The next step for the potential buyers included in this longlist is to assess their serious interest, their respectability and their basic ability and willingness to pay. This can be done by a combined confidentiality and solvency statement. On the basis of initial indicators, it is already possible to assess which interested parties have serious intentions to buy and which would like to find out more about the company. Prospective buyers without a technical and/or financial background and without management experience can also often be identified and eliminated at this stage. Consider how you would like to deal with prospects from your direct competitive environment. While such candidates may be willing to pay a good price for your business, disclosing sensitive company information in the course of due diligence carries a great risk despite a confidentiality agreement signed in advance, because by no means every breach of confidentiality can be proven as such. Some competitors signal their interest in buying solely in order to obtain sensitive information about your company. Special caution is therefore required and justified.
Don?t be afraid to include in the confidentiality agreement an appropriate penalty for each instance of a breach of confidentiality, plus compensation. Anyone who intends to break confidentiality will not sign the statement. You have already screened out such candidates in advance. For candidates who do not intend to break confidentiality, the penalty is irrelevant. Obligate your prospective buyers, their tax advisors, lawyers and, if applicable, other partners who are to participate in the process of the corporate transaction, to commit to this declaration by signing it.
Now we come to the declaration of solvency. Of course, you or your management consultant do not write your asking price in this declaration; you write down a higher amount, but in a suitable range. You ask your prospective buyers to declare that they are able to provide a purchase price. At this point, proof in the form of a bank guarantee is not yet required. Such a declaration is binding enough.
Your consultant will then work with the prospective buyers who return this confidentiality and solvency statement to provide the exposé disclosing your business.
After the potential buyers have found out about your company in the exposé, they will, in the best case, contact you or your consultant. If no response is received within two weeks, contact these candidates to inquire about the status of their thoughts. Unfortunately, rejections at this stage in the event that your company is not a good fit are not a given.
Focus on the prospects with the most interest and invite them to visit the company. Prospective buyers make it a point to see your company during core business hours to get the best possible idea of the company culture and how it operates. You will try to show prospective buyers your company on weekends so as not to start rumors about a possible sale. You can try to resolve this conflict by introducing the prospect to your employees as a possible cooperation partner or a new customer. But don’t fool yourself: Employees sense when change is imminent. However, you don’t want to give the market any hints about your intention to sell that could have a negative impact on your business. Therefore, don’t involve your employees in your plans until a solution is on the horizon. You can then explain to your employees that earlier information could have negatively impacted jobs. Diligently shortlist candidates from the longlist into a shortlist of suitable, solvent candidates who are willing to buy.
Before inviting prospective buyers to your company, do yourself the favor of taking a critical tour of the operation yourself. Potential buyers understand the business process best when you walk them through your company along the process. Consider a meaningful path through your premises. Often, such a process-oriented tour starts in the administrative office. During your preliminary tour, also look for unsightly areas of the business that can be easily removed (worn path markers, faded signs, dirty floors, discarded junk), and have these unsightly areas removed. The impression of your prospective buyers is significantly shaped during the tour of the premises. Show them a tidy, organized business.
After company visits, ask your prospective buyers to send you their indicative offers if they remain interested in buying.
Try to involve several candidates in this phase at the same time so that you can also move into the next phase, due diligence, with several candidates. This not only makes the process more manageable and efficient, but also allows you to conduct parallel sales negotiations.
After due diligence (8.4), contract negotiations (8.5) can take place, leading to signing.