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Home » Austin business broker

Maintaining Confidentiality In Your Business Sale

January 13, 2021 by bba12

For business sellers, maintaining confidentiality in your business sale is a crucial part of the sale process. If creditors, competitors, customers, or employees find out about an impending sale, it could adversely affect the business’ momentum and its value. While confidentiality is tricky, it’s less so when the owner works with an experienced, qualified Austin business broker. In this guide, readers can learn which steps to take to keep a business sale confidential.

Use Generic Descriptions

An Austin business broker will advise his or her client against using the business’ name until buyers are qualified and have signed a confidentiality agreement, also known as a Non-Disclosure Agreement (NDA). Businesses should be presented to buyers based on their strength and nature, rather than their names, and responses should be directed to the business broker to main confidentiality. Often, the business broker will also have a targeted list of buyers, which limits the number of people who have any kind of knowledge of the business sale.  If the business is advertised, the business is only advertised in the most generic terms, so that buyers do not know which business underlies the ad.  This step allows the broker to save money and time by following up only with the most qualified prospects.

Execute an NDA

It’s a good idea to have the buyer sign an NDA (non-disclosure agreement) before they begin working with the seller’s business broker. These agreements are rather broad, and they cover how much info can be shared with buyers’ partners, lawyers, accountants, and advisers. Buyers are required to work with the broker rather than going directly to the seller, which offers many benefits as far as confidentiality is concerned.  We also have different NDA’s, depending on whether the buyer is a strategic buyer (this means they are a company), a private equity firm, or high net-worth individual.  Different legal wording in these documents  can protect a seller, in the rare case where the buyer is simply fishing for information.  That being said, the grand, grand majority of our buyers are very serious.  They have no interest in starting a business from scratch.  They want to buy an established business for a reason.  That is, they want to put their skills to use right away.  Usually, these skills mean taking a business from one level to another.  They do not want to spend the two or three years it would take, at minimum, to get a business off the ground with limited to no cash flow during that time.  They would rather take an existing business and scale it to new heights.  Although tire kickers do exist in the marketplace, this rarely happens to our clients.  Our buyers have no simply interest in learning information, just to start a business from scratch.  That is a waste of their time.  They would rather spend that time scaling an existing business.

Pre-Qualify Buyers

An Austin business broker will screen potential buyers as a way of protecting the seller’s confidentiality. The firm has proprietary buyer verification methods, and the team takes the entire process seriously. If a buyer doesn’t have a resume, a LinkedIn profile, an established fund with committed capital, or some verification method, they’re not taken seriously, and they’re not qualified to buy the business.  We do not share any information with these buyers.  We ask the buyer to fill out a buyer profile, which details who the buyer is, where they work, and what kinds of fund they have.  This does a good job of weeding out potential tire kickers.

Learn What to Expect From the Broker

A qualified buyer would prefer for the business’ information to stay private because they like knowing that the broker has taken steps to protect sensitive information. Buyers should be ready to go through our proven process, and if they seem to be in a rush, they’ll likely be eliminated from the buyer pool. While it’s important for the seller to work closely with the broker, it’s vital for buyers as well.  Most of the buyers we work with have been through this process before and will quickly ask us for our NDA.  It’s usually a key sign that they have not been through this process before, if they balk at signing an NDA.  We have a verbal understanding with our sellers: You spend your time running the business while we get the deal done for you.  That’s the understand we have with sellers: You run the business and keep the cash flow going, while we run the deal.  This understanding seems to work well. Business brokers understand that maintaining confidentiality in your business sale is very important and deserves the utmost care.

Meet the Buyer In Person

After the NDA’s been signed and the buyer reviews the Confidential Information Memorandum (CIM), they will often ask for a conference call between Seller, Buyer, and Broker.  Here we get into more detailed questions and answers.  If things progress, the next step in the initial selling process is for the Austin broker to schedule an in-person meeting between the Buyer and Seller. Ideally, such meetings are held via Zoom (during covid) or at the business’s location. In-person meetings at the location, occur after hours, once all employees have left.  Serious buyers will want to see the facilities as part of due diligence, so this meeting checks one of the diligence boxes.  Buyers usually want to get a feeling for the Seller that they can’t get over the phone, so this meeting becomes part of the trust building process that needs to occur between buyer and seller.  Sellers typically take in-person buyers more seriously, and buyers will get the chance to learn whether the seller will help them during the training and transition phase.

The Final Word

As sellers review the steps listed above, they may be nervous about the process, especially if they’ve never gone through it before. An effective Austin business broker will help both parties in a way that keeps confidentiality throughout the entire process. CGK Business Sales has successfully handled many transactions over the years, and the team has an extensive knowledge base on how to successfully market and sell businesses. We know how to run an effective due diligence process to get a deal done.  Plus, we have outstanding legal, banking, and accounting referrals that will help take an opaque M&A process from start to completion.  We will begin by maintaining confidentiality in your business sale. Call today to schedule a consultation or visit the website for more details.

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Filed Under: Confidentiality Tagged With: Austin business broker

When Hiring An Austin Business Broker…

December 6, 2017 by bba12

You’ve worked hard over the years to build a business that would take care of you and your family.  Now, you think it might be time to sell your business.  This is a decision that most business owners in Austin do not take lightly.  They are proud of what they’ve built and would like to see their employees and customers treated well by the next owner.  Most often, the Seller would also like to receive full value and good terms for what they’ve built.  It’s hard building a business.  Unfortunately, it’s easy to mess up the mergers and acquisitions process.

It seems that in these late stages of a nine-year bull market, everyone and anyone thinks that they have the knowledge and know-how to sell businesses in Austin.  It’s easy to “hang a sign”, as they say.  The problem is, most practitioners do not have the education, backgrounds, or experience to do so.  We hear about it from frustrated buyers all the time:  “I think the broker I talked to was 20 years old.”  “I’m not sure they had any financial experience, whatsoever.”  “In order to sign up the deal, the broker gave the seller the most unrealistic expectations, making any kind of deal impossible.”  “I’m not sure the broker did any due diligence, at all, before bringing this to the market.”  “The broker knew nothing about the actual business.”  “The Information Memorandum, if you want to call it that, was full of wrong and useless information.”  “After spending thousands of dollars on due diligence, the cash flow was no where near what was advertised.”  “There was zero chance the bank would underwrite this deal.”  Or even worse, “The broker completely mis-priced the business on the low end.  I got a steal of a deal.”  On and on they go…  So, before you turn your life’s work over to a broker who will get these kinds of reactions from buyers, it’s best to choose wisely.

Why does this happen?  Quite simply, his happens because most people in the business brokerage industry do not have the proper backgrounds to be in mergers and acquisitions.  On Wall St., M&A investment bankers are often the best students, who go to the best schools, who go through rigorous financial training to help make vital decisions for their Fortune 500 clients.  These deals are often multi-billion dollar decisions that can make or break companies, CEO’s, and shareholders.  The stakes are high.  While your company may not be a Fortune 500 company, it is nonetheless just as important to you.  To you, the stakes are just as high, if not higher.

This is why it is vital to understand the backgrounds of those you might hire to sell your business.  Reading through the websites or LinkedIn profiles of most business brokers in Austin will likely sound impressive.  They want you to trust them.  They are putting their best foot forward.  They might have good corporate backgrounds at Fortune 500 companies.  They might have built a business and sold it.  They’ve been in “your shoes”, they will say, and are now selling businesses.  They might have even done M&A at a corporation as a buyer.  Unfortunately, these are the kinds of backgrounds that lead to the aforementioned reactions from a couple of paragraphs ago.

So who should you hire?  Before you make that decision, think about who the potential buyers for your company might be.  From our perspective, buyers tend to be in three general categories.  Ultra-sophisticated private equity or venture capital buyers, who have spent an entire career learning how to buy, run, and sell businesses.  These are your Ivy League or equivalent MBA’s and Goldman Sachs alums.  Think “Shark Tank”, but better.  There are also high-net worth, individual buyers who have built a great deal of capital by being really good at what they do.  Even if they, themselves, do not have M&A experience, they tend to be very sharp, and hire those that do, as advisors.  Finally, there are strategic or corporate buyers.  These are who most sellers at this level believe will buy their business.  Often, though, the smaller corporate buyers do not see the value in M&A.  These smaller corporate buyers are generally founders, who have built their businesses from scratch, and can’t understand paying millions of dollars for what they believe they can accomplish with a few more advertising dollars.  These are often your best fit, if they truly “get it”, but they usually are few and far between because they are unwilling to pay market prices.  Finally, that leaves us with larger corporate buyers.  We often hear about “Public Company A or B” that is going to be interested in my small business.  That’s exactly the problem.  If your business can’t move the needle, in terms of revenue or earnings, or provide some real, unique niche to a public company, then chances are, they are not going to be interested.  In the event that they are interested, we will likely be dealing with someone sophisticated at the firm, who is out for a good deal.

This is why we feel very strongly that we must be one of your calls, if you are truly interested in getting the best deal possible. We get good deals, in both price and terms, for your Austin business.  Remember, every buyer wants a good deal.  A high, headline sales price is worthless to you as a Seller, if you never receive the money or get jilted by other terms or deal structures.  There are some very sophisticated buyers in the marketplace.  Some will have backgrounds that are so much better than their business broker counterparts, that they are going to run circles around them during the deal process.  Unfortunately, some sophisticated buyers will try to rob you blind.  Most business brokers and smaller M&A advisors won’t even realize their mistakes.  The Seller, the broker, and their attorney believe they’ve gotten a good deal but they haven’t.  Your broker might have just squandered millions of dollars, in an instant, due to their lack of sophistication and M&A know-how.  But wait, you say, the broker I just talked to has been in business for 20 years and sold hundreds of businesses?  Have you ever heard the saying, “They don’t know, what they don’t know”?  We consistently sell businesses that other business brokers in Austin could not.

We run a different kind of process here at CGK Business Sales.  We get the best prices and terms because of our differentiated, proprietary process.  We reach buyers that other brokers simply don’t have access to or were too lazy to contact.  We have the types of education, backgrounds, and financial training to go to-to-toe with the most sophisticated buyers.  Put us to work for you.  Get the deal you deserve.  It’s your life’s work.  Protect it.  Call us at 512-900-3770.

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Filed Under: Uncategorized Tagged With: Austin business broker, Austin business brokers, business broker, business brokers

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Contact Us

CGK Business Sales

401 Congress Ave

Austin, TX 78701

phone: (512) 900-3770

website: https://businessbrokersaustin.com

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