DO YOU REALLY KNOW THE BUYER’S MOTIVATION?

 

Who would have guessed that buyers are homesick?

When selling your business, you thought the buyer was buying your business because you have great products, a superb team and are making excellent profits….

That all maybe true…..but there may be other reasons!

You have found a buyer and you intend to maximize your exit after your many years of ‘blood, sweat and tears’.

You are beginning to imagine life after you’ve sold….travelling, seeing friends and family and living life stress free.

The sales process has been going on for a few months and you’ve had a number of meetings with the buyer which have gone well.

But do you REALLY know the motivation of the buyer?

New research shows that when businesses make acquisitions, they disproportionately target businesses in the state where the owner grew up.

Curiously, while the owners might argue their knowledge of their home state gives them a competitive advantage, those deals tend to be viewed negatively by the markets.

Mergers where one company bought another in a different state that was the home of the business owner occurred 4% of the time, about one third more often than would be expected by chance.

The working paper – CEO Home Bias and Corporate Acquisition – by K Chung, T C Green and B Schmidt examined data on 15, 526 acquisitions between 1985 – 2014.

You genuinely believe the buyer is buying your business because of your great products, a balanced and motivated management team plus consistently high profits…all that is true but do you really know the motivation of your buyer?

The authors give the example of Hillenbrand, a coffin manufacturer in Indiana. After considering 400 acquisition possible targets, they decide to buy K-Tron, a Pittman, New Jersey company that makes factory equipment.

The shares of the Indiana company declined more than expected.

A spokesperson for Hillenbrand says K-Tron’s location was ‘merely coincidental’, it just so happened that Hillenbrand’s CEO was raised in Pittman and that’s where his mother still lived!

The paper adds to the growing stack of evidence that business owners often make decisions that don’t make economic sense.

Business owners like to think of themselves as making rational decisions to maximize returns, but they’re as vulnerable to their emotions as anyone else.

So when prospective premium priced buyers come knocking at your door, ask them plenty questions.

Yes….the usual ones regarding their intentions for your business, staff team and other stakeholders but add some unusual ones to try and decipher their true intentions for buying your business.

To discover how to maximize your exit and find premium priced buyers go to http://www.maximizeyourexit.com/sell-smart-net-what-youre-worth-t and receive a generous 75% discount NOW

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