Include Seller’s Reasons for Selling in an M&A Offering Document
A well-written M&A offering document should provide Buyers with information about Seller’s reasons for selling and what type of deal interests the Seller.
As Seller, communicating your motivation is important because doing so helps Buyer determine whether pursuing a deal makes sense. A Buyer who needs the Seller to stay on board to run the business is unlikely to bid if the deal involves the owner’s retirement.
When selling a business, don’t sound desperate when listing your rationale. Doing so gives Buyer the upper hand in negotiations because he knows you need to unload.
The transaction guidance portion of the offering document indicates the type of deal that interests Seller — that is, how much structuring (notes, earn-outs, and so on) if any he’s willing to accept, whether he strongly prefers cash at closing, whether he needs or prefers an asset deal or a stock deal, and so on.
You should not provide a price in the book. Doing so places a ceiling on the valuation, and Seller runs the risk of leaving some money on the table. Also, providing a price may inadvertently provide Buyer with the wrong guidance.
A Buyer who submits an offer by matching the listed price will be rightfully upset if the company is sold to someone who submitted a higher bid. The snubbed Buyer may have been willing to submit a higher bid but decided to follow the guidance of Seller.