{"id":15819,"date":"2020-01-21T11:22:21","date_gmt":"2020-01-21T16:22:21","guid":{"rendered":"http:\/\/vrnewhaven.com\/?p=15819"},"modified":"2020-04-07T13:29:43","modified_gmt":"2020-04-07T17:29:43","slug":"selling-a-business-to-a-competitor","status":"publish","type":"post","link":"https:\/\/vrnewhaven.com\/selling-a-business-to-a-competitor\/","title":{"rendered":"Selling Your Business to a Competitor the Smart Way"},"content":{"rendered":"\n

The time has finally arrived. You\u2019ve spent years diligently\nbuilding your business, and now you’re ready to reap the financial rewards by\nexiting. There’s just one wrinkle \u2013 your ideal buyer is your own competitor.<\/p>\n\n\n\n

While this is a common scenario, it\u2019s not always one that\nbusiness owners find easy to accept. Handing the keys over to a tough\ncompetitor can raise a host of issues not only for sellers but also for\nemployees. Therefore, it’s imperative to walk into the situation fully\nprepared. Selling to a competitor has its own set of challenges, most notably\nhow do you maintain confidentiality and protect your client base through the\ndisclosure and due diligence. With this in mind, let’s take a closer look at\nseven key tips for selling a business to a competitor.<\/p>\n\n\n\n

Tip One: Be Certain That You’re Truly Ready to Sell<\/h2>\n\n\n\n

It’s natural for business owners to waiver a bit when it\ncomes time to exit the organization they\u2019ve spent years growing. After all,\nselling is a mammoth decision that often has profound financial and lifestyle\nimplications. This indecisiveness might cost you a bit of time and money in a\nconventional sales situation. However, when you’re dealing with a competitor\nsale, uncertainty can have more serious repercussions. For example, if you\nbegin a transaction with a competitor and later back out, your opponent will\nlikely walk away with sensitive information about your business. This could\ngive them a competitive advantage, especially if you cancel the deal and return\nto running your company as usual. <\/p>\n\n\n\n

Tip Two: If Approached, Be Cautious<\/h2>\n\n\n\n

\"constructionIf a competitor indicates interest in purchasing your business, you can’t be certain that it\u2019s in good faith. The competitor may simply wish to gather more information in order to gain a competitive edge. Therefore, it’s crucial to protect sensitive information \u2013 don’t divulge anything prematurely and make sure you have them sign iron-clad confidentiality agreements before doing so.  You should also spend time assessing their industry position and background. <\/p>\n\n\n\n

Tip Three: Properly Value Your Business<\/h2>\n\n\n\n

Understand the value of your business and try to determine\nif the competitor is willing to pay for it before disclosing much about your\nbusiness. Establishing the value of a business is a complex task. Valuations<\/a> are linked\nto earnings, business assets and liabilities, tangible and intangible assets,\ncomparable sales within your industry, and a variety of other factors. To\narrive at an appropriate figure, it’s necessary to have an appraisal. This assessment\nwill help you substantiate your asking price and ensure that you aren’t leaving\ncash on the table.  Also, recognize that\ncompetitors may realize significant synergies in the transaction which may make\nyour business even more valuable to them. \nTry to estimate what this premium should be.  <\/p>\n\n\n\n

Tip Four: Negotiate Terms Beyond Mere Numbers<\/h2>\n\n\n\n

While price may be paramount, there are other terms worth\nexploring during a sale negotiation to a competitor. How will existing\nemployees be treated? How will any integration occur? Can you negotiate a\npost-sale consultancy? Do you wish to remain in a leadership role for a short\nperiod to help smooth the transition? Sellers may also want to avoid being\nlocked into a long term non-compete clause if they aren’t retiring.<\/p>\n\n\n\n

Tip Five: Work with the Right Business Broker or M&A\nAdvisor<\/h2>\n\n\n\n

Selling a business in a timely fashion at your preferred\nprice is no small task. Valuations are just one piece of the puzzle; sellers\nalso need to understand the dynamics of the market, put together a marketing\nplan, and negotiate with buyers. Business owners rarely have the repertoire of\nskills and experience needed to accomplish this on their own. This is why\nworking with the right business broker can be a game-changer. An advisor can\nwalk you through each step of the process, including valuation, marketing, business\nbuyer identification, negotiation, deal mechanics, and more. This is especially\ncritical when competitors are striking a deal, as a broker can help ensure that\nsensitive information isn’t needlessly exposed.<\/p>\n\n\n\n

Tip Six: Ensure That You Remain in Control of the Process<\/h2>\n\n\n\n

Any complex business transaction is an artful dance between\nbuyer and seller. You have to know when to push, when to concede, and how to gauge\nthe strength of your position. In situations where a competitor is the buyer,\nit’s even more important to have the upper hand.<\/p>\n\n\n\n

Ideally, a seller should wait to be approached by a\ncompetitor, rather than making the first move. Sellers should also dictate the\npace and timing of the due diligence process, meetings, negotiations, etc. It’s\nnever a good thing to bargain from a position of weakness, and this is\nespecially true when you’re obligated to give a competitor a peek at your most\nvaluable information and assets during the purchase process. Preferably,\neverything should be on the seller’s terms.<\/p>\n\n\n\n

Tip Seven: Keep Emotion Out of the Transaction<\/h2>\n\n\n\n

This might be easier said than done if you’ve had a\ncontentious relationship in the past. However, allowing a mutually beneficial\ndeal to be derailed over competitive feelings is a bad outcome for everyone.\nTry to remain as dispassionate as possible and focus on the positive aspects of\nselling to a competitor \u2013 which we will detail for you below.<\/p>\n\n\n\n

Why Selling to a Competitor Makes Sense<\/h2>\n\n\n\n

Closing a deal on attractive terms often boils down to one\nkey thing: The ability to quickly identify a qualified and interested group of\nbuyers. Competitors are natural candidates for a sale because:<\/p>\n\n\n\n