There are traditionally a lot of off-market sales for large transactions in Australia, like large real estate, commercial property, and business sales, but this is also starting to happen more with the sale of small and medium businesses as well. An off-market sale is when the business is sold somewhat “under the radar”, meaning it isn’t listed for the general public to see.
It makes common sense that the more people that know about a business that’s for sale the more interest there will be, which can also mean more demand which drives the price up and usually means a faster sale. So why would someone want to sell their business off-market? Generally speaking, the owner doesn’t want the word out for a variety of reasons.
For instance, your competitors might use the knowledge to their advantage – “You should choose us instead of them. They’re selling the business and who knows what might happen with that.” Or you might have key staff that decide to look for a new job before they potentially (in their minds) end up working for new owners that might replace them with their own people or change the business model significantly. It’s the ‘devil you know versus the devil you don’t’ way of thinking.
If the sale of your business takes a long time – as much as several years – the internal changes or loss of competitive advantage can make the purchase less desirable to potential buyers. Selling off-market can help prevent that from happening. Another factor could be the time itself. If the business hasn’t sold for a long period of time and everyone can see that, the perception could become that the business isn’t worth buying for one reason or another.
The key to selling your business off-market is to partner with a broker that has two things:
1) a large database of contacts and potential buyers, and
2) a strong motivation to make a deal happen for you.
A business broker like Finn Business Sales, the largest business broker in Australia which receives more than 1,000 new enquiries each month about business purchase opportunities, is the kind of partner an off-market seller dreams of. The volume of potential purchasers in that database is almost equivalent to listing the business publicly, without all the unwanted publicity.
Steve Finn, the founder and co-owner of Finn Business Sales, gives a word of warning to potential sellers that may want to test the waters of an off-market sale without committing: “You either want to sell it or you don’t. Don’t approach a broker and say, ‘If someone comes along that could be interested, let me know’. That doesn’t really work, because the broker won’t feel as confident in using their influence with a potential buyer to take a transaction to them that maybe could happen or maybe not.”
According to Finn, the best strategy is to let the broker prepare all of the information on the company in advance, so that they’re “armed and dangerous with all of the information on due diligence” that’s needed to lead the potential buyer to a fast decision.
