Comparing offers: why the highest price is not always the best offer

What a price does not tell you

A price is only a starting point. Between the figure written in the offer and the amount that actually reaches your account, several items can move the result, sometimes a great deal. And some offers, attractive on paper, never complete.

Comparing two offers therefore means comparing three things: what you will actually receive, how likely the sale is to complete, and what you guarantee after signing.

What you will actually receive

• Is the price fixed or adjustable? Some offers set a final price based on accounts drawn up at an earlier date (a so-called locked box mechanism); others provide for an adjustment based on accounts drawn up at the transfer date (completion accounts), which can move the final amount down as well as up.
• How are current accounts and cash treated? Two offers at the same price can lead to very different amounts depending on whether they include the cash, and on how they treat sums owed between the company and the shareholder.
• How much of the latent tax has been deducted? This is often where the gap between two offers lies. How a buyer values your shares.
• Is part of the price deferred or held back? Staged payment or an amount held in escrow is not worth the same as payment in full at signing.

How likely the sale is to complete

A high offer that never completes is worth less than a more modest one that does. Several items indicate how solid a buyer is:

• Financing. Does the buyer have the funds, or does the offer depend on a bank's approval? A financing condition shifts the risk onto the seller.
• Conditions precedent. The more numerous or broader they are, the more room the buyer keeps to walk away, or to reopen the negotiation.
• The exclusivity period. During this period you can no longer negotiate with other buyers. A long exclusivity granted too early leaves you with no alternative.
• The buyer's track record. Some buyers sign an attractive offer, then renegotiate the price during due diligence, once the seller is committed. Knowing how a buyer usually behaves is worth as much as the figure it proposes.

What you guarantee after signing

The liability guarantee binds the seller beyond the transfer. At the same price, two offers can create very different risks:

• its duration, and whether it is aligned with tax and social-security limitation periods;
• its cap, and the threshold below which no claim can be made (the basket);
• whether there is an escrow or a bank guarantee, and for how much;
• any specific guarantees requested on points identified during due diligence.

What the liability guarantee covers is explained here.

Timing and your personal guarantees

An offer that completes in six weeks is not worth the same as one that completes in six months, especially if you remain exposed in the meantime. Check too who arranges the release of your personal guarantees with the bank, and when: until it is obtained, you remain committed on a loan whose debtor you no longer control.

An example

Two offers for the same company:

On paper, offer A brings in 50,000 EUR more. In practice, it may never complete if the bank refuses the loan, it keeps you exposed for longer, and its uncapped guarantee leaves you facing unlimited risk for years. Offer B is often the better of the two.

Compare on a grid, not on a figure

Faced with several offers, build a grid showing, for each, the amount actually received, the certainty of the sale, the guarantees requested and the timing. It is the overall reading, not the price alone, that identifies the best offer.