Sell-Side Behind-the-Scenes: Preparing a Company For an Acquisition Part 2

Selling a business is always challenging. Finding the right buyer, negotiating a fair price, and preserving the business for sale takes time and effort, and there are plenty of potential pitfalls that can derail the entire process along the way. 

This interview is part two of our M&A Science Podcast interview with Frederic Lebourg, CEO & Managing Director at Redlands Farm Holding, Inc. During this interview, he discusses how to prepare a company for an acquisition. 

"There's no point in creating anxieties if you yourself don't know if the deal is going anywhere." - Frederic Lebourg

How to Prevent Disruption

Sellers can never anticipate the buyer's every demand during the diligence process, no matter how much preparation they do. As a result, there may be unexpected terms that could be hard to comply with or disrupt the entire business.

At the beginning, keep a potential deal a secret until it's highly likely to push through. Telling people too early will create unnecessary anxiety and will affect people's performance. 

Backdoor-Buyer Due Diligence 

Before deciding whether to sell the business to the interested party, perform backdoor-buyer due diligence. Just because the buyer is famous or a big name doesn't mean the deal will be a good experience for everyone. One of the most significant parts of seller preparation is investigating and finding out more about the potential buyer. 

1. What is the company all about?
2. What is their corporate culture?
3. How do they handle employees?
4. What does their recent acquisition look like?

The goal is to identify if the buyer is a good fit for the company and understand how to best prepare the employees for the forthcoming transition. 

Handling employees

Making employees feel comfortable about the transaction should be a top priority. Sellers should always remember that until the deal is closed, the buyer can still back out of the transaction. If the buyer does back out, it can leave employees feeling mistreated. 

Communicate the positive sides of the deal and be as upfront as possible when the right time comes. If the employees feel the acquisition will be detrimental to everyone, they can internally sabotage the business to derail the transaction. 

But regardless of all communication plans, financial incentives are still the best way to motivate people to accept the deal and cooperate. Employees know that the owner will receive huge amounts of money from the transaction and will feel betrayed if they are neglected.

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