Preliminary talks for the possible sale of your print and graphic communications business are promising. The potential buyer has not been turned off by your large debt load and the unprofitable results of 2009. The process is going smoothly and you want to make this work.
Then the buyer pop a leading question: "You don't mind if I speak with your bank, do you?"
You pause. Fork in the road time.
If you refuse, does the buyer walk away, thinking you are uncooperative or hiding something? And besides, he/she kind of expected getting the go-ahead without any hesitation. You are inclined to say "sure", but you first check with NAPL M&A advisors.
Here's what we recommend in nearly all cases: DO NOT LET THE BUYER NEGOTIATE DIRECTLY WITH YOUR BANK.
Why?
Because nothing good can happen.
Huh?
The bank wants to get its debt paid. That is the only objective for the bank. If the value of the business is greater than the value of the bank debt, that doesn't matter. The bank will push you to take the buyer's offer that, by coincidence, is a penny more than the bank payoff figure. The bank doesn't care if suppliers are holding the bag, or if leasing companies are hung out to dry, or, for that matter, if shareholders including you get nothing.
The buyer wants the lowest price and the best deal. If the buyer can get away with satisfying the bank but not paying a penny more than it takes to get a lien release, well, that's good for the buyer. Other stakeholders can just pound sand.
So, the introduction of the buyer to your bank has really made a difference. Your bank is paid; the buyer gets a great deal.
What about you?
Yeah, what about you. By the time the bank and the buyer haggle over the price and terms of the transaction, you've become irrelevant. The bank will hammer you into caving in on any attempt to delay the process while you scramble to negotiate your deal. The buyer will tell you what you want to hear until the bank gets you to capitulate. Then the buyer blames that darn bank.
Bank is paid; buyer gets a deal. You get.....well, you know the 4 letter word I'm thinking of.
So, remember: DO NOT LET THE BUYER NEGOTIATE DIRECTLY WITH YOUR BANK.
There are tactics for how you, as the owner, can manage and control this process without alienating the buyer or frustrating the bank. For those insights, you know where to find me and the NAPL M&A advisory team!
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