The initial rush of inquiries after listing your business for sale can be exhilarating. Hooray, people want to buy my business! However, before sounding the trumpets, there are a few things that NEED to be done to protect your confidentiality and your time. Simply curious, and sometimes ill intended, parties can suck up a lot of time, leak confidential details, or may even represent a competitor that is seeking information. On top of that, not all interested parties will have the financial strength and resources to buy the business. Working with a trained, certified M&A Advisor is the best way to avoid any headaches and will ensure only qualified candidates reach your doorstep.
What does prescreening buyers entail?
Prescreening buyers is best achieved by requiring the interested party to complete both a non-disclosure agreement and a buyer financial statement, then following up as needed with a phone interview or some basic research on the person or company. For individual buyers, the buyer financial statement should request basic personal and financial information to gage their capacity to debt finance an acquisition. Most parties who have serious interest in a business are willing to provide such information. Performing searches on Google or Linkedin often yields valuable information on who these people are. If it is a company, then searching relevant information on Dun & Bradstreet is useful as well. If the buyer is a Private Equity Group (PEG), then one needs to determine what control the firm has over the capital to be invested. Is it “committed” capital or capital that is only “on-call”. What kind of Private Equity Group is it? Is it a “search fund” or a “sponsored fund”. The answers to these questions may dictate how much and at what level information should be disclosed. Remember, maintaining confidentiality throughout the process is critical to ensuring you can keep running your business successfully right up until the end, and there is no need to disclose more information than is absolutely necessary.