If you are looking to exit your business quickly, selling to a competitor might seem a logical solution and in fact, there could be a number of advantages; In addition to the possibility of a rapid transaction, your competitor will know the ins and outs of your business, resulting in a smoother transition. Their experience will also make securing financing to buy your business much easier. Additionally, because your competitor can turn a profit faster, he might be willing to pay more for your business.
Of course, there are two sides to every coin. Just like there are pros to selling your business to a competitor, there are also some cons or disadvantages. First, it can be emotional when considering selling your business to a competitor. Try, as much as possible, to set aside your emotions so that you are not compelled to sell if the price and situation are not right. Using the support of an M&A advisor is a good solution as he will be objective advising you based on the facts.
Before selling to a competitor, you will need to make plans to keep the business going during the process. As important, you will want to be sure of the potential buyer’s intentions. Take the time to talk with him and ask the right questions. Will the buyer keep the business going or are they only looking to buy your assets? What kind of relationship will they have with your current customers? How will you protect your business information or business secrets during the purchase?
Before you decide to sell your business to a competitor, make sure that you’ve done a proper valuation and know exactly how much your business is worth. Don’t be afraid to negotiate strongly and walk away if you believe that your business reputation is at risk.
Call Mergex for information on our advisory services.