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We are often contacted by a business owner after he has been approached by a buyer. He wants information form us on the merger and acquisition process, which we are happy to provide. He wants to wait, however, to engage our firm to sell his company "until this situation with the buyer plays itself out."
This is the start of the death spiral. I don't want to sound overly dramatic, but this rarely has a happy ending. These supposed buyers will drain your time, resources, focus on running your business and, your company's performance. They want to buy your business as the only bidder and get a big discount. They will kick your tires, kick your tires, and kick your tires some more.
If they finally get to an offer after months of this resource drain, it, to the surprise or chagrin of the owner, is woefully short of expectations. A second potential outcome is that when the offer does come, the owner doesn't know if it is a good or bad offer. Finally, once the buyer has tied up the owner with the LOI, he then proceeds to attack transaction value through every step of due diligence.
Dave Kauppi is a Merger and Acquisition Advisor with Mid Market Capital, Inc. MMC is a private investment banking and business broker firm specializing in providing corporate finance and business intermediary services to entrepreneurs and middle market corporate clients in a variety of industries. The firm counsels clients in the areas of M&A and divestiture, family business succession planning, valuations, minority interest shareholder sales, business sales and business acquisition. Dave is a Certified Business Intermediary (CBI), a licensed business broker, and a member of IBBA (International Business Brokers Association) and the MBBI (Midwest Business Brokers and Intermediaries). Contact Dave Kauppi at (630) 325-0123, email davekauppi@midmarkcap.com or visit our Web page www.midmarkcap.com.
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