March 14, 2013

What to look out for when buyers come calling

Window shopping might be fun for those doing the looking, but for business owners in search of serious transactions, it can be tiresome and unproductive. It’s necessary to weed such organizations out of the picture, ensuring that only serious buyers are given the right amount of information.

For example, understanding the concerns that a company has about making a purchase can be helpful. Additionally, discussing how a transition would take place is also beneficial – for both sides. Qualified buyers understand this tactic, and will be able to intelligently discuss varying scenarios.

According to an AllBusiness contribution piece, screening potential buyers is an important stage when looking to sell. By taking the time to ask questions – such as what a larger company plans to finance a purchase and what they see for the future daily operations – can help find the ideal candidate.

“It’s okay to provide some general information on the business, but do not offer any details until you find out if the individual or company is serious about purchasing your business,” the article said. “Ask your suitors what they plan to offer, how they intend on financing such a purchase, and what they expect from you as the seller in terms of staying on to train or consult.”

While prospective buyers often gather information, the same should be done by individuals looking to sell. When business owners find data that fits their own criteria, moving forward with company mergers will be much easier. Additionally, they could avoid wasting time with buyers who are not serious, are looking at multiple options, or are simply looking to learn more to develop their own products in-house.

Ken Westin, CEO of GadgetTrak, has had personal experience with these kinds of buyers and explained what to look for on a recent blog post.

“When a company approaches a startup it can be rather flattering, but it can also be a big waste of time, time that should be spent focusing on generating revenue for the company and value for your customers,” he wrote. “Many times companies use the guise of a potential acquisition or funding as a way to get information about your technology, customers and strategy. It can be difficult to tell the true intentions of the company interested in your business, not to mention stressful. Having a knowledgeable and experienced third party that can help filter these suitors enables you to focus on your business and increasing its value while not having to be distracted by tire kickers and ensuring sensitive information is disclosed to the right people at the right time to mitigate risk.”

M&A advisors can help business owners through the screening process and beyond, helping them save time, prevent distraction, protecting intellectual property and ensuring the best outcome if there is a deal to be done.