Should I Take my Business Off the Market When I Accept an Offer?

Jacob Orosz Portrait
by Jacob Orosz (President of Morgan & Westfield)

Executive Summary

Many sellers take their business off the market after accepting an offer. This is a critical mistake. We recommend keeping your business on the market until a definitive agreement is signed and all contingencies have been removed (unless you have signed a no-shop agreement with the buyer). If you want to maintain your negotiating position, keep your business on the market, continue to show it, and accept backup offers. This will keep the buyer on their toes and prevent them from playing games later on in the process.

As a seller, you have the most negotiating leverage early in the transaction. This is the time when you can negotiate key deal terms that will make a tremendous difference in how the deal progresses. Take advantage of this leverage while it exists. The most intelligent way to do so is to have experts advise you along the way.

Here’s our advice…

It ain’t over till it’s over.” 

Yogi Berra (1967)

Focus on Running your Business

The number one mistake sellers make when they accept an offer is to get too excited and lose their focus on the business, without realizing that over half of business sales don’t make it to the closing table, even after an offer is accepted. If you want to close the deal, focus on running your business throughout the due diligence process until the closing.

If revenues slip during the process, expect the buyer to negotiate a lower price. If, on the other hand, revenues increase during the process, you can expect to lock in your negotiating position.

Keep your Business on the Market

Keep your business on the market until you sign the documents at the closing table and the money clears. Note that this is not possible in mid-market deals where nearly all sophisticated buyers (companies, private equity groups, etc.) require exclusivity once you accept a letter of intent (LOI). In these cases, negotiate as short of an exclusivity period as possible.

For smaller companies, keep your business on the market until the day after the closing. Doing so helps you maintain your negotiating position. Additionally, continue negotiating with other buyers throughout the process, so you always have a backup plan in place.

Avoid Deal Fatigue

Avoid deal fatigue by developing options and maintaining your emotional objectivity. Sophisticated buyers are aware of the natural tendency of business owners to experience fatigue as the process wears on. They may take advantage of this by drawing out the process and nibbling at the last minute. The most common way to avoid this, again, is through positioning. Always have other options available in case the buyer attempts to renegotiate the price.

The best option for avoiding deal fatigue is preparation — by preparing your business for sale, you minimize the chance the buyer discovers a material fact they can use against you during the due diligence process.