Already have a buyer? How to protect value between offer and completion
Receiving an offer for your business can feel like the defining moment in a sale. A number is on the table and, understandably, attention turns to whether it is acceptable. But an offer is not the same as proceeds in the bank, and the price you agreed isn’t necessarily the value you’ll receive. Protecting value in a business sale is largely what happens next, in the months between that offer and completion.
Between an initial offer and completion, a buyer will test the assumptions behind its valuation. Due diligence will examine financial performance, customer concentration, forecasts, contracts, working capital and much else besides. The legal and commercial structure of the consideration will also be negotiated. This is where value can leak.
A £20m headline valuation does not automatically mean that shareholders receive £20m on completion.
The treatment of cash and debt, working capital requirements, deferred consideration, earn-outs and price adjustments can all change the eventual economic outcome.
None of this means the buyer is behaving unreasonably. Sophisticated buyers are doing what they should do: understanding risk and ensuring that the price and structure reflect what they believe they are acquiring.
The challenge for an unadvised seller is that the buyer may have done this many times before.
Click here to download our 15-point Deal Leakage checklist
A business sale can change after the offer
Once you have agreed to progress with one buyer, the nature of the negotiation changes. You no longer have a live field of alternatives creating competitive tension. Both parties want the deal to work, but the buyer has a detailed diligence process to complete and will naturally test the assumptions behind its offer.
Requests for information can become more frequent. A question about a forecast can develop into a wider debate about maintainable EBITDA. A discussion about normal working capital can become a proposal that changes the amount payable at completion. An earn-out or deferred consideration structure can move more risk back onto the seller.
Each point may sound manageable in isolation. The danger is rarely one dramatic concession. More often, it is a series of smaller decisions that gradually move the economics away from the deal the owner believed they had agreed.
That is why the period after an offer can require just as much judgement as finding the buyer in the first place.
Three signs you may need sell-side deal support
1. The economics are beginning to move: Perhaps the buyer is proposing changes to price, working capital, cash, debt, consideration structure or forecast assumptions. The important question is not simply whether a request is normal, but whether it is commercially justified and what it means in practice. An apparently modest adjustment can have a much larger effect on shareholder proceeds than first appears.
2. Due diligence is taking over the business: A buyer’s diligence requests may be entirely legitimate, but answering them properly takes time, judgement and coordination. Management still needs to run the business, protect performance and retain focus. Without a clear process, information can be shared without the right context or explanation. Uncertainty can then become leverage for the buyer.
3. Momentum has gone. Timetables slip and the same questions return. Decisions wait for someone else to make them. The owner becomes concerned about losing the buyer and begins to make concessions simply to keep the process moving.
This is often the point at which a calm, experienced adviser can make a material difference – helping establish what is genuinely important, what is standard, and what needs to be challenged.
Protecting value in a business sale is about more than price
A successful business sale is not only about achieving an attractive headline valuation. It is also about understanding the terms attached to it and protecting the value, certainty and control that matter to the shareholders.
That may mean reviewing the buyer’s financial analysis, clarifying the presentation of trading performance, preparing a more robust response to diligence, supporting negotiations or helping the parties regain momentum. It can also mean giving the owner a second opinion: is this a normal request? Is the buyer’s interpretation fair? What are the alternatives? Is the deal still proceeding on terms that make sense?
The answer will depend on the circumstances. But these questions are much easier to address before they become embedded in the transaction.
It may not be too late to appoint an adviser
If you already have a buyer, you do not necessarily need to restart the whole sale process. You may simply need experienced sell-side support around the part of the transaction that is creating difficulty. A focused intervention can help an owner, CFO and existing advisory team understand the position, protect the seller’s commercial interests and move towards completion with greater clarity.
Your buyer will have advisers. Make sure you do too.
If the economics are beginning to move, diligence is becoming difficult or the deal has lost momentum, bring us the blockage.