and data. Why? Intermediaries use Memorandum (a 30+ page document containing facts about the business) as a stepping stone of the process and expect the potential buyer to submit their initial price range based on the information contained within.
2. The Need to Enjoin Other Employees in the Process
Naturally, there is more than one person engaged in selling a business although some owners paranoid about confidentiality leaks wish they were the only ones. Contrary to this belief, it is suggested to inform at least a few key members of staff – CFO and Sales Manager. CFO will be involved in providing insight into financials, Sales Manager will help by suggesting names of synergistic companies and CEO’s secretary might be asked to set up a “war room” where all legal and contractual information is assembled for the buyer’s due diligence team. All of these suggest that company is being sold, so it only makes sense to inform those employees.
In order to avoid unnecessary surprises at this stage, CEOs/owners are, furthermore, advised to implement “stay agreements” for these key employees.
3. The Need to Maintain or Accelerate Sales
Many owners tend to take their eyes off running the business while selling it, but this is arguably the worst time to do that as the potential buyer will be watching the company’s performance with caution. CEOs thus need to maintain their momentum even during the selling process and keep improving the business. Any hiccups in the performance can result in devaluing the business and its final price.