So, You’re Selling your Business!
Unless it’s a management buyout or succession deal, buying a business can be very, very scary. Whether you buy shares or assets, you will inherit everything in the business being purchased, the Good, the Bad and the Ugly. Unfortunately, there are rarely pleasant surprises after closing. Mostly, there are skeletons, warts and pimples. More like hairline cracks, invisible to the eye, even to X-rays.
How do you know (verify) what you’re getting? How can you confirm (validate) the value you are paying? The W5 of deals applies here too: who does what to whom, when and why?
No business is perfect, so there will be negatives discovered after the deal is done. The aim is minimize the Bad and avoid the Ugly. Qualified advisors can help you with this goal.
You can do the same things the huge M&A players do and do well: deep, wide, and diligent review to independently confirm value and assess risks.
This is most often misdescribed as “due diligence review” ¬– or I use “DDR”. In buying a business, you want to do absolutely everything you can to find the Bad and the Ugly before closing. Not just the “due” amount of effort. Time and cost are two limiting factors, but the main factors are the competence and judgement of the buyer and its team – a smart CPA and experienced business attorney.
Experienced M&A advisors (independent, not paid on contingency of the deal closing) are able to navigate the rocky shallows and treacherous shores. They can shine a bright light on the Bad and the Ugly, then help you to arrive at a sensible approach. You might still do the deal; you might negotiate a price reduction; you might walk away.