December 22, 2008, 4:00 pm
Seller's remorse
Entrepreneur Scott Wainner nearly lost his company, ResellerRatings – and then got it back. Do you have tips on selling a company?
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As an investment banker who specializes in selling middle market privately held companies, we see this happen every week. Entrepreneurs think that they can do everything ( that is what makes them good entrepreneurs)however, these mistakes are exactly what we see when they get contacted about selling and are unfamiliar with the specifics details thatcan cause exactly these problems.
In almost every case, one buyer is NO buyer, (we usually get between 5 and 7 LOI's per deal) you never take 50% in an earnout (we strive for between 66 and 75% cash and the balance in an earnout)with put and call provisions so if a buyer does not follow through or fails to devote marketing dollars to promote your product or service, or simply shelves your product in favor of what they already have (an effective freeze out)you get the option of buying back the technology, the service, or even the entire company for a stipulated very low price.
In your solution you stated one of the most obvious points when you said, Now you have an excellent Attorney. In all of our dealings if the client is not represented by good, experienced M&A counsel (we interview all attorneys before engaging a client as a majority of our Managing Partners are trained M&A Attorneys)then we either refuse to take them on as clients ( and we turn down 6 out of 10 deals we see) We will always provide a list of acceptable, qualified, experienced law firms and the potential client is encouraged to interview all of them to make their decision.
While there are literally hundreds of other things to consider in every deal,
all in all you learned a valuable (but unfortunately a very expensive)lesson, however, it could have been prevented with quality advice as soon as you received that first contact about selling your company. It is never too early to speak with an experienced Investment Banking firm who specializes in Mergers & Acquisitions. They can prepare you and your Company so when the time arrives you will be in the best position possible to attract more and better offers.
Best of luck this time and congratulations on buying back your Company. Now focus on re-building it and making your dreams come true.
RM Esecson
Senior Managing Director
Blackbridge Partners, LLC
Boston, MA
http://www.blackbridgepartners.com