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The sale of a business is complicated enough when there is a sole proprietor – let alone when multiple owners are involved. Sometimes, joint owners have very different priorities, and a degree of friction becomes evident during the sale process. As in any relationship, the stress of shared responsibilities can cause a breakdown of communication, and lead to misunderstandings.

In the case of an M&A transactions, tensions can become temporarily acute. Large sums of money are in play, and angst about the future can cloud judgment about goals and cause unhelpful behavior. The owners may have invested years of time and money - and a lot is at stake for everyone involved.

Even in the absence of particular areas of conflict, shareholders may have different commitment levels or objectives attached to the sale itself. The following examples illustrate why this might be the case:

1. An older shareholder may feel that now is the right time to fund his retirement, while his colleague feels financially compelled to maintain income into the future.

2. A young Finance Director is enthusiastic and eager about his professional advancement and wants to build the firm; whereas his colleagues are seeking a quick transition and departure.

3. One shareholder receives great satisfaction from the prominence his management position in the firm affords him in the local community, whereas his minority co-owner – who is equally critical to their mutual commercial success – is so frustrated by what he considers as his lack of input in decision making as to want to dissolve the relationship at any cost.

4. Lastly, one of the shareholders of an old family business, is concerned about his grown up children who are employed and financially supported by the company.

Understanding your goals

If owners are unable to manage their differing objectives and points of view on important issues like these, there could be a very public fallout. Because it is not unusual for a deal to collapse under the pressure of the conflicting interests and styles of the owners, it is vital that objectives are evaluated, and open lines of communication established between the owners early in the process. There will be compromises in every deal – both internally and with the buyer – so it is essential that individual owners establish which aspects of the sale are most important. Of course, the more flexible a seller can be on the ‘smaller’, less-critical items, the greater the likelihood that a buyer will offer a higher price for the business.

How to achieve a successful sale IN WHICH EVERYBODY WINS

By Bob Goldsmith

Tensions between shareholders can sometimes cause setbacks in the sale process. Open, honest communication and an agreed strategy is vital,

as BCMS North America President and CEO Bob Goldsmith explains.

Large sums of money are in play, and angst about the future can cloud judgment about goals and cause unhelpful behavior. The owners may have invested years of time and money - and a lot is at stake for everyone involved.

Prior to starting a sale process, advisors should endeavor to develop a clear understanding of the clients’ objectives and desired outcomes, both individually and as a group. A good advisor will then devise a strategy to achieve those objectives. Because upfront and honest communication remains at the very heart of a healthy sale process, there are a number of issues that can be reviewed with business owners informally. The panel on the right shows the kind of questions worth considering. Again, the earlier in the process this is done, the better.

The united front

Candid and honest communication amongst joint owners creates cohesion, and provides important information to the advisor trying to craft the deal. With the right feedback, the advisor can engage the ownership group thoughtfully and early to provide guidance and to accommodate various aims and objectives while steadfastly focusing on maximising value, terms and conditions for the owners.

By addressing issues early and thoroughly, a united front can be established that will serve the sellers well as deal tensions increase, and as the negotiations with the buyers intensify. This will support the ultimate and collective interest of achieving maximum price, and the best possible deal terms.

Your conflict avoidance checklist:

Questions company owners should consider in the early stages of the sale process:

• Are there differing commitment levels to the sale among the shareholders?

• What do the shareholders want their involvement to be with the company, post-sale?

• Do any of the shareholders have family members employed in the business, and what will their involvement be?

• Will minority shareholders be informed of the pending transaction at the outset or at the end?

• Are there minority shareholders who may not be aware of the transaction and have the potential to dissent?

• Are there inter-owner issues that could affect the deal, the resolution of which the advisor could help facilitate?

• How can one ensure that personal issues do not get in the way of business issues?

• What are the individual time commitments to the M&A process and do the shareholders have realistic expectations?

• Who within the ownership / management team will be involved in the day-to-day sales process, and how will they communicate progress to the others involved?

• Are there any managers within the business that the shareholders want to reward or protect?

• Are there any community related issues to consider, for instance, if the business is a significant local employer?

• Is the continued use of the company name important as a legacy issue?

• Is the continuation of certain business traditions important?

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