Key Points for a Successful Company Sale Process 

Contributed by Tim Murch and Andrew Rust, 4M Building Solutions

Most business owners have spent their lives building their company into a legacy they are proud of — putting in years of hard work, blood, sweat, and tears, sometimes working 24 hours a day and seven days a week. But there comes a time in most every owner’s life when they are finally ready to sell their business. 

Like most entrepreneurs, they have never sold a business before and are unfamiliar with the entire sale process. It can be a very emotional process of selling their “baby” that the buyer must appreciate. Like most, they’re probably feeling excitement with a mix of some anxiety of the unknown.  

The acquisition process can be simpler if they know what to expect and how to effectively navigate. By doing the following, business owners can be sure their sale process will be smooth, efficient and highly successful for all stakeholders. 

Know Your Why 

Selling a business is one of the biggest decisions an entrepreneur will ever make. It can be a daunting undertaking. Before they make this decision to sell, they should know why they are selling the business and be able to clearly articulate this up front to the buyer.  

Common reasons for selling a business are a well-deserved retirement, burnout, ongoing business challenges, no succession plan, or a desire to partner and be a part of a larger more experienced team with proven resources to help support and drive future growth and value. 

Why Is Someone Interested in Acquiring Me? 

Businesses acquire for a variety of reasons. For most, it’s a great way to grow or expand into new geographical markets. It is also a strategic and efficient way to quickly enter new desired market segments.  

In most cases businesses use acquisitions to grow their market share, expand and enhance their service offerings, expedite achievement of long-term strategic goals, and increase the value of the company by increasing both top and bottom lines. Acquisitions are also a great way to bring new talent and leadership into a company. Those selling their business should always ask their potential buyer why they are interested in acquiring their business to ensure both their values are aligned.  

How to Select the Right Buyer 

Aside from price, there are numerous factors to consider when an entrepreneur is selecting the right-fit buyer for their business. When starting the process of vetting buyers, it is critical to establish complete trust, comfort, and total confidence in any potential buyer. Sellers should spend ample time truly getting to know a buyer. It is critical that they ask a lot of questions, get references, and do their own due diligence on the buyer. They should also get to know the members of the potential buyer’s management team.  

After getting to know the buyers, good questions to ask themselves are: Are they good people to partner with? Does the buyer’s culture, mission, vision, and core values align with theirs, and vice versa? Will all their team members be taken care of? Do they over explain things for the seller's benefit? Do they have all the critical resources necessary for a guaranteed smooth transition and integration for the team members' and customers' benefit? What is their account retention experience post close? Have they proven to be more than well financed to close? Sellers should inquire about anything else that is most important to them and the future of their business.  

The answers a buyer gives to these key questions should help any seller form a strong opinion of who the right buyer for their business will be. To ensure a win-win deal sellers must make sure they know and completely trust whoever the buyer is.  

“Red Flags” to Look Out for in a Buyer 

Those in the business of acquiring other businesses can be a savvy bunch, but sellers shouldn’t ever be fooled. If they don’t want to be taken advantage of, they should be on the lookout for the following “red flags” as they go through the sale process. This will indicate that a buyer is not right for them or their team: 

• They employ high-pressure tactics to force a seller to make a decision before they are ready. This is a sign of a toxic culture. Sellers should remember that they are always in control. They should not let prospective buyers drive the bus. Successful buyers will make sure a seller is 100 percent comfortable before they make this monumental decision to sell their business. 

• They aren’t responsive, open, or transparent. Some buyers will dodge or avoid a seller’s questions. They won’t share critical information about their company or their plans for the to-be-acquired business and their team. They are hesitant to provide references or other requested information. This is a major red flag. Lack of transparency is often a sign that the buyer may not be a straight shooter. They likely have been taken advantage of, mistreated, or exploited sellers in the past. Their business may be struggling operationally or financially, or they might just not have any plan or strategy for a seller’s business. Whatever the case may be, any seller should steer clear of those who seem to be hiding something. 

• They show little concern for a seller’s feelings, interests, what is most important to them, or what the seller’s ideal result would be. They do not spend the time to listen and hear their desires or issues. Sellers should be mindfully concerned of those buyers that may be arrogant or lacking in empathy to hear, understand and respect their issues and how important the legacy of their business is to them. That buyer very likely will not be a good, committed steward of their business, culture, or team members. 

Be Ready to Work 

Selling a business is hard work, and must be done while also running the business. Most business owners who have sold will admit it was the hardest thing they have ever done.  

Selling a business will create a meaningful financial windfall for the owner and in many cases, their leadership team. But not without some warranted and worthwhile pain along the way. Sellers should be prepared for some late nights and tight deadlines with all the required diligence.  

When it makes sense and when necessary, sellers should include trusted members of their leadership team in the sale process to help with some of the diligence workload because it will be challenging to do it all themselves in a timely manner. Including select members of their leadership team will also ensure a smoother transition process and provide key team members to get to know the buyer who they will be working for, along with the opportunity to contribute and be a part of the process.  

Sellers should be suspicious if a diligence process is not reasonably extensive. In this scenario, it is likely that a buyer is taking advantage, or the buyer is a careless investor and may make a costly mistake or oversight that results in a delayed closing, a sale price that ends up being “retraded,” or a sale doesn’t happen at all. “The devil is in the details!” A buyer should know everything necessary about the company for it to be a successful post-close operation for everyone’s benefit along with the absolute highest certainty of closing. 

Hire The Right Attorney and Manage Them Accordingly 

For a successful sale, sellers should be sure to hire a good attorney specializing in mergers and acquisitions (M&A). The biggest mistake a seller can make is retaining their general business attorney to represent them. M&A attorneys may seem expensive, but they will be considerably less costly than a general attorney because they will bill for their time spent having to learn acquisition-related laws.  

If a seller doesn’t have an M&A attorney, they should ask their potential buyer for a reference. A buyer can recommend the attorney of a former counterparty who has seen many of the legal documents the seller will soon be receiving. A M&A specialist will be much more efficient in their review, saving sellers valuable time and money. Remember, attorneys are legally obligated to represent their client’s interests and theirs alone, even if they are a referral. 

With the purchase agreement and related documents being very extensive, the seller’s attorney should interpret and explain the legal documents to the seller in laymen’s terms. Sellers should not expect to understand every word of their legal agreements by themselves. Sellers should listen to their attorney and trust them. A specialized M&A attorney will have seen hundreds of acquisition agreements before and will be able to focus a seller on the key terms that matter and what those terms mean for a seller. 

While an attorney is there to represent a seller’s best interests, often times, attorneys can become overzealous and can obstruct and delay a sale closing. It is important for sellers to know when to tell their attorney to stand down, concede, or compromise on a term or issue.  

Sellers should never be afraid to pick up the phone and call the buyer directly to discuss issues or work something out. At the end of the day, the seller and the buyer are the decision makers on the terms, not the attorneys.  

If a seller has done their diligence and they know the buyers are very good people, worthy of their trust, then they should be able to reach an agreement on any sticking points without excess attorney interference or disputes that just run up the bill. Sellers should be careful to stay in control and not let their attorney get carried away. 

Other things to learn and consider for a successful sale process are: 

• Understanding everything involved with the transition and integration process. 

• Learning about valuations, add back adjustments, and multiples of EBITDA. 

• Purchase price terms and conditions. 

• Everything that is included in all the Purchase Agreement Documents and who pays for drafting the documents.  

Andrew Rust is Head of Corporate Development & M&A for 4M Building Solutions. Andrew is an expert in acquiring and partnering with founder-owned businesses having closed more than $650 million of transaction value in his career. 

Tim M. Murch, CBSE, is CEO & Managing Partner of 4M Building Solutions, a 45-year-old janitorial services company with sales just under $200 million, operating in 23 states with 5,000 team members. Tim and 4M have successfully completed 31 acquisitions (as of press time). 4M partnered with O2 Investment Partners at the end of 2022 with 4M being the platform company leading acquisitions and further organic growth.