In this blog post, I’m not talking about the early stage of a sales process when you define the term sheet and structure of the acquisition. In this phase, you should ask every question that you need to qualify the offer.
But, in the last stage of selling your company, you will still get a ton of questions from the buyer and typically you will be very busy answering them. On the other hand, you might find out that you also still have some questions about the joint future. My recommendation is that, at this stage of the process, you should think twice before asking any questions. I got this advice from my M&A advisor when selling my company and I think this is some of the best advice that he gave to me.
Why is this so important? When you ask a question about the joint future at this late stage, you risk that the buyer has not thought about that question yet. Worst-case scenario, they will start thinking about your question and it will either delay the process or it will end up as a new clause in the final contract. Such scenarios are especially tricky when you are much more experienced in your market than the buyer. Maybe they are coming from a different market and want to enter your market or their focus is different than yours. In those scenarios, it’s very likely that the buyer has not thought about every aspect of the joint future and asking a “good” question can raise a lot of internal questions in the buyer’s team. This is the last thing that you want to have at the end of a selling process. Many sellers will tell you that many months, and sometimes years, after an acquisition, the buyer’s management team may still not have the full picture about the joint market or will simply see things very different than you did in the past. This is also the reason why I recommend being very careful with earn-outs, like described in my previous post. An acquisition always changes the market setup and you simply must see how customers and competitors will react to that. Therefore, it makes no sense to risk delaying your sales process by entering discussions about the joint future which have not been covered in the first phase of the M&A process. The same applies for answering questions that you will get from the buyer. Answer in the necessary detail but avoid adding something which was not explicitly asked by the buyer. It’s better to get a request to provide more detail than to hurry ahead and provide too much detail.
To summarise: The later you are in the M&A process, the more you should focus on closing the deal and avoid opening new doors by asking questions.