Selling a Construction Business: How to Protect Your Reputation

As a service business, construction companies are built on reputation. A tarnished reputation in the industry can lead to a dried up lead pipeline and subcontractors less willing to commit to your projects. As a mergers and acquisitions firm, we specialize in marketing your construction business confidentially, preserving your reputation throughout the listing, offer procurement, and closing stages of selling your construction business. Here are some steps you can take as the business owner to protect your reputation during a sale.

Market Your Business Discreetly

The first step to protecting your reputation is marketing your business discretely. Owners sell construction businesses for a variety of reasons, sometimes sensitive in nature. In addition to preparing the financials and making sure the company is performing well, we take steps in preparation for sale to ensure that word does not get out about the listing. A good business broker will have discreet marketing methods to ensure the seller and business’ privacy while a list of prospective buyers is drawn up.

Selecting The Right Buyer

Given the immense value of a solid reputation in the construction industry, it’s imperative you sell your construction business to a strategic buyer. A strategic buyer is another construction firm that builds the same types of projects and has similar systems as you do. As an example, let’s say you sell custom homes in Central Texas. If you sell your company to another custom home builder in Austin, it will be a good strategic fit and the transition should go smoothly. However, if you sell to a homebuilder in Dallas that only builds tract homes, they will not be able to continue your legacy projects or replicate your systems and it could lead to customer confusion (and lost business). Working with a reputable business broker will help with the buyer selection process, vetting each offer and requiring an NDA before disclosing details about the business.

Ensuring Buyer Confidence

After you’ve selected the right buyer, you want to protect that new relationship with the prospective buyer. As the seller, you will likely go through a due diligence process where the buyer will perform their own investigation into your company. During this time, it’s important to keep your head down and not do anything that could tarnish your reputation. Don’t take any new projects that you can’t fulfill or go through a downsizing of employees. This will create customer confusion and could be red flags to the buyer that something isn’t right.

Letting Your Customers Know

Once you sell your construction company, it’s important to let your customers know about the transaction so they have time to get used to the idea. This can be done through a formal letter introducing the new owner and what it means for them as clients. You should send this out shortly after closing so your customers don’t find out from another source by accident. The post-acquisition integration plan will likely include the involvement of the seller to make introductions to vendors, subcontractors, and customers, as a sign of good faith in the new owner’s commitment to the firm.

Keeping the Business Running As Usual

The final step in protecting your reputation during a sale is to keep everything running as usual. You’ve likely worked hard to build a solid reputation in the construction industry and sell your business for an attractive price, so it’s important not to do anything that could jeopardize the sale at closing. As the seller, you will work with the buyer and your business broker throughout due diligence to ensure a smooth transition of ownership on closing day.

If you are looking to sell your construction business, it’s important to take the necessary steps to protect your reputation. If you would like to schedule a free confidential consultation please contact us and one of our experienced business brokers will contact you to set up an appropriate meeting time.