#253: What Should I Do If I Get an Unsolicited Offer to Buy My Company?

Many entrepreneurs experience extreme anxiety whenever they think about selling their businesses—to the point where they won’t even pick up the phone or answer an email from a potential buyer. Have you ever stopped to think about why this is? On today’s show, my business partner here at Arkona, Pat Hobby, and I talk about ways to mitigate this anxiety through intelligent and intentional planning. We also discuss why you should be prepared for an out-of-the-blue offer—even when you’re not considering selling—since potential buyers are reaching out to business owners with increasing frequency. Do you want to miss your multimillion-dollar deal? Of course not. But if you have no plan, you’re not going to get what you want out of an unsolicited offer (or even a solicited one!). This isn’t an episode you want to miss if you’ve ever wondered what you need to know to be ready for any outcome, or even if you just want to give your future more choices.

 

What You Will Learn In Today's Podcast Interview

Why private equity is raising so much money right now
Where investors are looking to commit their capital and how you can capitalize on that
What a prepared business owner can do with an out-of-the-blue offer
The rise of platform companies becoming involved in M&A
When it’s better to buy instead of building from the ground up
The spread between intrinsic value and transaction value
Why you need to layer in a buyer’s intention when thinking about selling
What common risks you need to address to strengthen your valuation
The value of understanding what really drives you, especially in terms of life planning
Planning creates choices and decreases anxiety
Why you do need to build a support network of trusted, knowledgeable advisors before you sign away your company
What seller’s favor is and how to protect yourself from it
How net proceeds factors into what ends up in your bank account when selling
When to disclose your financials to potential buyers and what to include
Why an LOI can gaslight you into a poorer deal than expected

 
Are You Growing The Value of Your Business

Take The 2-Minute Assessment To Get Your Intentional Growth Score™ And 1-Page Vision Board.

Are your company's current initiatives intentionally designed to increase the value of the business?
Do you know what you want from your business long term and why?
Do you know what your company is worth?
Do you know the differences between Management, Family Transitions, PE Firms, ESOPs and Strategic Buyers?
Does the business have a written strategic plan on how to achieve the desired normalized EBITDA and valuation?

 
About the Guest:

Pat Hobby started his career as an auditor at EY and over the years held various finance positions before launching his own outsourced CFO services company. As one of his clients continued to grow and needed more assistance, he joined the company full-time for more than 20 years. He helped the company grow significantly, do acquisitions and eventually sell it to the employees via an ESOP. Two-and-a-half years later, he led the sale of the company to a PE firm—with tremendous benefit to the employees. Since then, Pat helped co-found Arkona to help change how owners grow and exit their businesses.

 
Quotes:

06:00  - “There’s a lot of money looking for a place to get a return.” – Pat Hobby

06:43 - “Right now, in the private equity world,

Many entrepreneurs experience extreme anxiety whenever they think about selling their businesses—to the point where they won’t even pick up the phone or answer an email from a potential buyer. Have you ever stopped to think about why this is? On today’s show, my business partner here at Arkona, Pat Hobby, and I talk about ways to mitigate this anxiety through intelligent and intentional planning. We also discuss why you should be prepared for an out-of-the-blue offer—even when you’re not considering selling—since potential buyers are reaching out to business owners with increasing frequency. Do you want to miss your multimillion-dollar deal? Of course not. But if you have no plan, you’re not going to get what you want out of an unsolicited offer (or even a solicited one!). This isn’t an episode you want to miss if you’ve ever wondered what you need to know to be ready for any outcome, or even if you just want to give your future more choices.

 

What You Will Learn In Today's Podcast Interview

Why private equity is raising so much money right now
Where investors are looking to commit their capital and how you can capitalize on that
What a prepared business owner can do with an out-of-the-blue offer
The rise of platform companies becoming involved in M&A
When it’s better to buy instead of building from the ground up
The spread between intrinsic value and transaction value
Why you need to layer in a buyer’s intention when thinking about selling
What common risks you need to address to strengthen your valuation
The value of understanding what really drives you, especially in terms of life planning
Planning creates choices and decreases anxiety
Why you do need to build a support network of trusted, knowledgeable advisors before you sign away your company
What seller’s favor is and how to protect yourself from it
How net proceeds factors into what ends up in your bank account when selling
When to disclose your financials to potential buyers and what to include
Why an LOI can gaslight you into a poorer deal than expected

 
Are You Growing The Value of Your Business

Take The 2-Minute Assessment To Get Your Intentional Growth Score™ And 1-Page Vision Board.

Are your company's current initiatives intentionally designed to increase the value of the business?
Do you know what you want from your business long term and why?
Do you know what your company is worth?
Do you know the differences between Management, Family Transitions, PE Firms, ESOPs and Strategic Buyers?
Does the business have a written strategic plan on how to achieve the desired normalized EBITDA and valuation?

 
About the Guest:

Pat Hobby started his career as an auditor at EY and over the years held various finance positions before launching his own outsourced CFO services company. As one of his clients continued to grow and needed more assistance, he joined the company full-time for more than 20 years. He helped the company grow significantly, do acquisitions and eventually sell it to the employees via an ESOP. Two-and-a-half years later, he led the sale of the company to a PE firm—with tremendous benefit to the employees. Since then, Pat helped co-found Arkona to help change how owners grow and exit their businesses.

 
Quotes:

06:00  - “There’s a lot of money looking for a place to get a return.” – Pat Hobby

06:43 - “Right now, in the private equity world, it’s easy to raise money.” – Pat Hobby

11:49 - “If you’re positioned properly, you can maximize the results of what you’re trying to accomplish.” – Pat Hobby

17:26 - “It’s human nature. When you don’t understand something, you just ignore it.” – Pat Hobby

21:55 - “A lot of people who had a great success on the financial side of selling their business are still unhappy because they don’t know what’s important to them.” – Pat Hobby

28:00  “Business owners aren’t professional folks selling their businesses.” – Pat Hobby

35:00 - “Most people do it once. It has to be done right.” – Pat Hobby

35:44 - “The ability to negotiate the right deal is not automatic.” – Pat Hobby

41:18 - “Is that extra amount worth it? Is it worth 60 people losing their jobs?” – Pat Hobby

43:00 - “Your kids act up when they feel like they don’t have any control. I believe that about adults.” – Pat Hobby

44:20 - “You can’t see what’s going on all the time unless you do the financials the right way.” – Ryan Tansom

46:32 - “Once you figure out what your strategies are, you have to translate that into your financials.” – Pat Hobby

46:35 - “Financials are the language of business.” – Pat Hobby

57:21 - “It’s critical to understand the process.” – Pat Hobby

61:34 - “So many of the terms and conditions you’ve negotiated can make or break a deal.” – Pat Hobby

63:23 - “Every seller is expected to deliver the buyer a normal quote-unquote working capital, which in most businesses is AR—inventory less payables.” – Pat Hobby

67:16 - “The training that we created was because this is something we wish we had eight years ago.” – Ryan Tansom

67:26 - “The stress of running a business without a plan is just, it just doesn’t need to be that way.” – Ryan Tansom

 

Links and Resources:

Mastering Your Cash Flow Digital Course

ARKONA Boot Camp

Reach out to me if you have questions about the boot camp!

You can also reach out to me via email at [email protected], or on my LinkedIn.