For many entrepreneurs, building a business is deeply personal. It represents years of sacrifice, risk and perseverance. Receiving an unexpected call from someone interested in buying that business can therefore feel like validation. It is exciting. It is flattering. It can also be the point where costly mistakes begin.
Despite the challenging economic environment, if we look across our network there are signs that transaction activity is starting to pick up. Private equity firms continue to look for quality businesses, larger companies are pursuing acquisitions to accelerate growth, and well-capitalised investors are actively seeking distressed or undervalued assets. This means more business owners may find themselves approached by potential buyers, often without having considered what they would do if that day arrived.
The reality is that receiving an approach is not the same as receiving an offer, and receiving an offer is certainly not the same as completing a transaction.
The first conversation should never be driven by emotion.
Decide whether you really want to sell
One of the biggest mistakes entrepreneurs make is assuming that because somebody wants to buy their business, they should immediately begin exploring a deal.
Before discussing valuations or due diligence, the owner needs to ask themselves a far more important question: Do I actually want to sell?
Many transactions ultimately collapse because entrepreneurs only realise halfway through the process what selling really means. In many acquisitions, particularly those involving founder-led businesses, buyers expect the owner to remain involved for several years. Earn-out structures often require founders to continue running the business as employees while portions of the purchase price are only paid if future performance targets are achieved.
Selling your shares does not necessarily mean walking away.
If that future is not one you want, it is better to recognise it early rather than after months of negotiations.
Protect your confidential information
Once a potential buyer expresses interest, there is often pressure to begin sharing financial information, customer data and operational detail.
While due diligence is an essential part of any acquisition, entrepreneurs should be careful not to open the doors to their business too quickly.
Sophisticated buyers understand exactly what information they need. Entrepreneurs, particularly those navigating a transaction for the first time, may not appreciate the commercial value of what they are disclosing.
Confidential information should only be shared under appropriate confidentiality agreements, through structured information requests and with experienced advisers helping to manage the process.
A buyer who ultimately decides not to proceed should never leave with a detailed blueprint of your business.
Build the right deal team
Running a successful business does not automatically prepare someone to negotiate the sale of one.
Corporate acquirers are often supported by experienced corporate finance professionals, legal advisers and transaction specialists whose job is to identify risks, negotiate terms and justify lower valuations.
Business owners need their own experienced advisers sitting across the table.
A capable CFO is often central to this process, but not every finance leader has transaction experience. Bringing in a fractional CFO or specialist corporate finance adviser can make a significant difference when it comes to valuation, negotiation strategy, financial modelling and responding to buyer requests.
Good advice will pay for itself many times over down the line .
Manage the human side of the transaction
Selling a business is not only a financial exercise.
Boards, shareholders, minority investors and senior management all need to be considered.
Sometimes there are legacy shareholding structures that should be simplified before a transaction proceeds. Key executives may need to be retained, incentivised or brought into discussions at carefully managed stages.
Poor communication can create uncertainty, damage morale and unnecessarily complicate an already demanding process.
An example of this is your Sales Manager or Sales Director getting wind of a transaction that might leave them in an uncertain position. Will they communicate this uncertainty to key clients and take these relationships to a competitor? This could be very damaging to valuations and long-term earn-outs.
Every transaction should have a deliberate communication strategy alongside the financial and legal workstreams.
The process will take longer than you think
Entrepreneurs are often surprised by how much time an acquisition consumes.
Transactions involving businesses valued between roughly R50 million and R500 million can easily take 18 months or longer from the first discussion to final completion.
During that period there will be negotiations, financial reviews, legal documentation, due diligence, regulatory considerations and ongoing requests for information.
Meanwhile, the business still needs to perform.
One of the biggest risks is that founders become so consumed by the transaction that they lose focus on running the business itself. Ironically, declining performance during negotiations can weaken the valuation the buyer is willing to pay.
A signed deal is not the finish line
Even after commercial terms have been agreed, significant hurdles often remain.
Many acquisitions are subject to funding approvals, investment committee decisions, debt financing or other conditions that sit entirely outside the entrepreneur’s control.
Until every condition has been met and the transaction has formally closed, there is always a possibility that the deal may change or even fall away. This is also a common negotiating technique where the buyer and seller will agree the price and then come back to the table saying: “We’re going to have to negotiate downwards if we want to get this deal over the line”
We have a very good example of one of our own clients who thought they had gotten a deal over the line, only for the acquirer to take multiple years to raise the funding. The acquirer couldn’t raise the targeted amount and opted instead to come back with a reduced offer. Fortunately our client stayed the distance thanks to a strong advisory team and they eventually secured the valuation they had initially agreed.
That is why experienced advisers encourage business owners to continue operating as though no transaction exists.
Don’t be flattered by the offer – play it smart
Exiting your business can be a game-changer for your personal financial wealth – but it is rare that you will be able to exit multiple businesses in your life. That makes this decision one of the most important financial decisions you will make.
Receiving an acquisition approach should be viewed as the beginning of a strategic decision, not the conclusion of one.
The businesses that achieve the best outcomes are rarely those that react the fastest. They are the ones that prepare thoroughly, surround themselves with experienced advisers and make decisions based on long-term objectives rather than short-term excitement.
Selling a business may be one of the most important financial decisions an entrepreneur ever makes.
It deserves the same level of preparation that went into building it.