How do I choose between two appealing prospective buyers?

By Everingham & Kerr. Inc.

For most business owners trying to sell, this is a dream quandary. But believe it or not, choosing between two buyers with equally enticing offers can be challenging.

Find the real differences

Many sellers make this decision with their gut. If the two potential buyers really do offer a similar price and deal terms, have similar plans for your company and have both secured financing to make the purchase, it could come down to personal relationships. Which owner or executive team do you and your managers like and trust more?

The chance that you’ve received two truly identical offers, however, is small. When you scrutinize them, you’re sure to spot some important differences. For example, one prospective buyer may be a midsize company that already operates in your industry. It plans to buy your company to eliminate competition and acquire products that will complement its own.

The other prospective buyer may be a large diversified company that’s hoping to use your business as a gateway to a new market sector.

There are pros and cons involved in either offer. The key is to understand your own goals. Do you want your business to capture a larger share of your current market? If so, merging with a competitor may be the more appealing option. But if you want your company to be part of a larger enterprise, with greater access to capital and new markets, the multi-industry buyer may be the better choice.

Study cultures

Comparing the two prospective buyers’ corporate actions, reputations and cultures may also make your decision easier. Has one been on a serial acquisition binge, while the other has been slow and deliberate in its purchases? Is one considered to be the established leader in its industry while the other is an up-and-comer?

Getting a sense of each buyer’s culture is critical.

For example, one may have a hierarchical culture that’s likely to alienate many of your employees. The other may have high turnover because it’s poorly managed and doesn’t value its people. For the sake of staff members and customers who will stay with the company after the sale, choose a buyer with a culture and values similar to your own.

Make the call

There’s a limit to the amount of information you can gather about a potential buyer before finally committing to a sale. But if you work with an experienced M&A professional and thoroughly research your options, your decision will probably be the right one.