Bridging The Gap Between Buyers And Sellers
Division is present in every aspect of our lives, and the business landscape is no exception.
During the deal process, this division can widen, leading to frustration and breakdowns in communication. To ensure a successful transaction and to navigate future deals effectively, it’s crucial to understand why and how this division occurs.
Business owners typically approach deals with a clear goal and a composed mindset. However, in high-stakes situations where they may interact with individuals from prominent equity firms, their knowledge and composure can falter. Emotions can take over, jeopardizing the deal’s success. This phenomenon, known at The Exit Group as “The Continental Divide,” refers to the significant gap that can exist between parties, particularly when one is unprepared.
In the following article, we’ll explore the complexities of this divide and provide proven strategies to avoid such common pitfalls that often lead to deal failure.
Let’s start here – with why The Continental Divide can be so destructive. At the end of the day, we’re attempting to unite two individuals with diverse backgrounds, experiences, perspectives, business styles, and personalities. Conflict is bound to emerge. The entire experience of owning a business very much shapes your decision-making approach, deal negotiations included. If you’ve poured your heart and soul into your business, it can be distressing to consider handing it over to someone with ambiguous intentions. Such apprehensions can derail deals, or result in complete deal abandonment, based on reasoning like “we couldn’t align” or “the risk was too high.”
Bridging The Divide
Knowing that this divide exists, it’s essential to take steps to build bridges and close the gap. Gaining a deeper understanding of the deal’s context and the parties involved is important for the buyer, the seller, and a team like us, who are facilitating the deal. Finding common ground can significantly improve the outcome – as can approaching the table with the right mindset, whether you’re a buyer or a seller.
Finding shared interests and fostering trust-driven communication are both vital for successful transactions. Consider the environment your counterpart comes from and the situations they’ve likely dealt with. Avoid making assumptions, and enter every conversation with an open mind.
Remember, it’s humanity that gets lost in the divide, so breaking down barriers through simple conversations and mutual understanding can help bridge the gap. Initiate non-polarizing topics of interest (sports, travel, kids, cars, etc.) and gauge the buyer’s response. Establishing a personal connection can help to ward off skepticism, unhelpful assumptions, and distrust.
- Ask the owner to share the story of how the business started. Listen attentively to gain valuable insight and display true interest.
- Inquire about the sacrifices and risks the owner made to grow the business, to foster connection.
- Seek perspectives from owners who have already closed deals. Learn from their feedback and personal experiences.
- Understand family dynamics if dealing with a family-owned business. If possible, get to know as many family members as possible.
- Remember that real sellers want to have real dialogues with their potential buyers. They don’t want to be interrogated, poked and prodded. Most of them don’t like conversations that are exclusively transactional in tone and context.
- Ask the seller about their plans after selling the business.
- Connect with someone unrelated to your deal who has experience selling a business. If you’re dealing with a private equity firm, speak to other owners who have sold to private equity firms for valuable insights.
- Establish a personal connection by finding common interests or shared experiences.
- When appropriate, ask to speak to any owners who’ve sold specifically to your buyer. This is less to validate your buyer, and more to gain insight into the potential of your deal.
- Request specific details about the buyer’s concerns and fears related to the purchase. Encourage them to be specific – no clichés or platitudes.
- Ask the prospective buyer about their worst-performing deal and the reasons for its failure.
When In Doubt, Seek Guidance
Seeking guidance from experienced owners or third-party experts can be invaluable. Our team at The Exit Group is often referred to as “bi-lingual,” meaning we possess the ability to understand and communicate the perspectives of both sellers and professional investors. We assist in translating communications and bridging the gap between parties, facilitating a smoother negotiation process.
By recognizing the existence of the divide and actively working to bridge it, you improve your chances of a successful and mutually beneficial deal.