There are many ways to offer a business for sale to the market. Many business owners will attempt to sell their business by advertising their business or by approaching some of their employees or competitors to see if they have an interest in buying the business. In our experience, these methods are not always ideal for selling a business, with an expression of interest sale campaign instead often producing better sale outcomes for business sellers. Herein, we explain what an expression of interest sale process is, and why it can be beneficial for achieving a great outcome for the sale of your business.
What is an Expression of Interest Campaign?
An expression of interest campaign for the sale of a business involves a number of potential buyers being invited to make an offer to acquire a business. The offer is often requested by a set deadline date. Further, the offer is required to be made based on the disclosure of a pre-prepared set of information provided to the interested parties following their agreement to confidentiality terms. Lastly, the offer must normally conform to set criteria which is dictated to potential acquirers of the business at the outset. In this sense, an expression of interest campaign is similar to an auction for the sale of your business.
Why are Expression of Interest Processes Beneficial to Achieving a Good Business Sale?
There are a number of reasons why expression of interest processes can work well to achieve an optimum sale outcome for you when selling your business, such as:
- Managing confidentiality: Expression of interest processes normally entail a broker directly approaching specific strategic buyers for your business and seeking agreement to confidentiality terms, as well as gauging their initial interest prior to releasing the identity of your business and any of its operational information. When compared to other business sales strategies like advertising, this approach ensures that only the parties who you are comfortable with approaching, who are qualified, vetted and who agree to confidentiality terms will receive information regarding your business and its sale.
- Negotiating bespoke terms: During many traditional business sale processes, it is difficult to demand specific terms from buyers when offering your business to the market. However, as part of an expression of interest campaign, doing so is quite common. Let’s assume for example that you wished to sell the retail arm of your business and retain its wholesale division whilst continuing to supply products to the retail business – as part of an expression of interest process you could ask potential buyers to submit their desired terms for an ongoing supply agreement with your wholesale business, thus enabling you to negotiate on both the price and terms of the sale, together with the terms of an ongoing supply agreement in the same transaction, therefore allowing you to assess the terms of each component of the deal concurrently.
- Generating competitive tension: Too often when offering your business for sale through advertising, or by making ad-hoc approaches to various potential buyers, minimal competitive tension is generated. This occurs as each buyer is normally negotiated with separately, meaning as a seller it is difficult to gain an overall view of the market response save for through the benefit of hindsight. In expression of interest campaigns however, it is often the case that acquirers will be requested to make an offer by a set deadline date, thus ensuring that you can negotiate will all buyers at the same time, and play buyers off against one another in order to generate an optimum sale outcome.
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Groves & Partners are experts in negotiating the sale of companies and businesses for our clients. As brokers and advisors on the sale of businesses and companies, we solely act for higher value companies and are particularly experienced in conducting expression of interest campaigns to achieve optimum outcomes for the sale of our client’s businesses.