Surprises CEOs Face When Selling Companies #2
4. A Confidentiality Leak
In an ideal world, the processes of merger or acquisition goes smoothly without any problems, however, that’s not the case in real life. Problems may and do occur and one of them is a confidentiality leak, or in other words, a situation when confidential information gets to the wrong hands. CEOs need to be prepared for this situation and have a contingency plan in place for such occurrences.
5. Unexpected Low Bids
Both seller and buyer enter the sale of a business with own expectations of a fair price. What happens when the seller values their company higher than the potential buyer? This wouldn’t normally be a problem should there be a plenty of interested buyers, however, if the pool of intermediary’s buyers has been dried out, the situation is different. At this point, the seller generally has three choices – take their company off the market and return in a few years’ time; sell the company in parts (e.g. 80%, 20% later) or accept the lower price with the condition of incorporating an earnout formula.
6. Agreements of Other Stakeholders
Since business is not a one man show, success of the transaction depends on mutual agreement of all stakeholders, such as Board of Directors, majority of shareholders or financial institutions which have a lien on certain assets.
For many CEOs, selling their company is a once in a lifetime experience. They may be very experienced, very talented executives, but they can also be blindsided by surprises when selling their company.