It is now time to consider the pros and cons of a sale to a third party:

Reasons For:

• Higher Selling Price: Canvassing many potential buyers and exploring selling options can create interest among multiple buyers. This process is likely to identify the purchaser willing to pay the highest price.
• Strategic Buyers: Potential purchasers include strategic buyers such as suppliers, customers or competitors who may pay a higher price because of the value attributed to synergies in terms of cost savings and/or increased revenues.
• Payment of Purchase Price: Since a third party will likely have additional financial resources, it is more likely that most, if not all, of the purchase price will be paid on closing.
• Owner Objectives: This can be an effective way to achieve the objectives of the current owner if their goal is to reduce or eliminate their involvement with the existing company for reasons including retirement.

Reasons Against:

• Higher Risk: Selling to a third party inevitably comes with increased risk. The successful transition of key employees, customers and suppliers to the new owner can be unpredictable. If it is not done properly, the sale process can affect the company's operations.
• Reduced Control: The new owner may change the company's operations, which may affect existing employees, suppliers and customers. Owners looking to sell their company should consider whether this is something they would like to explicitly consider in their decision.
• Disclosure of Information: There is the risk that contacting multiple parties will result in widespread knowledge about a potential sale and that confidential information will be disclosed to competitors.
• Payout Uncertainty: If there is an earn-out there is a risk that sellers may not receive the anticipated earn-out or contingent payments if earnings are lower than anticipated amounts. If the vendors are no longer involved in the business it is difficult to monitor the operations.

Leveraging the positives of a third-party sale and limiting the negatives comes down to the art of negotiation. As a general rule, keep the following considerations in mind:

• Find a trusted team of advisors to objectively identify potential issues.
• Consider and discuss the target selling price and the structure of a transaction early on in the process to determine whether potential acquirers are willing to pay a price within this range.
• Be clear about the assets being sold and the structure of the transaction, including whether it is a share or an asset sale.
• Evaluate the buyer early. Concerns about buyer intentions must be resolved to determine if the buyer is right for the sale.
• Designate a spokesperson to negotiate on behalf of the company. It is important that the owner is not distracted by the process of negotiations to ensure that the company continues to run effectively.
• Structure negotiations around price and financial terms and do not be afraid to take a hard line on deal breakers.
• Prepare for surprises and setbacks and accept that the deal may not happen within your desired timeline.

A third-party sale of an owner-managed business is an unpredictable process that should be negotiated thoughtfully. Whether it be money, lifestyle or legacy, it is important to define priorities that will guide the process and help determine which potential purchaser is best.