Dr Jeff Cornwall

There is an excellent article by an entrepreneur named Alan J. Smith over at Kauffman Foundation?s EntreWorld web site on what lessons he learned from exiting his own business. One cannot over emphasize the importance of planning ahead for an exit, being fully educated about the options and their consequences, and being fully engaged in the actual exit process.

The first lesson he raises is to rely on experienced merger and acquisition experts to assist in the process of selling a business. I have seen too many entrepreneurs try to do most of the negotiations themselves or rely on attorneys with little or know experience in such transactions. Selling your business, particularly to a larger company, is hard ball. The devil is not only in the details, but also in the basic terms, the letter of intent, and every other part of the deal. Do not wait to bring these folks in at the end of the deal. The best your deal will look is at the beginning. During the rest of the process, the buyer will hack away at the deal trying to make the terms more and more favorable. If the seller gets greedy or tries to push the deal in their own favor, many buyers will walk away. So it is critical to meet with experts before any discussions begin, no matter how casual they may seem. The goal must be to establish the strongest and most favorable position at the beginning, because the odds are that that is the best the deal will ever look.
Mr. Smith?s second lesson learned is to understand how the process of selling works, so you can be fully engaged in the process. That is the only way that you will get the best deal possible. He recommends that you build a good story and market it well. Once the hook is set with a buyer, stay focused in the process with your experts because there are many critical points in the process that only you can decide. Your attorneys are there to look out for your best interest, but you must inform them of what those interests are so they can build them into the final deal. What role do you want to play after the sale? How do you want your staff treated by their new employer? What financial risk and exposure are you willing to take post deal (the deal is not over at closing as there will be hold-backs, earn-outs, and so forth)?
I remember how exhausted I was toward the end of the sale of the bulk of our business interests. I just wanted the attorney to finish it off and leave me alone. We had been down multiple paths of selling our business (some went off track near the very end), and I was ready to be done. But my attorney insisted that I stay focused, and for that I will always be grateful. Many important issues were negotiated in the final days and even final hours of the process.