We’ve come across a couple of recent instances where clients have been approached, agreed a deal, and then the deal has taken forever, leading ultimately to the seller walking away. The reasons for timelines being stretched can be numerous: failure to finance the deal, change in business priorities for the buyer, change in performance for the seller, and even legal intransigence!
Not only does such a delay take time and attention away from running the business (quite possibly to the detriment of financial performance), it also risks imparting useful information to the would-be acquirer who might start to compete.
Deal momentum is key. Once a deal slows down, it can be very hard (sometimes impossible) to get it going again. Competition, or at the least the threat of competition, can provide a buyer with the incentive necessary to keep to the designated timetable.
We are firm believers in creating a market for the sale of your business. This drives up valuations and most importantly keeps buyers honest. It would be wrong of us to suggest that pursuing a single interested party is never advisable – it can be the right course in certain circumstances. Just beware of the potential power shift as a result.