It might seem like the easiest thing to do to list your company for sale, but what happens if a potential competitor is interested in purchasing your business. Does it make sense to give up the brand and all the hard work you have put into the company by selling it to someone you’ve been competing against for some time?
Appropriate disclosure and protection are required when you are thinking about selling your company to an existing competitor. This helps you to minimize the risks in case something goes wrong in the sale while also giving you the best possible chance to get the maximum price for your business. When you start to think about selling your company, there are two primary kinds of buyers who are likely to show up as interested.
The second category is the strategic buyer, which means that this is a person who has almost always already in your market who could get benefits from acquiring a complementary business and continue to build that out and fold that into their existing company. If you choose this option to get maximum profit for your business, it means that strategic information would have to be disclosed to a competitor, which of course, generates nerve wrecking concerns for any solid business owner. The second category person who might show up at the table interested in purchasing your business is a financial buyer; like a private equity firm.
These are very popular with sellers because they help to push up valuations, often come to the table with a lot of cash, and very few people want to deal with the problems of going public when thinking about a larger transaction.
Gradually releasing information is one of the most important things you can do when selling your existing business to a competitor. Make sure that you protect yourself along the way by having an existing relationship with an experienced business broker. You will need to have agreements in place to protect the company. The potential buyer should always be willing to sign a non-disclosure agreement which makes sure that anyone you share these details with will keep it confidential and that you have a method to take legal action if they fail to comply with that. Make sure that you disclose information gradually. Having an agreement in place is the first step to this, but don’t show everything about your business right away.
Certain sensitive information will need to be released to this buyer, such as profits and basic financials in order to set a price, but don’t give them too much information, such as customer names, for example. You can use pseudonyms as a way to protect your existing customer list in your business. This should provide you enough of a foundation to get a letter of intent and a clear indication of price. As the buyer narrows down the price range, they are willing to pay, you can use this as a vote of confidence that you can give them additional information.
Once you get down to a specific card number, you would have to provide many different details. If the buyer intends to pay the price that you listed the company for, bear in mind that they do have the right to request to check out the business to be sure that you have described it accurately. While this is extremely nerve-wracking for any business, having the support of an experienced and knowledgeable business broker at your side can make this difficult process that much easier. Schedule a consultation with an experienced business broker at Website Closers today to learn more about selling your business to a competitor.