More than any other type of business sale, the intellectual property based business is the most complex and difficult. The primary reason is that the seller is not interested in selling their company for a financial multiple like 5 X EBITDA. They almost always want that amount plus a premium for strategic value. t https://npfinancials.com.au/Another very important factor is that most smaller information technology companies run their financials on a cash basis and the buyers usually employ the accrual method. The adjustments in transaction value that often occur during the due diligence process are often surprising and expensive. Below are several reasons why a seller of an IT business should seek a firm that specializes in this type of business sale.
1. Confidentiality. If an owner tries to sell his own business, that process alone reveals to the world that his business is for sale. Employees, customers, suppliers, and bankers all get nervous and competitors get predatory. The investment banker protects the identity of the company he represents for sale with a process designed to contact only owner approved buyers with a blind profile – a document describing the company without revealing its identity. In order for the buyer to gain access to any sensitive information he must sign a confidentiality agreement. That generally eliminates the tire kickers and deters behaviors detrimental to the seller’s business
2. Business Continuity. Selling a business is a full time job. The business owner is already performing multiple functions instrumental to the success of his business. By taking on the load of selling his business, many of those essential functions will get less attention, sometimes causing irreparable damage to the business. The owner must maintain focus on running his business at its full potential while it is being sold.
3. Time to Close. Since the investment banker’s function is to sell the business, he has a much better chance of closing a transaction faster than the owner. The faster the sale, the lower the risk of business erosion, customer defection, employee problems and predatory competition.