When I finally got serious about wanting to sell my events business, I asked around about how the process worked.
I soon discovered there are people who make a living selling and buying businesses. Like the Tom Cruise character in the movie Jerry Maguire, these agents go by the title of business broker, M&A (mergers and acquisitions) professional or investment banker, depending on the size of the companies they sell.
As I dug deeper, I found out most brokers specialize in a specific industry. I narrowed my list down to four companies, all located in New York, that specialized in selling conference businesses.
I had a warm introduction to three of the firms so I was able to get face-to-face meetings. The fourth did not respond to my e-mail, which I found curious but would later learn was not uncommon.
I spent the day in Manhattan interviewing intermediaries, or perhaps I should say they interviewed me. It turns out investment bankers only make any real money if the business actually gets sold, so they grilled me to ensure I had a sellable business:
• "Describe your sales cycle."
• "How many salespeople do you have?"
• "Describe your cash flow cycle."
• "Who are your customers?"
• "How do you know if they are satisfied?"
• "How often do they repurchase?"
My last meeting of the day was the most memorable. The banker on the other side of the table looked disinterested as he began asking his stock set of questions. His mood began to warm with each of my answers to the point where his face actually broke into a broad smile as he finally interrupted me: "I know just the company to buy your business."
My reaction to his proclamation was a mixture of excitement and skepticism. After all, we had only just met. I asked him to elaborate, and he described a large company he knew well that wanted to get further into the events business in North America -- he thought it was a perfect marriage. He explained that he would charge me 5 per cent of the transaction value and that I would have to promise to work exclusively with his firm as my broker.
I agreed to his terms, and my new-found banker friend arranged a dinner in one of Manhattan's most exclusive restaurants for us to meet the division president of the company he thought should buy my business.
As I walked into the restaurant a few minutes early for our 7 p.m. reservation, I found my banker and the division head sitting at the bar. The lads looked as if they were old friends. My guess was that they were already onto their second scotch and soda, which I found strange given that my broker was supposed to be representing me. He seemed awfully chummy with the person he would soon be negotiating against.
As the evening progressed, it became clear to me that my banker and the division president were actually long-term colleagues who had done many deals together. In fact, my banker earned the majority of his fees from buying companies on behalf of his dinner guest, not selling them.
My adviser was simply trying to deliver me as a gift to his friend. If successful, he would earn a quick fee from me and ingratiate himself further with his main client, who would have been given a first look at my business without any competition at the table to drive up the price.
I left dinner vowing to find myself another banker.
Special to The Globe and Mail
John Warrillow is the author of Built To Sell: Turn Your Business Into One You Can Sell . Throughout his career as an entrepreneur, Mr. Warrillow has started and exited four companies. Most recently he transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which he sold to The Corporate Executive Board in 2008. He is the author of Drilling for Gold and in 2008 was recognized by BtoB Magazine's "Who's Who" list as one of America's most influential business-to-business marketers.