M&A: How To Sell Your Business And Start A Bidding War

If you are planning to sell your company through the acquisitions process, you want to attract the best deal possible. Here's how to start a bidding war.

If you are planning to sell your company through the acquisitions process, you want to attract the best deal possible. One way to do this is to have more than one bidder for your business. These potential buyers will then compete with each other, driving up the price.

For you, the seller, this will result in a larger profit. It will also result in better deals for the company and its employees. However, some businesses will not naturally attract a bidding war.

How, then, can you start a bidding war?


1. Be desirable

Landing a bidder through the acquisitions process involves attraction. Your business has to attract the attention of someone with the capital to buy it. Without this interest, no one will be interested. For this reason, you have to get your house in order first, and then, make your business desirable.

Have your financial records in order. Ensure that all accounting records are up-to-date and verified by a reputable firm. Limit or resolve any overtly negative press surrounding your company. Consult with a reputation management company, if you’re in need of more strategic guidance and expertise.

Be professional. Conduct yourself in a positive and professional way so potential buyers know they are dealing with a successful and confident business person.


2. Avoid looking desperate

Desperation is not attractive. That is true of any relationship and it is certainly true in the business world. Desperation has two negative consequences.

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The first is that it conveys to any potential buyer that there is something wrong or precarious about your business. The second negative consequence of desperation is that it puts you in a weak negotiation position. If a buyer believes you are desperate to sell your business, they will offer you a substantially reduced figure.

Of course, sometimes the very motivation for an acquisition is the fragility within a business. However, it is important to frame that fragility as an opportunity for buyers and not a downside.

Maintain the impression that your financial success and existence is not predicated on the outcome of one single bid or business. You are a talented entrepreneur, so exude that quality so buyers know they are in safe hands.


3. Build it (and they will come)

The “build it and they will come” mantra is sometimes mocked in the business world. It’s more nuanced than the simplicity of the cliché. However, in the context of starting a bidding war for your company, this is exactly what you need to do.

You need to build interest in your business. You need to build the bidding war. When you do that, bidders will be curious about the growing interest surrounding your company. The truth is, you can build the bidding process from the ground up, as long as you have something worthwhile to sell. You must believe that you can attract massive interest and create a bidding war through a thoughtful strategy and hard work.


Start a bidding war for your business

But just how can you start a bidding war?


Identify your options

We have already touched on the idea of presenting confidence to attract bidders. However, let’s take this concept to the next level. By being confident and employing one simple technique, you can launch bidding war. Start with research.

Draw up a list of potential buyers. Surprisingly, these are not people who have sought you out. Instead, these are people you will approach. To build this list, look for people who have the capital and interest in buying businesses within your industry.

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A potential buyer could be an angel investor. It could also be someone representing investment firms or groups, looking for a profitable opportunity. Lastly, a potential buyer could be someone already involved in the same niche.

Look for someone who may be interested in adding your business to their portfolio or eliminating you as a competitor in their market. Source potential buyers from local angel and investment groups, personal and business networks, online investor networks, and even social media pages for specific investors.


Enlist a bidder

Now that you have done the prep work, your business affairs are in order, you’ve presented yourself in a professional and confident way, and have a list of potential buyers – it is time to make your first approach.

As a good M&A advisor might recommend, identify the people on your list who are most likely to be interested. Target a few of those in that category and contact them directly. This is best done in writing and could be done even with a simple email.

Be concise and informative. Tell the potential buyer about the opportunity to acquire your company. Remember, you are selling the idea of acquisition to the potential buyer, but do not appear desperate. Once you have a dialogue with a few buyers, even if they have not put in a concrete bid, you can send out more query letters to others on your list. At this point, you’ll want to inform potential bidders that there are other interested parties.

In the second round of letters, tell potential bidders why you believe they should be interested in this time-sensitive opportunity. Once you have a few preliminary offers or statements of direct interest, you can send out more letters to existing and potential bidders.

In this third round of letters, you can categorically state there are offers, if you’ve had them. Finally, if none of these strategies are working, fall back on a more nuanced approach. Contact additional potential buyers and tell them that you are considering (not definitely) selling. This may encourage people to step forward with a tentative offer.


More advice on mergers & acquisitions

If you would like to learn more about mergers and acquisitions, check out DealMakers Podcast. There, I interview highly successful entrepreneurs. These business leaders share their advice for selling and buying businesses, making the podcast an invaluable resource to anyone hoping to make a deal.


Tommy Wyher is a marketer and business consultant located in Tampa, Florida. He is the founder of Husky Marketing, based in Lutz, Florida.


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