Sincerity in Buying and Selling a Business:
We believe it is essential for us as a company to be Sincere in all of our dealings with Buyers and Sellers.
Similarly, we encourage our Buyer and Seller customers to be Sincere in their dealings too.
We don't like buyers capitalising at the misfortune of the seller and vice versa. It is all about creating a win-win scenario for both Buyer and Seller.
What do we mean by Sincere? We believe the extract below is a great analogy to describe the word Sincere.
The English word Sincere is derived from the Latin - ‘sine cera’, which means ‘without wax’. According to our modern definition, “Sincere” implies an absence of pretence or hypocrisy and an adherence to truth.
As the stories go in the Roman world, it wasn’t unusual for pottery to crack after being placed in an oven to cure. A well respected potter would inspect his pottery after firing, and if any cracks were found, the vessel would be discarded and he would start over. Of course, this would increase the price and value of the piece of pottery. Less reputable potters would rub wax into the cracks and then paint over the imperfections and blemishes and pass off their pottery as perfect but sell it for cheaper prices than the fine quality pottery. The honourable pottery merchants placed signs over their stores and on their pottery bearing the phrase - ‘sine cera’ - meaning, in Latin, "without wax". It is the same idea in modern retail where products are stamped as “authentic” or “genuine”.
Some debate the truth of the ancient pottery stories, however, the idea of being Sincere, or, “without wax” in our personal lives holds water!
Careful and wise Buyers of pottery in Roman times would hold the pottery up to the sunlight. In this way they could see the wax and cracks in the pottery. Thus, the pottery was seen to be flawed as it had wax applied. The perfect pottery was ‘sine cera’ i.e. without wax.
So, for both Buyers and Sellers and of course our company too, we should be Sincere.
From a Buyers perspective, an example of this occurs when a Buyer doesn’t completely inform the Seller how they intend to purchase the Seller’s business from day one and thus the expectation of the Seller is badly handled e.g. often a Buyer will use the Seller’s assets to lever money (a Leveraged Buy-In) towards paying for shares, but this is not declared early on in discussions. Some Buyers also put no money down from themselves, and while in principle this may be acceptable in very few cases, more importantly the Seller is not informed of this until the Share Purchase Agreement is drawn up - at which point the penny drops and they back out of the deal - feeling very annoyed.
Similarly, from a Sellers perspective an example of this occurs when the Seller knowingly does not inform the Buyer of all the facts relevant for the Buyer to buy the business e.g. the Seller may know that an impending HMRC investigation could occur because they have been using one man band subcontractors and paid as self-employed firms, when in fact they are most definitely quasi-employees as they only have one customer i.e. the Seller. This would result in the company having to pay substantial tax post acquisition when the Buyer is now in charge, resulting in possible litigation.
No one is perfect, however, please, let’s all try our best to be as Sincere as possible, so that when the deal is ‘held up to the light’ (so to speak) we are all seen to be Sincere.
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