When you have a Business for Sale, or are using a Business Broker or M&A Intermediary to sell your business, the ultimate scenario for you is what is called a “controlled auction”.
Unlike a piece of art, the way to get a premium price for your business is not through a typical “open cry” type auction. Nor is it helpful in most situations to simply put a sign out front and announce to the world your business is for sale, and then play buyer against buyer. The fact is because each middle market business is so unique, and the closing process so long, even though you might think you are getting a premium price most of the time you are not.
Many of the serious, and qualified buyers will not even participate in an ”open cry” auction process, so from the start you are eliminating most of your best buyers. In addition, people will not pay a premium until they have had time to really look into your company. Finally, even though you start with a good price, you might get burned during due diligence when that buyer walks away, and you are forced to put the business back on the market with a “black eye” since you were unable to close the deal with the first buyer.
Businesses get a premium when they run a controlled auction for their company. A “controlled auction” is still an auction, and you still use multiple buyers to boost up the asking price. But, instead of a free for all, this process is controlled by an intermediary.
The intermediary plays many roles in this process. One of the most important is with the preparation of the business. Before anyone knows the business is for sale, you must create some type of dealbook or offering memorandum that details the business. This document is only shown to buyers that appear to be qualified, and have signed an NDA. It is so important becuase it puts all the buyers on the same playing field, giving them what they need to make a serious offer on the business in a short amount of time. Otherwise, you might have one offer in hand that would like an answer, and yet the second interested party is still waiting on information from you before they can make a bid.
Secondly, it is the intermediary’s role to narrow the field of buyers, and get the best offer from each of them. This is not accomplished by telling each buyer what the other is willing to pay in the hopes of getting them to outbid that buyer. This will just scare the qualified buyers away. Instead, the intermediary makes buyers aware that other buyer’s exist. It is human nature to place a higher value on an object just because someone else would like it. In addition, no one likes to lose. Therefore an intermediary should make sure that each buyer knows this is a competitive process, and that there are other interested parties.
A properly run controlled auction can be a business seller’s best friend.
Princeton Capital Strategies, llc.
Value beyone a typical business broker
Mergers & Acquisitions (M & A)is a unique business opportunity to sell their business, but because most business owners only sell a business once in their careers, they learn too late how to work with business brokers, business valuation firms, and investment banks. Princeton Capital is an M&A intermediary in the CT NY area that provides value beyond that of a typical business broker. Princeton Capital can bring more qualified buyers to a business owner in less time, because our methods come from world-class investment banks instead of typical business brokers. 
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