Selling your SME is like selling a part of you. You’ve worked for years to build it into a success and you want it to thrive in the future. But if you’re retiring, cashing in, or just want to move on to a new venture, how can you be certain that the companies and investors who claim to be interested in acquiring your firm are really serious, will give you a good price and have the company’s best interests at heart?

Making sure they mean it

I founded Acquis with my fellow director Rob Whorrod after three decades of developing and selling manufacturing SMEs. Our experience has allowed us to get a real sense of the actions, words and even facial expressions that can tell you what a buyer for your business has in mind. Nowhere is this truer than judging whether they are committed to the purchase.

If a company from your sector says they may be interested in acquiring your business, be very wary if they send over their engineers or operations team to have a look round before you have been scrutinised by their financial experts. They may just be trying to steal your ideas. In fact, it’s worth limiting such visits to accountants, CFOs and the like, especially in the initial stages.

If a prospective buyer from a financial organisation says they are keen but are slow to respond to emails or requests for meetings, you may just be one of many businesses they are looking at – keeping their options open. Don’t pin your hopes on them. The more interested they are, generally the faster they’ll respond and the more probing their questions and analysis.

But if a private equity firm, a trade buyer or any other supposedly interested party is taking time with due diligence, going through all attributes of the business thoroughly, it may be a little painful, but it’s positive. They wouldn’t be doing it if they were half hearted. The same can be true if someone is keen to point out issues they see in your operations and ask you how you’d tackle them. This is serious interest.

If you think a party isn’t really genuine, don’t be afraid to ask them about their intentions and inform them that you have other possible buyers. Request confirmation of genuine interest – perhaps a letter or other formal expression of interest, stating that the business at the values discussed is genuinely appealing, subject to successful due diligence. Judge their reaction for sincerity.

Driving a good financial deal

Some parties are likely to express interest in your business, tempered with an unwillingness to pay a lot for it. It may not seem like it, but they may well be very interested in it and are judging your response. Don’t lose your nerve in negotiations – the real value range of your business can be established with advisors. Ask what the possible buyer thinking and tell them it’s a non-starter for now, and you’ll get back to them when others have made offers.

Buyers will often use debt and refinancing to cover part of the acquisition – it is usual for an acquirer to assess the asset values of plant and equipment. This should not be taken as derogatory – they are finding ways of funding the acquisition without injecting all the cash themselves.

Depending on the nature of your business, a potential acquirer may ask questions regarding staff and attitudes to relocation. If your business is fairly simple to integrate into their existing facilities, this can be used as a tool to hold firm on your price expectation. If they don’t need to retain the overheads of your business because they have the infrastructure in place already to integrate yours into theirs, that’s a potential big saving.

Some interested parties may allude to wanting only elements of your business – certain products or services aren’t of interest. You shouldn’t accept an offer for the whole lot at a reduced price or walk away from negotiations. Suggest they buy the whole business at a fair price, and you could buy certain elements back, or they can sell unwanted elements on to a third party – potentially making a quick return.

Safeguarding your staff and ethos

As an SME owner, you may just want to take the financial rewards of selling a business you’ve worked so hard to develop. But many people are keen to ensure staff don’t lose their jobs under new ownership or that strong company values aren’t abandoned.

Of course, a new owner can make promises about the future of the business, without sticking to them. But a buyer who is transparent about their strategic goals for the firm or is very praiseworthy of the company culture is probably more likely to keep the infrastructure running along your lines, perhaps with an agreed period of transition. Private equity organisations in particular are unlikely to want to lose key staff or infrastructure – they probably want to grow the business organically on a plan spanning several years, giving the staff a degree of security.

Ultimately, judging the mind or a potential buyer takes intuition coupled with experience. It’s always wise to seek advice from a fellow business owner who’s been there before or work with a mergers and acquisition advisor.