Navigating the Emotional Journey of Selling a Business

November 2, 2023

Dilys Chan

Insights into the highs and lows of running an M&A process

If you are considering selling your business, you are likely thinking about what you might need to do to prepare. Your idea of getting ready might involve looking at financial records, thinking about legal and tax implications, and timing your sale for an opportune moment. But many business owners underestimate the rollercoaster of emotions they can experience when conducting a sale.

Naturally, selling your business can stir up strong feelings. The life of an entrepreneur can become closely intertwined with every aspect of their company, especially if they have built their operations from the ground up. Many small business owners develop close relationships with both their employees and customers. And for family-owned businesses, the lines between personal and professional can be even more blurred.

Selling a business requires a seller to be patient and keep a cool head. The most successful sales happen when business owners understand their goals and make steps toward working toward them, even in the most emotionally challenging situations.

Managing emotions is crucial during an M&A process

Jim Baker is accustomed to offering advice on managing emotions when selling a business. He has spoken frequently on the topic to colleagues and is a veteran of the M&A process at Volaris Group, having led Cultura Technologies since 2010. Cultura Technologies is a division of Volaris that focuses on agri-food software.

In his experience, it is difficult to convey your point of view to someone on the other side of the negotiating table when you are upset or angry.

“Business owners who are on the front lines of negotiating their way through deals have to think rationally,” he says. “When negotiating, it helps to have a little bit more understanding and patience to get through discussions, rather than escalating any stressful emotions.”

Life events can prompt a business owner to sell

Running a business can be an all-consuming venture that requires a lot of personal sacrifice on behalf of business owners. People normally think about selling their business because of major life events that change their professional circumstances.

These reasons can include:

●   Planning for retirement
●   Moving on to a new business pursuit
●   Spending more time on personal matters
●   Seeking additional support after the exit of a co-owner
●   De-risking the financial burden of owning a business
●   Needing a succession plan

At Volaris, business owners who sell are offered the choice of staying with their businesses. This can be an attractive option for owners who remain ambitious, but whose businesses have become too big for them to run alone.

“The financial aspects of owning a business can be very stressful for people,” says Ricky Sykes, Portfolio CFO and COO at Volaris Group. Business owners take on a financial burden that can have a heavy impact on their personal lives. For example, a business owner’s ability to pay the mortgage may be dependent on them collecting invoices from customers.

“By selling their business to Volaris, we can take on some of the financial burden, including some of the less enjoyable financial tasks,” Sykes adds. “We can relieve some of that stress and enable them to focus more on more of the tasks they genuinely like doing, which can include growing the business.”

Early talks with potential buyers

The early stages of M&A talks are often the most exciting part for many business owners. At this point, you may be talking to more than one interested buyer. They are learning about you, and you are learning about them. As a business owner, you are hopeful about the many possibilities open to you.

At this point, you might begin to have early strategic discussions about how a potential buyer can help your business grow, what that buyer’s strengths are, and how they might be able to help your employees and customers.

Business owners who are thinking about selling may not have thought about these capabilities of a potential buyer at length until they engage more closely. If both parties are interested in beginning more serious discussions, this can be the point where you both sign a non-disclosure agreement (NDA).

Beginning serious discussions

Once you have signed an NDA with a potential acquirer, your discussions can lead to an indicative offer. If accepted, further clarifications and data sharing can lead to a letter of intent (LOI), a non-binding offer that establishes the negotiating framework for both the buyer and seller as you work your way to a definitive sales and purchase agreement (SPA). Indicative offers are based on data collected about the business and projections about how that business will do in that specific market.

But many business owners find that it can be difficult to see their companies assigned a valuation in hard numbers. This is especially difficult when they have spent years pouring their heart into the business.

Beyond valuations, it is important to look at the bigger picture of what the buyer is offering, and whether that will help your business, employees, and customers continue to be successful.

Often, priorities of what sellers are expecting from a transaction can fluctuate as M&A conversations continue. Aside from valuation, permanence, autonomy, and knowledge are three of the areas that can be important to sellers.

-Lawrence Rosedale, VP, M&A, Volaris Group

At this point, the business owner who is interested in selling is increasingly dealing with more legal and financial jargon. It can take a lot of time and energy to establish new relationships with business advisors and your potential acquirers, absorb input from these advisors and evaluate their advice, while also learning new terms related to M&A.

This is all happening in the backdrop of keeping their business running smoothly, while not being able to share every detail of the process with all your employees. On the personal side, the business owners may be answering questions about the sale for spouses or other family members.

Running a business is complex, challenging, and emotional, and we need to be very sensitive to that as we conduct conversations about M&A.

-Lawrence Rosedale, VP, M&A, Volaris Group

It is important to note that not all deals work out the first time around, but it doesn’t mean that you won’t be able to sell your business in the future. A successful interaction with a potential buyer will leave the door open to talk again in the future.

Even if the deal doesn’t work out initially, we believe in leaving the door open to be able to talk again, whether that is six months or six years down the road.

-Jim Baker, President, Cultura Technologies

Deal fatigue can be common

Due diligence is typically the most thorough stage of the M&A process, and this is often the step when sellers begin to experience deal fatigue, or feelings of frustration or exhaustion.

As experienced acquirers, we understand it’s normal for sellers to feel fatigued. We recognize that this process can be stressful, so we prioritize maintaining open communication.

-Ricky Sykes, Portfolio CFO & COO, Volaris Group

Though deal fatigue can happen during any time in the process of a sale, it’s an especially common emotion during this phase due to the intensity of analysis of all aspects of the business, including legal, financial, and human resources matters.

“For an owner, going through the process of due diligence is like reviewing your pride and joy,” says Sykes. “We ask questions about the business with empathy as we aim to understand it better. We are not trying to point out issues in the business, but ultimately the questions can draw out details and cause business owners to look at their business in a new light.”

There can be many ups and downs in the due diligence process. The buyer must double-check that everything initially communicated about the business in earlier stages of M&A align with their understanding, including the details of the company’s balance sheets.

“Sometimes misunderstandings that happen during due diligence come down to a difference in interpretation of terminology,” says Lawrence Rosedale, VP of M&A at Volaris Group.

While the business owner may not be able to share all the details of a sale with their employees, many Volaris M&A veterans say that sharing with some key senior staff can be helpful, especially since they can help with the due diligence phase.

“It can be best to get key staff involved and bring them on the journey of selling the business, provided that confidentiality is kept within those walls. Otherwise, it’s hard to get all the information needed for diligence without difficult questions arising,” shares Sykes.

Openness and honesty are critical in due diligence. We need to understand the minutiae of the business so we can help improve and grow it.

-Lawrence Rosedale, VP of Business Development, Volaris Group

Due diligence is also a good time to learn more about the acquirer by asking questions about the post-acquisition future of the business.

Closing a deal: Final steps of the M&A transaction

Once due diligence is complete, the potential acquirer can execute a final contract, also known as the sales and purchase agreement (SPA). This binding legal contract that outlines the detailed terms of the transaction and finalizes the terms of conditions of the sale that have been agreed upon in negotiations between the buyer and seller. The SPA contains information about the asset, purchase price, payment terms of the sale, and confidentiality.

After signing the SPA, the transaction is complete, and the seller can look ahead to starting the next stage of growth in their business.

After a deal closes, the seller may feel a sense of relief that the M&A process is over. Luckily, if they have sold to Volaris, the business will never have to go through that process again since Volaris never sells the companies they acquire.

Transitioning the business after the acquisition

A business owner may feel nervous as he or she prepares to tell staff about the news. Volaris assigns integration managers to help newly acquired businesses transition smoothly. Those integration managers can provide advice on how best to communicate upon deal close, which can help keep staff engaged in the business as they absorb the change in ownership. They can answer many common employee questions that come up after a sale.

Meanwhile, business owners need to continue developing trust with customers. In most cases Volaris likes to keep businesses running as they always have.

With our M&A experience, we can take a lot of the stress out of communicating to employees and customers for the business owner after acquisition.

-Ricky Sykes, Portfolio CFO & COO, Volaris Group

Upon joining Volaris, many staff are intrigued to find they have access to training events and programs that they wouldn’t have been able to experience as a small business, which can open new avenues for career growth. Being part of a larger company like Volaris can also be a liberating experience for business owners, who can focus more on what they enjoy spending time on.

While the M&A process may be over, the years following an acquisition are just the beginning of a new journey of transformational growth and new opportunities for the business.