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Price Isn't Everything

John Kielich, Managing Director of Kolb+Co. M&A Advisers   email | bio
LeAnne Foster, Senior Associate for Kolb+Co. M&A Advisers   email
August 2010

"I want the highest price you can get me for my business." Sometimes this is the most important issue to the seller. However, other times (most times) we work with buyers and sellers who are proud of their companies and wish to make sure (as much as possible) that they are selling to a buyer who will take good care of their customers and retain their employees. These sellers have often invested in and cared for their employees in such a manner that the employees are extremely loyal and take pride in working at that company. Buyers can quickly sense good culture as they tour a company -- most recognize that it isn't something that can be manufactured, and they often see this as a positive. Business isn't all financial statements and cash flow - it is also personalities, environment, and culture.

Earlier this year, we represented a seller who turned down the highest monetary offer that he received. He chose to sell to a company based on its reputation of not making significant changes to its acquisition targets. This owner had put in a tremendous amount of time, energy and sweat equity in to creating a business he was deservedly proud of. The opportunity to keep that culture in place and have his employees treated well was worth more to him then the extra dollars he would gain. It is truly a pleasure to work with these clients.

A seller of a business should consider four constituencies.

• Shareholders: Are you all on the same page in terms of timing, pricing and priorities?
   
• Employees: Why are they loyal to your company? Are those things going to remain once you've sold the company?
   
• Customers: Who maintains key relationships? What are your differentiators? Are either of these going to change with the sale?
   
• Community (the town or city you are located in): Does the community value your business? Does the buyer value and support the community like you do?

The weight given to these will vary in every transaction, but each usually plays a role in the transaction. This is particularly true in the sale of a family business. The owner has usually spent many years building a reputation as a quality company in the community and treats the employees as family. As the example above shows, the sale of a business does not have to mean turning your back on everything you have built, especially your reputation.

Go through the exercise of defining your priorities for your sale and make sure your advisers understand your goals. This is key to successfully crafting a transaction that will provide peace of mind regarding the company you are selling or buying.