An offer to buy your business can be exciting, especially after years of building it. But the headline price tells only part of the story. Before giving a buyer a positive response, understand what is being acquired, how the money will be paid and what you will be expected to do afterwards. These points shape the commercial outcome as much as the number on the first page.
Clarify what the price includes
Is the proposal for shares or selected business assets? Does the price assume particular stock levels, working capital or debt repayment? What happens to surplus cash, equipment finance and shareholder loans? A price that looks attractive can produce a different return once those assumptions are applied. Ask your accountant to reconcile the offer to the amount you might actually receive.
For example, two hypothetical offers of the same amount may be very different. One may provide most of the money at completion. Another may defer a substantial portion and make the balance dependent on future performance. Comparing them requires more than ranking the headline values. Timing, conditions and the practical likelihood of payment all belong in the comparison.
Understand the buyer's conditions
Ask what the buyer still needs to investigate or approve. Is finance arranged? Is investment committee approval outstanding? Are customer consents or third-party arrangements important to the proposal? A conditional offer is a starting point for discussion, and its usefulness depends on whether the conditions are clearly identified and capable of being satisfied within the proposed timetable.
Exclusivity deserves particular attention. If you are being asked to stop speaking with other buyers, discuss the duration, the work the buyer will complete during that period and how progress will be monitored. Ask your lawyer to explain the effect of any exclusivity, confidentiality, costs or other binding provisions before you agree to them.
Define your role after completion
Buyers often want continued access to the owner's knowledge and relationships. Sellers may assume that a short handover will be sufficient. Discuss the expected hours, responsibilities, location, remuneration and end date. If future payments depend on performance, consider whether your continuing role gives you any meaningful influence over the factors that determine those payments.
Also think about life after the sale. Are you planning to retire, start another business or remain involved in the industry? Those plans should be raised with your advisers before commercial commitments narrow your options. A negotiation that ignores your personal priorities can produce an agreement that works financially but is difficult to live with.
Prepare a commercial response
Before responding, write down your essential terms, acceptable trade-offs and questions requiring advice. Have your accountant consider the numbers and tax consequences, and your lawyer assess the proposed commitments. A transaction adviser can help coordinate those inputs and negotiate the outstanding commercial points with the buyer.
You do not need every detail resolved before discussions continue. You do need a shared understanding of the major assumptions. If you have received an offer and want help working through the commercial terms, call Ardian Law on 02 8111 7700.