M&A Insights – Mark Young, Managing Partner, CKS Advisors
Welcome to the March 2022 edition of M&A Insights. Our goal at CKS Advisors is to help you stay up to date on the Mergers and Acquisitions climate.
This month, we touch on some of the consequences that business owners selling their company may face if they choose to do it themselves by moving forward with only one buyer.
“One” is The Loneliest Number
- For many business owners, an unsolicited buyer is intriguing, possibly flattering, may have even come to the door at just the right time, and seems simple. Thus, their first instinct might be to jump on the offer.
- If this happens to you, fight the impulse and take the time to consider your options. Like with many things in life – one (buyer) is the loneliest number and often really means no buyer.
- They could be the right buyer, but who knows. What we do know is industry professionals who get paid to help their clients find companies to buy state “…. you will pay less and get better terms if you find a company to buy in a one-on-one process”.
Reasons Why You Should Choose a “Go to Market” Strategy
- A Traditional M&A Sales Process Increases Exposure – The more eyes that see the opportunity, the higher the chances of receiving multiple offers. The more options a seller has, the more likely they will achieve their goals. Competition is a good thing in this circumstance.
- Sellers Win – Several independent studies, designed to determine what value, if any, investment bankers provide to sellers, determined that business owners receive both quantitative benefits (such as a higher sales price) and qualitative benefits (such as more access to qualified buyers, managing the process and its strategy, and negotiating/structuring the transaction) when following a structured M&A process.
- Time Kills Deals – When a buyer knows that they are the only one in line for your business, there is no sense of urgency to get the deal done. Time is then on the buyers’ side, and they use it to their advantage when they are not tethered to a pre-defined transaction schedule. Additionally, the longer the process carries on, the more chance for an issue to arise that could make the transaction fall through.
- Less Opportunity for Renegotiation – In many cases, a single buyer will try to renegotiate their original agreement because they know that they are the only one at the table. When buyers see that they are competing, they are less apt to renegotiate the deal as there are other buyers waiting in the wings.
- Backup Offers – Sometimes deals fall through. Having gone to the market, you likely would have backup offers should a buyer back away.
In Summary
- If they are serious and authentic, a buyer who approaches you should have no issue participating in a larger process. If they do have an issue, what does that tell you?
- As we always hear, “options” are usually a good thing.
If you would like to learn more about the M&A process, the M&A market in general, or are ready to take the next step to explore your options, we would be glad to meet. Please contact me at 480-351-8533 or myoung@cksadvisors.com.
This post is for informational purposes only and does not constitute an offer, invitation, solicitation, or recommendation to buy, sell, subscribe for, or issue any securities. While the information provided herein is believed to be accurate and reliable, CKS Advisors, LLC and Ashland Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Certain Principals of CKS Advisors, LLC are registered representatives of Ashland Securities, LLC Member FINRA, SIPC. CKS Advisors, LLC and Ashland Securities, LLC are separate and unaffiliated entities. Securities and Investment Banking Services are offered through Ashland Securities, LLC.
