6 Bona Fide Ways To Sell Your Business To A Competitor

Helpful Tips To Help You Sell Your Business To A Competitor

You may be in a position where you’re looking to sell your business to a competitor.  It makes practical sense and is a common occurrence in the modern business world. After all, who better understands the market and customers than the company that competes with yours every day?

However, there are a few risks worth considering if you’re looking to sell to your competition.  Here are 6 things to consider:

Get an Accurate View of the Business Valuation

The first thing every business owner who wants to exit must do is get an accurate valuation. Business appraisers do the job, and they settle on a precise figure that will help you begin negotiations. Your accountant should be able to come up with a number that serves as a starting point. After that, an appraisal will rough in the estimate.

You may decide to look for a price beyond those given by these two professionals. If you do, there’s a risk you may bid yourself out of the market. However, since a direct competitor stands to gain because of the “absence” of your company, they may be willing to pay more than you think.

Also, keep an open mind on pricing – don’t just look for the highest lump sum.  If you can make more money with installment payments over the course of 5-7 years, that could be a big win for you as well!

Whip out the NDAs Early

Since you’re dealing with competitors and any deal has the potential to fall through, you must cover your bases with the proper documentation. Nondisclosure agreements are the best way to proceed before turning over any potentially sensitive information. Without the proper legal framework in place, there’s a significant chance of running into a snag.

Before getting into details, it’s worth binding your competitor to an agreement that they won’t analyze your business just for competitive purposes. If they’re unwilling to sign such a contract, you may not be dealing with people who are negotiating in good faith. It can be risky to speak with competitors, especially at this critical stage in the life of your business. Be wise and get legal counsel to ensure you have the proper paperwork for protection.

Cooperate During the Due Diligence Process

If you want the deal to close quickly, be fast and precise when responding to requests for due diligence. The other company’s team is covering their track and making sure the information you provide is right. If you help them do their jobs more efficiently, it will result in a faster deal.

The more well-prepared you are at the start of the transaction, the easier handling all of the details. You should have a lot of completed paperwork already from your accountant and appraiser. They have an idea of how much the company is worth, so you have a realistic starting point for negotiations. If your competitor isn’t willing to pay that high, there’s no reason to discuss details of the business.

Make the Best Deal Possible

You never have to settle for the first deal. Negotiating for a better payout or terms is expected, so be ready to give the other side a run for their money. This opportunity is your only chance to cash in on your years of labor and investment in your business. You must get the most significant return you can. Landing a lucrative outcome requires knowing your numbers and understanding what makes your enterprise so valuable.

Once you convince the other side that there’s sufficient value, they will pay. It’s entirely up to you what type of sale you want to make and what assets you’re willing to include. Every day, transactions between business owners occur for all or parts of companies. If you need to hang on to a brand, but want to sell your customer base, that’s possible.

Clear Any Hurdles to a Sale

Don’t let tiniest details stand in the way of a sale. You need to gather together the right paperwork and any financial information that is necessary to complete a transaction. Why put an unnecessary roadblock in the way since you benefit from a fast exit?

You probably already have a basic set of terms that you know you’ll take. Keep those in mind during negotiations, and if all of them align, it’s probably worth getting your payout.

The types of roadblocks that stop a deal from happening are lawsuits, owed money, and debt. If your company is currently in bad shape financially, you’ll have to disclose that to your competitor, and that could be a problem.

That’s why the first step to selling your business to a competitor is to ensure that you clear away all problems and put solutions in place. That will speed up the entire process and make for a stress-free experience for all parties. If your competitor is looking to make a deal quickly, they’ll appreciate you going the extra mile to finish the transaction.

Talk to Experts As Needed

Don’t be scared to tap the expertise of M&A specialists and professional investors. Since their entire business is transactions oriented, they take a dispassionate approach to valuations. It’s worth paying a consulting fee if it adds a lot of value to the final deal numbers. These specialists know a lot about selling your business to a competitor, so they’ll be able to contribute common sense wisdom.

There’s no shame in not knowing every detail about how to maximize the sale of your business. Rely on outside help to fill in the gaps and to make your transition easier. There’s no need to add undue stress to this crucial time in your life. People with experience give you a glimpse into how the process works so you can maximize the benefits.

It always comes down to the numbers, so having a get it done attitude is vital. You’ll need to want the deal, and you may have to work hard to finalize it. However, consider the rewards! It’s quite an accomplishment to sell a company. It will afford you the chance to build another if you like. If not, take the money your competitor invested and live your dream life.

Summary of 6 Ways To Sell Your Business To A Competitor

Selling businesses is relatively painless these days, and there’s a lot of help on the subject. Don’t be afraid to start the process now, getting your financials in order and talking to others who are experienced in this arena.

If you have any questions about how to sell your business to a competitor, please feel free to contact us.