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What I learned selling my company

harryglaser.com

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Re: What I learned selling my company

#41

Post by lhh »

thewizardofaus wrote: post #34

"Once you get an offer, try to generate competing offers from your key relationships" I've always seen the statement of getting competing offers but how does it actually work in reality? Is it as simple as contacting the key decision maker from competitor and saying... "I've got an offer X, what can you do?"

Yes: “Hey, our company is on the market for sale and I thought you might be interested in taking a look before we accept another offer.”

And you can tailor it based on the specifics.

Working with an advisor can sometimes make this easier because they can be more direct and say things like: “Competitor X has made an offer and I know it’d make your life difficult if this asset ended up in their hands, so I wanted to give you an opportunity to take a look first.”

By the way, waiting until you get an offer to start trying to bring in competing ones isn’t great, definitely better to do that as early as you can if you’re serious about selling. You risk pissing off the interested party if you’re making them feel like they’re just being used as leverage and drag things out before giving them an answer.

Re: What I learned selling my company

#42

Post by greenhexagon »

mcmcmc wrote: post #29
gumby wrote: post #14

Earlier quoted context omitted.

Running a profitable business with happy customers is parasitical? I thought that was for PE and hedge fund clowns.

The concept of profit itself means you are beating the market by taking advantage of someone else or extracting value through arbitrage. In a perfectly competitive market with zero barriers to entry, profit margins will converge on zero as new entrants capture market share or competitors leave overcrowded markets. Edit: this is classical economic philosophy, not my personal opinion https://en.m.wikipedia.org/wiki/Pro…

This is more like, a gross oversimplification of the first chapter of a freshman intro to economics.

This is to economics what "assume the cow is a perfect sphere moving on a frictionless surface without wind resistance" type of problem is to physics.

In the real world, profit absolutely does not correspond to "taking advantage" or "extracting value through arbitrage".

Re: What I learned selling my company

#43

Post by jahewson »

cj wrote: post #27
aidos wrote: post #20

Earlier quoted context omitted.

Not to diminish your point, but you’ve described the UK housing market where that’s exactly how it works.

Sounds like the US and UK housing markets, as well as startup M&A, suffer from similar problems. In a free market, you should be able to market what you’re selling until the moment it’s officially sold.

That’s not fair though because it takes a few weeks for a broker to close on a mortgage whereas a cash buyer can pay immediately.

Re: What I learned selling my company

#44

Post by tptacek »

cj wrote: post #36
tptacek wrote: post #28

Earlier quoted context omitted.

These are definitionally the most sophisticated buyers and sellers in the entire economy. Organic market norms dictate what the industry standard is; it doesn't make much sense to think about protections. If you're selling, and you want some kind of protection, structure the dealmaking or negotiate the deal to get what you want.

> it doesn't make much sense to think about protections Why? If I’m going to put my business on hold for 3 months to entertain your offer to buy my company, why would it not make sense to make sure the buyer is serious enough to offer something they shouldn’t need to ever pay out if they are serious about their offer? > structure the dealmaking or negotiate the deal to get what you want. You usually have lawyers doin…

Because we assume, reasonably, that businesses are sophisticated enough to navigate these transactions themselves.

Re: What I learned selling my company

#45

Post by jahewson »

ramraj07 wrote: post #31

> Your post-money valuation is a hard floor on your sale price > Punctuated by fielding calls from confused angel investors. Can someone ELIE - explain it like I’m an engineer?

Don’t sell your company for less than your investors have agreed it’s worth.

Re: What I learned selling my company

#46

Post by syndicatedjelly »

101011 wrote: post #40
alberth wrote: post #37

Be profitable. It’s implied when OP says “run a good business”, but as someone who’s been on the acquiring side - it becomes a lot harder to be the advocate to buy a company when it’s losing money. (The business case math gets hard fast, with unprofitable companies & introduces a lot more risk)

Surprisingly, that didn't matter for a lot of years until pretty recently.

It mattered for most years in history except for one particular decade

Re: What I learned selling my company

#47

Post by ramraj07 »

jahewson wrote: post #45
ramraj07 wrote: post #31

> Your post-money valuation is a hard floor on your sale price > Punctuated by fielding calls from confused angel investors. Can someone ELIE - explain it like I’m an engineer?

Don’t sell your company for less than your investors have agreed it’s worth.

I don’t understand how it’s a hard floor though. Is there a contractual limit when you get a funding round?

Re: What I learned selling my company

#48

Post by [deleted] »

dboreham wrote: post #30
zik wrote: post #25

Earlier quoted context omitted.

Coming from Australia the way London house sales work seems like such a complete disaster. It seems like you can make your buy contingent on selling your old house, which creates chains of buys and sells which fail the instant anyone pulls out. I can't imagine how anyone can operate in that environment.

Perhaps different today, but back when I lived in the auld country it was totally different in Scotland (still in the UK, I believe).

[deleted]

Re: What I learned selling my company

#49

Post by fxtentacle »

ramraj07 wrote: post #31

> Your post-money valuation is a hard floor on your sale price > Punctuated by fielding calls from confused angel investors. Can someone ELIE - explain it like I’m an engineer?

If you sell lower than that, you lock in a loss for your investors. They'll probably prefer to keep hoping for a better offer in the future instead.

Re: What I learned selling my company

#50

Post by tptacek »

cj wrote: post #35
mbesto wrote: post #32

Earlier quoted context omitted.

As a seller, not going exclusive is an absolute PITA. Based on anecdotal experience, I'd bet that most of the "50% of signed LOIs" don't actually close because the seller misrepresented themselves. > There’s an extreme power imbalance in favor of acquirers. Buyers do NOT like dead deal fees (it doesn't get paid out of the LP fund), so there is little incentive for them to play games there. So, no, this is not true.

> So, no, this is not true. I don’t think you’ve provided any evidence other than “buyers like to make as much money as possible at others expense” which everyone knows to be true which doesn’t bear much weight on a skewed power balance existing.

Buyers do like to make as much money as possible. That is why they purchase companies. Sellers also want to make as much money as possible. That is why they negotiate. If they can't agree, the transaction doesn't take place, which is usually for the better.
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