Honesty is the best policy - How seller honesty can protect a premium exit value

Honesty is the best policy

When selling your car, it's understood that there will be minor defects, some marks of wear and tear from previous owners. Some like scratches, we tackle with some elbow grease and polish, while others can be more challenging and will be likely visible to the observant buyer. If the car is a quality vehicle, and there is strong market interest, making it clear in the sale notice that there is a slight dent in the bumper will likely have a negligible impact on the market value ultimately achieved. Selling it however as “pristine and perfect”, will likely invite some difficult negotiations and frustration when the potential buyer ultimately seeks to reduce the agreed upon price for the previously undisclosed bumper damage. In such cases being honesty about any defect at the outset, will usually conclude a better, quicker and altogether less emotional deal.

This is no different when selling your own business, particularly when it is an accepted truth that is no business is perfect. This is however the truth that “well-meaning” corporate advisors like to bend at times, and will seek to obscure anyperceived problems that your business may have within the glossy pages of the Information Memorandum that they have diligently prepared. The corporate advisor’s reasoning is indeed honorable since they often view any problem as being an admission of weakness which will reduce both the exit value and their commission.