Our firm represents owners of businesses in the online industry. As a boutique brokerage focused on representing Sellers of Internet and Digital Businesses, we have noticed that during the process of the sale, there is a never-ending flow of issues requiring answers. Today’s article is focused on the questions that a Seller can expect from a Buyer so she/he can be ready with answers that make sense and impress upon the Buyer the knowledge the seller has in regards to the acquisition target.
Let’s start with the initial moments in the interview process – usually the first conference call with the broker(s), buyer and seller. The most important aspect to this initial call is to establish a connection with the potential Buyer. After all, the seller has likely worked years to build up this business – they want to have faith in the Buyer, and they want the Buyer to have faith in the business as well as the person selling the business. The initial moments should be spent with a brief Bio about the Buyer. Listen carefully to what is being said. Find things in common. Draw lines from comments to potential synergies with your company. More than anything, it is important to establish a feeling of comfort and trust with the Buyer. Show them ways they will gracefully transition into your company. Explain how your company began and detail the reasons you are successful along with what you have done to set yourself apart from others. Don’t be shy – much of selling a company is just that – sales.
Describe a “day in the life” of yourself. Let them know that you have a great, challenging and intellectual position. Don’t be afraid to detail your time away as well. Everyone wants to know the company can survive and thrive if you leave for a week or two.
Another good topic is to identify your competitors, why you are able to successfully compete in your sector, and details of your plan for continuing to compete and thrive. An issue as important to a Buyer as your recent past is your ability to succeed indefinitely into the future.
Next, what scale opportunities do you see on the horizon. What low hanging fruit can be snagged right after the acquisition to cause immediate growth? A word of caution here – be very careful of this subject because if you sound extra enthusiastic, then the first thing an intelligent Buyer will wonder is why you aren’t doing these things yourself. Mention these things as potential add-ons, not as an answer to life’s mysteries or a magical elixir.
Elaborate carefully on the topic of your infrastructure. Detail the fact that your job description is oversight, but that you are fully ready and willing to jump into action if the need arises.
Why are you selling? Don’t be afraid to be very forthright. Any number of reasons for selling are acceptable right up to just being burned out.
Discuss the transition as you picture it in detail. Picture yourself in the shoes of your Buyer and demonstrate a path from beginning to end in regards to the actual transition process. Remember that all of this will be new to them – so the more detailed you are, the easier the transition will be for everyone involved. Help them to visualize it and feel that, though challenging, there will be an ease to the process. Specifically deal with the issue of vendors and suppliers and how the accounts will migrate seamlessly to their new company. If there are any vendors that could potentially be more challenging that others, be very clear about this and discuss the potential downside of that particular vendor. A smart Buyer will find out everything in Due Diligence, so don’t feel the need to sweep this under the rug.
Above all, the important thing is to be upfront and honest about everything from the initial conversation. Much of an acquisition is about trust – especially if a seller note is involved – so it is important to be detailed about your reasons for selling the company along with any other problems that may be evident at the moment, or on the horizon. Put it all on the table and deal with it up front so as not to potentially lose the deal during the Due Diligence phase of the process. It will all come out anyway – it always does.
Note – be careful about disclosing the names of your clients or vendors. You can talk about how many, what percentage they respectively represent and the relative importance to your company, but be less than forthright about the identities. This is something that can be discovered during Due Diligence after we have an agreement on the table. Though the Buyers in this sector are focused on the prospect of buying a company with an existing infrastructure and an existing cash flow, there are certain trade secrets that should come later.
Certain employees can be considered critical to the success of your company. What is the likelihood that they will stay on post acquisition? If they didn’t stay on, how will their loss be dealt with? Is there someone else in your company that could jump in? Is there a labor pool out in the marketplace that would be easy to draw on? If that were the case, take out an ad, maybe on craigslist, and see how many responses you get. That would be a great selling tool to ease the pressure on a Buyer of this potential worst case scenario. If the labor Market is not conducive to finding a suitable replacement, then you need to consider offering your services in the event that this occurrence may come into play.
In the end make sure you are confident, forthcoming and knowledgeable about all the representations you make. Do not be afraid to admit that you do not know the answer to a question. It is a very easy thing to get back to them with a correct answer; much better than making a claim that is only partially correct or perhaps incorrect.