The Auction Process. What am I talking about? Brokers know. It is when several buyers are lined up against each other and the highest bidder wins. It is an Auction Ebay style only you are buying a business not a widget.  That may be fine for Ebay but it doesn’t work when buying a business.  If you find yourself bidding against other bidders, head for the hills.  Oh, I will qualify that. If you have deep pockets and can afford to keep raising your bid to stay in the game then you can play.

Most individual buyers including me have no business being in that scenario. It is a process that is generally reserved for private equity groups, major corporations and high level deals. Now I may exaggerate just a tad because, after all, we all have to live in the same world with other buyers. Buyers will appear on the scene with many deals. That doesn’t mean you have to like it. In fact you have my permission to go so far as to gripe about it to the broker. You want a one on one negotiation with the seller. You do not want a four on one, three on one or even a two on one negotiation with the seller. You want to be the ONLY one negotiating with the seller.  Am I clear on that?

Why is this? Other buyers will muck up everything. They will offer too much and won’t be able to finance it. They will raise seller expectations, they will raise broker expectations. They will overvalue the deal and offer way too much cash. They will promise stuff that is often crazy. The only benefit they can have is that they can often make you look good by comparison. Any questions?

So if you aren’t with me so far I will restate it. If one of your acquisition candidates has a buyer other than you, move on to the next deal.  Hah, you say, but how will I know? The broker won’t tell me if there are other buyers! Yes the broker often will tell you and if you ask him/her straight away he will have a tough time fibbing about it. As always, there are exceptions to this advice. If you love the deal and there is one little pathetic buyer that doesn’t show well, sure go ahead and negotiate.