More often than not, the first two questions HNH Group’s Corporate Finance team are asked at the outset of a sales process are: how much will we get and how much will it cost.
The natural tendency is to seek more of the former and less of the latter, but we find that this can lead to sub-optimal decisions being made. In our experience, it is frequently the case that the highest offer is not necessarily the best offer. Saying this to prospective clients often results in a raised eyebrow or two and indeed it does sound odd to suggest that you shouldn’t automatically accept the best price, but there are so many other variables to consider, over and above the valuation.
No matter how attractive an offer looks on paper, ultimately it means nothing until the SPA (Sale and Purchase Agreement) has been signed and the funds have transferred. So, before rushing to accept the highest bid and grant exclusivity, it is critical to consider the execution risk, i.e., how likely is it that the offer in question can be successfully transacted.
The worst case scenario for any business owner is to find that, after spending months in a process, incurring legal and professional costs and taking time away from the day-to-day management of the business, there is either no longer a viable deal, or that the goalposts have been moved so significantly the final form of the deal barely resembles that set out in the indicative offer letter. It is therefore vital to objectively assess each offer and, through addressing the questions outlined above, ensure that the best offer is picked, not necessarily the highest one.
An experienced M&A (Mergers and Acquisitions) team is there, not only to maximise value, but also to ensure the structure is appropriate, execution risk is minimised and that business interruption is kept to a minimum.
HNH Group offer a full range of corporate finance advisory services provided by an experienced team with backgrounds in private equity, banking, due diligence and lead advisory. For more information or assistance, send your contact details via the form below.