Selling you business

Office World News, Oct 1999

I Can Sell My Business Myself. Why Do I Need an Investment Banker?

This is probably the question most frequently asked by owners of privately-held businesses. You may seriously handicap yourself by undertaking the sale of your busi-ness without an investment banker. Just as you did not acquire the skills needed to run your business overnight, an investment banker likewise brings years of sales and merger experience to his area of specialization. Moreover, he is able to tap extensive resources in order to market your business most effectively. Selling a business successfully requires a knowledge of domestic and international buyers, extensive computerized buyer and industry data bases to develop accurate market values, and detailed knowledge of evolving tax, legal, accounting, and regulatory issues.

I Know My Business Better Than Anyone Else. Therefore, Aren't I the Best Person to Sell It?

As an owner, you have a large emotional stake in your business. This can hinder your objectivity in valuing the company, identifying the best buyers, marketing the company, and negotiating the best price. In particular, it is difficult for an owner of a business not to be influenced by his knowledge of that business. Your contacts, for instance, are likely to be within your own industry. Frequently, however, the best price can be obtained from a buyer whom the seller may not have considered, or by using a structure with which you may not be familiar.

I Am a Good Negotiator, I Am Not So Sure That Some Investment Banker Can Hammer Out A Better DeaL

Most buyers of private businesses are skilled in the process of negotiating for the acquisition of companies and are objective. Your business, most probably, will not be your buyer's first purchase. No matter how sophisticated you are in the art of negotiation, your limited experience in the specific bargaining disciplines of the corporate selling process may put you at a severe disadvantage.

I Still Think My Deal Is More Important To Me Than To Any Investment Banker. I Don't Like The Idea of Giving Up Control

In fact, an investment banker gives you more control because he acts as an important buffer between you and the buyer. When dealing with a number of buyers, it is important for a seller to be able to buy time and avoid confrontations with potential buyers over price and terms until he is ready to decide among offers. This is much easier if the investment banker, who, after all, can't commit the seller, can collect responses and play a gobetween role (including "good guybad guy").

What About The Fees That Investment Bankers Charge?

Because the investment banker brings added value to your transaction, the fees should be more than made up for by the higher price that a professional will be able to elicit from the buyer. In addition, the speed with which the experienced investment banker can execute the entire selling process translates into a higher sales price in a number of ways. First, the sale will take less of your time, leaving you more time to run your business. Second, timing can be critical not only in the time value of sale proceeds ultimately received, but in opportunity costs should market and business conditions move against you.