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Five Reasons to Consider a Negotiated Deal

By Bassem A. Mansour

Co-Chief Executive Officer, Resilience Capital Partners

Article for Smart Business Dealmakers

Negotiated deals – where an owner sells a business without going through an auction – have an undeserved reputation for generating lower prices. Superficially, it makes sense that sellers would get better value if there are multiple prospective buyers. Yet, negotiated or proprietary deals often can be a far more effective and efficient way of selling a company without sacrificing net returns.

Here are five reasons why a negotiated deal can make sense for companies looking to sell themselves.

If negotiated deals make so much sense, then why are they comparatively rare? Put simply, excessive seller expectations. Owners of companies frequently have an outsized view of their value. Proprietary buyers are usually the first in the door, and they are the ones who deliver the news about a company’s value. If the price is too low, the owner may pursue an auction. Often enough, they realize that the original offer was close to the mark, especially when all risks and costs are factored into the price.

By that point, however, the time and expense associated with launching into an auction process are so great that they may continue down that path rather than restarting the alternative. They would have done much better to approach a sale with more realistic expectations to begin with, realizing that – in today’s markets – no one is able to steal a company, and that a negotiated or proprietary deal may well be the best approach for them.



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