M&A Nuggets: Know Your Buyer
Many times, a business seeking to sell is in discussions with the wrong buyer – a mismatch. Negotiating with a mismatched buyer can be a waste of time, money and resources and lead to either the demise of a potential transaction or a transaction taking longer with much greater effort, all of which could have been avoided. It is therefore very important that a seller conduct its own due diligence on potential purchasers. This due diligence should include the following:
- Checking the background of the owners of the potential purchaser – in conducting this check, treat the owners as you would a job applicant;
- The potential purchaser’s experience in the M & A arena – has the potential purchaser acquired any businesses?
- The potential purchaser’s finances – requests should be made for the potential purchaser’s financial statements and for evidence of the source of its purchase price funding;
- References – ask the potential purchaser for the names and contact information of the owners of other companies that have been acquired and contact those references;
- NDA – insist that any potential purchaser sign a non-disclosure agreement up front. Any reluctance to do so should be a warning sign;
- The potential purchaser’s objectives – obtain a clear understanding of the purchaser’s objectives, which can vary greatly depending upon whether the purchaser is strategic or financial; and
- Time Frame – ask the purchaser for a definite time frame in which it anticipates closing the transaction. A reluctance to state a time frame could indicate that you are dealing with a purchaser which is always exploring but never willing to commit.
By following the above suggestions, a seller can go a long way to assure that its purchaser is a match.
If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at firstname.lastname@example.org or 443-738-1522.
ABOUT GLENN D. SOLOMON
email@example.com | 443-738-1522
Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
ABOUT OFFIT KURMAN
Offit Kurman, one of the fastest-growing, full-service law firms in the United States, serves dynamic businesses, individuals and families. With 15 offices and nearly 250 lawyers who counsel clients across more than 30 areas of practice, Offit Kurman helps maximize and protect business value and personal wealth by providing innovative and entrepreneurial counsel that focuses on clients’ business objectives, interests and goals. The firm is distinguished by the quality, breadth and global reach of its legal services and a unique operational structure that encourages a culture of collaboration. For more information, visit www.offitkurman.com.
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