"Don't even think of shopping your company,"booms the voice from the speakerphone. "If you're shopping it, I have no interest in talking further."
That message came across loud and clear to the NAPL member-client in my office, an owner of a once-successful-but-now-treading-water printing company. The first two discussions between the client and the potential buyer had gone well. But now came this stern admonition from the potential buyer that he would walk away if the client was out there talking to other suitors.
What should the client do?
First, let's assess the relative bargaining positions of the client and potential buyer. The buyer is looking for sales to "tuck into" his existing infrastructure----he has no interest in taking on the client's debt-laden balance sheet. The client is looking for a graceful exit from ownership and for an opportunity to participate in the revenue from his customers going forward. Lots of buyers are looking for sales; not as many owners selling to "tuck in" acquirers as you'd think. The client selling clearly has the upper hand here.
Second, what's wrong with shopping the company? From the seller's point of view, nothing. Before signing on the dotted line, wouldn't the owner want to know he got the best deal he could? Doesn't he owe it to his family (and his creditors) to vet out all reasonable opportunities? From the buyer's point of view, the seller shopping has negative connotations of spinning his wheels on something that is going to get away in the seller's over-optimism of "price" and "structure".
Third, in my experience, buyers who use the "don't even think of shopping it" argument tend to be sophisticated, aggressive, and shrewd. Some would call them "vultures", but the guy on the phone ordering my client to not talk to anyone else is known to pay a decent price, so he escapes the "bottom feeder" tag. But clearly, the "don't even think of shopping" argument, combined with the tone of voice, suggests the seller better be armed and ready for serious M&A.
All in all, my client in this case is willing to accept the warning, and he is giving this potential buyer a window of opportunity to explore a deal.
Stay tuned, we'll see what happens in future blog posts.
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