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Initial Questions for Potential Acquirers

If a company’s owners are approached by an entity seeking to acquire their business, what are the “top 10” questions they should ask of the potential acquirer’s management in the initial conversation?

Would you answer change if the company were actively seeking to sell and approached the potential buyer?

Thanks,

Ken Drossman

Posted: 5/1/2012 11:39:49 AM by Tom Thompson | with 1 comments
Filed under: buyers, management, questions, acquisitions

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Comments

	Carol Vachon
	I'm sure that others will have more to add, but I'll take a stab at starting the list. With each of these items, you'll need to decide the best timing and approach for getting transparent answers. You should consider all of their conversations with you as being part of negotiations. 1) purchase price - how much 2) how will purchase price be paid, in cash or stock 3) is any part of the purchase price subject to an earn out, such that it will be paid at specific time intervals or when specific metrics are achieved If part of the purchase price will be paid over time, you should conduct research as to what the acquirer's track record is for making earn out payments on previous transactions. If you can find prior instances where the earn out payment was litigated, then you may expect the same. 4) does the acquirer have cash or will it need to raise cash, and if so, how will it raise that cash (you don't want to spend a lot of time and energy going through due diligence on your business and negotiating purchase price if the potential acquirer has no real means of fulfilling their commitment) 5) how long would the acquirer expect the management team to stay on 6) what is the expectation for streamlining (i.e., laying off) your current employee base - what % and over what period of time 7) what type of indemnification is expected, i.e., how long, for how much, to cover what types of issues 8) are they planning to buy your business assets or the stock of the business. this is important as it will impact your on-going liability, as well as how much tax you will pay on the sale 9) what type of contingencies (if any) will be built into the letter of intent? will they expect an exclusive opportunity to conduct due diligence on your business, or will you be free to pursuit other opportunities at the same time
	5/7/2012 10:06:50 AM
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