Between 1996 and 2002 I took a 6-year hiatus from the commercial software industry to try my hand as CIO of an investment bank. Specifically we did mergers and acquisitions - M&A. We represented the owners of mid-sized, privately held companies. Interestingly we didn’t represent ourselves when we were acquired by Smith Barney in 2001, but that’s a different story for a different day.

Anyone can sell their own business. Many do. One of the value adds that we offered our clients was the ability to line up multiple potential buyers in parallel. We justified our handsome commission in part because we could create a competition among buyers for the company we represented. Our goal was to present the seller with three or four letters of intent (LOI) simultaneously. The simplest principle of economics is that supply and demand greatly influences price. So if you have three buyers and one seller, demand exceeds supply, so theoretically the price is higher or the terms are better.

Without a pool of potential buyers, the one buyer negotiates against YOU instead of against the other potential buyers. The point here is that if you are an entrepreneur and you think it’s time to sell your company or time to raise capital (which is really just a partial sale), then you’d do well to heed the cry of the CEO of our M&A unit - “One Buyer is No Buyer!”