4 traps to watch out in potential acquirers

By siliconindia   |   Friday, 05 November 2010, 12:54 IST
Printer Print Email Email
Bangalore: Potential acquirers can be a crafty bunch when they start poking around your business. John Warrillow, who recently transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model, says potential acquirers can pose traps to which the owner should watch out for while selling the company, as quoted in Inc.com. Most professional acquirers will have a checklist of questions they need answered before buying your company such as the terms and expiry of lease, consistent and up to date contract with customers and employees, any ideas, products and processes protected by patent or trademark, status of software license, loan covenants on your credit agreements, presence of any late payers or deadbeat customers, pending litigation etc. They will be also keen in trying to determine just how integral you are personally to the success of your business. These are the four traps which Warrillow suggests the owners to stay away from while selling the company: 1. Playing with calendars - By asking to make a last-minute change to your meeting time, an acquirer gets clues as to how occupied you are personally in customer service. If you can't lodge the change request, the acquirer may explore to find out why and try to determine what part of the business is so reliant on you that you have to be there. 2. Scaling vision imparity of the business - An acquirer may ask you to explicate your vision for the business, which is a question to answer with caution and preparedness. However, he or she may ask the same question of your employees and key managers. If your staff members proffer inconsistent answers, the acquirer may take it as a sign that the future of the business is in your head. 3. checking with your customers - A potential acquirer may ask to talk to some of your customers. Though we assume that they will question the passionate customers to obtain good answers, the customers may be asked a question like "Why do you do business with these guys?" The acquirer is trying to figure out where your customers' loyalties lie. If your customers answer by recounting the benefits of your product, service or company in general, that's good. If they respond by explaining how much they like you personally, that's bad. 4. Mystery shopping - Acquirers often conduct their first bit of research behind your back before you even know they are interested in buying your business. They may do a thorough background check by acting as a customer, visit your website or come into your company to comprehend what it feels like to be one of your customers. Make sure the experience your company offers a stranger is tight and consistent, and try to avoid personally being involved in finding or serving brand-new customers. If any potential acquirers see you personally as the key to wooing new customers, they'll be concerned business will dry up when you leave.