Should I Take my Business Off the Market When I Accept an Offer?
“It’s not over until it’s truly over.” — Yogi Berra (1967)
Many sellers make the mistake of taking their business off the market once they’ve accepted an offer. This can be a critical error. Our recommendation is simple: Keep your business actively listed until a definitive agreement is inked and all contingencies have been satisfied (unless you’ve entered into an exclusive no-shop agreement with the buyer). To maintain your strong negotiating position, keep your business visible, continue showcasing its potential, and remain open to backup offers. This approach will not only keep the buyer on their toes but also deter any potential games down the road.
As a seller, you hold the most negotiating power early in the transaction. This is the golden opportunity to shape the key deal terms that will significantly impact the entire process. Seize this advantage while it’s at its peak. The smartest course of action is to enlist expert guidance every step of the way.
Here’s our firm advice…
Focus on Running your Business
One common error sellers commit when they accept an offer is becoming overly excited and diverting their attention from the business. It’s essential to recognize that more than half of business sales fail to reach the closing stage, even after an offer’s acceptance. To secure a successful deal, stay dedicated to managing your business throughout the due diligence process until the closing.
Should revenues decline during this period, anticipate potential price negotiations from the buyer. Conversely, if revenues show an increase, you can fortify your negotiating stance.
Keep your Business on the Market
Keep your business actively listed until the ink dries on those closing documents and the funds are securely in your account. It’s worth noting that in mid-market deals, where you’ll encounter sophisticated buyers like companies and private equity groups, exclusivity is typically demanded once you accept a letter of intent (LOI). In such cases, aim to negotiate the briefest exclusivity period possible.
However, for smaller enterprises, don’t take your business off the market until the day after the closing. This strategy is your key to maintaining a strong negotiating stance. Moreover, keep those negotiations with other potential buyers ongoing throughout the entire process, ensuring you always have a reliable backup plan in your arsenal.
Avoid Deal Fatigue
Prevent deal fatigue by creating alternatives and maintaining emotional objectivity. Savvy buyers recognize that business owners often tire as the process unfolds and may exploit this by prolonging negotiations and making last-minute requests. The most effective strategy to counter this is strategic positioning. Ensure you have alternative options in place should the buyer attempt to reopen negotiations.
The optimal approach to stave off deal fatigue is thorough preparation. By readying your business for sale, you reduce the risk of the buyer uncovering any adverse information during the due diligence phase that they could leverage against you.