I recently traveled through several cities in Europe and the U.S. speaking at various conferences that Corum sponsors. The one question I received that sticks out more than any other is What is the biggest mistake I can make in trying to sell my software/IT company?
My response used to be a litany of a dozen or more things you can do wrong, just as we outline in our Selling Up, Selling Out conferences. However, having sold software, IT, internet and related technology companies for over 25 years, Ive learned that the single biggest mistake you can make in this process is to deal with only one buyer, usually someone who first approached you.
The reasons are simple; you can never get maximum price or structure without calibrating your value with a range of potential partners. And some of those buyers are foreign companies, some are firms you may never have even heard of.
The statistics from hundreds of successful M&A engagements are startling:
• In a professionally managed global partner search, where you take the time to gauge the interest of other potential acquirers, in only 25% of the cases is the first party that approached you (the one that may have started your search process) the eventual buyer! 75% of the time, there is someone willing to pay more!
• Further, if that first interested party is the eventual acquirer of your firm after a professionally managed process, the price you receive improves by an average of 48% on actual liquidity. Moreover, with the leverage you have in the negotiations, you get a much better structure, especially regarding liability.
That kind of significant difference in both price and structure makes it imperative for you to take the time to investigate other interested parties. Remember, this is likely to be the most important transaction of your life, so do it right!
In future blogs I will detail the various reasons why you dont want to make this mistake and how you can get maximum price and structure for the company you have worked so hard to build.