A Buyer visits the Seller's facilities and likes what he sees. "I'm very impressed. I like everything I've seen here today".

The Buyer reacts to the Seller's asking price with no concern or objections and comments an all cash sale might be preferable.

The Buyer's only concern is whether there are other buyers in the picture. Mr. Buyer explains that his company's attorneys, accountants, and numerous other advisors will need to review everything, which is very expensive, and they need a stand-still (no shop) agreement for 60 days.

The meeting ends: The Buyer has Financials, other confidential details, and a 60 day stand-still clause. The seller has what he dreamed about -- full price, all cash, and a buyer who will act quickly.

During the next 60 days, the Seller mentally is selling the business and dreaming about a life with all that money, freedom, and the desire to sell becomes very strong.

Meanwhile, the Buyer runs the Financials through every value methodology and pricing equation model available...creating printouts.

The Buyer then returns with the low-price print-outs and other ammunition. He explains how he could use the Seller's help to keep the sale moving because his financial advisors could not justify the Seller's price. The Buyer does not argue price. He asks for help from the Seller to review and discuss the Buyer's computer print-outs of lower prices.

The BUYER BECOMES THE TEACHER OF THE SELLER by explaining how "professionals" value a business and establish prices.

After several hours and some token adjustments for the Seller, THE PRICE HAS BEEN LOWERED.

The Buyer leaves with an agreed upon lower price and all the Seller's arguments. The Seller is left thinking that the negotiations are over. Later, the Buyer comes back and ask for more concessions.

A few common examples follow:

• The deal does not meet the rate of return required by the Company
• Each deal must now compete for limited capital and the returns on this deal must now
  compete for limited capital.
• Funding has dried up and this deal can not be all cash now.
• At this price, the Seller will have to stay on board and run the business.
• Inventory does not check out.
• Receivables don't seem as solid.
• Etc., etc., etc.

Dealing with the Buyer's advisors, seller's advisors, landlords, taxes, and EPA is time consuming and costly for the first time seller. The Seller ends up devoting an enormous amount of time to a bad deal that can seriously damage the Company.

85% to 90% of middle market businesses have never sold a business. Many professional buyers look at 300+ companies each year. Sellers should know that companies are sold for high multiples when major factors are present. The most important (from a long list) are:

• The Company’s financials are in order.
• Partnerships with real professionals -- including an experienced business broker. Improper advice can cost you tenfold.
• No asking price when going to market. He who mentions price first - - loses.
• Multiple aggressive buyers, all pursuing the company at the same time.
• The wisdom to know that the Buyer, their representatives and their advisers are not the Seller's friends. They are friendly, yes, but friends, no!
• Thorough understanding of deal-structuring and offer analysis.
  

"The Unsolicited Offer" is condensed from eleven case studies and articles published by Nash & Company. Nash & Company works exclusively with owners of middle market businesses who are considering selling or transferring all/or part of their business.