Tech Buyers Be-aware: When to ask questions during the business sale process
Tech businesses tend to attract prospective buyers with a lot of questions.
This observation came out of a recent conversation with my colleague, Mark Sykes, who had recently experienced an all-too-familiar scenario where a buyer who had, for a period of time, been enthusiastically asking for more information about the company - only to be pipped to the post on the deal by another buyer who was prepared to make an initial offer on the basis of our detailed Information Memorandum and a set of accounts.
The sale of IT and managed services businesses always attracts a large amount of interest. As a result, we have to pay close attention to how we handle the process of giving out the information required to facilitate a successful sale.
The scenario experienced by Mark concerned the sale of a managed IT services business, which generated over 130 enquiries within a matter of weeks. On the surface, this outcome sounds great but in practical terms could have translated to the client having to respond to requests from 130 directions, with no idea of which among them were from serious buyers. This was just not practical.
We understand that the nature of acquiring a managed IT services business means that potential buyers will need more granular details about a potential acquisition, so require more information than the average buyer. However, we also recognise our key role in respect to the seller; to attract committed interest from serious buyers, with the outcome of achieving a successful sale.
Given the nature of the information requested, which in many cases is commercially sensitive, it is reasonable for this information to be reserved for potential acquirers with a serious interest in the business – serious enough where they are prepared and, in a position, to make an indicative offer.
If you’re a buyer seeking an acquisition of a managed IT services business, making an indicative offer is the most effective way for you to put your best foot forward. There is no downside, as it demonstrates a seriousness of intent and presents an opportunity for genuine and detailed enquiry, through a clear process of due diligence.