You might be seeking exit strategies for your engineering business that may have a suitable successor within the business itself.
Did you know you can sell your business via an auction? If you have a strong preference for orderliness, then an auction can be perfect for you.
The first step in selling an engineering business is selecting one of two sale mechanisms:
Option 1: Auction Mechanism
If you wonder “how do I sell my engineering business for maximum price,” look here:
There are several differences between the auctions we see in movies and an auction
mechanism for selling an engineering business. Here are a couple:
(1) Bids will entail several numbers in addition to purchase price. For example, the percent of the price paid through a multi-year seller note and your compensation during the transition period are two other numbers that could be included in a bid.
(2) The winning bidder will be selected based on a valuation formula that calculates how much each bid is worth to you, so you know when you should sell your veterinary practice.
(3) The bidders will not be aware of each other’s bids.
What are the benefits if I want to sell my engineering business via auction?
(1) If we have at least two bidders, then an auction will generate more value for you than an adhoc mechanism. This is how to sell a business to a successor for a maximum price.
(2) The business is more likely to end up in the hands of the right person.
(3) The high amount of structure required for an auction forces everyone to produce and act upon a high degree of clarity early in the process. This reduces the likelihood of the deal falling through late in the process.
What are the disadvantages if I sell my engineering business via auction?
(1) There is somewhat more work to do upfront: (a) Closing documents need to be generated upfront rather than late in the process. (b) We need to decide upfront on precisely how you would value different possible deal structures.
(2) You have less flexibility. Once you have executed an auction agreement with the prospective acquirers, you cannot back out of it.
Option 2: Ad Hoc Mechanism
If you’re thinking, “I want to sell my engineering business the old fashioned way, and an auction sounds too complex,” look here:
In this mechanism, we negotiate with each prospective buyer one-on-one. If you like what someone offers, you move forward with them. If you are uncertain about their offer, we ask them to wait until we have more offers.
What are the benefits of selling my engineering business via ad hoc mechanism?
(1) Less work is required before engaging prospective buyers.
(2) You commit practically nothing to the acquirer until final closing documents are signed which is relatively late in the process. This implies that you are free to change your mind until then.
What are the disadvantages if I sell my engineering business this way?
(1) If you ask a prospective buyer to wait until you have fielded more offers, you risk losing
them because they might find another opportunity.
(2) The best prospective buyer might drive a hard bargain, offering too little. A less qualified prospective buyer might not drive such a hard bargain. As a result, you might go forward with the less qualified buyer. It is important that we find the best buyer because everyone wins when that is the case.
(3) Because this is a less structured process, with less agreed upon upfront, it is more likely that the deal will fall apart after a non-binding offer is accepted. This can result in significant lost time, money, and energy.