The Buyer is available for Co-Brokerage
Downpayment available: $ 250000
A financial statement is available for this buyer.
Preferred Location: Southwest (OK, AR, LA, TX) / TX
Experienced Operator seeking established Indian restaurant or conversion opportunity located in Dallas Fort Worth, Irving, Frisco, Plano, Austin, Houston, San Antonio. Will convert to Indian Vegetarian quick service, fast casual restaurant. Prefer 1500-2500 SF with seating 50+ and will provide catering, takeout.
KEYWORDS: restaurant, food, vegetarian Catering, biryani, biriyani Indian recipe, curry, south north cuisine spice spicy Asian Chinese Tandoori lamb goat mutton chili Tikka Masala Kofta Kabab Bhuna kashmiri
For information, contact us and reference Indian Vegetarian Quick Service Restaurant Buyer MB6031
Not the Indian Restaurant Buyer you’re looking for? Search other buyers at SEARCH OUR BUYERS, email or call us to discuss your opportunity. It may fit an active buyer’s search criteria. Thinking of selling: Contact us TODAY to Sell your Business
Indian cuisine encompasses a wide variety of regional and traditional cuisines native to India. Given the range of diversity in soil type, climate, culture, ethnic group and occupations, these cuisines vary significantly from each other and use locally available spices, herbs, vegetables and fruits. Indian food is also heavily influenced by religious and cultural choices and traditions. There has also been Middle Eastern and Central Asian influence on North Indian cuisine from the years of Mughal rule. Indian cuisine has been and is still evolving, as a result of the nation’s cultural interactions with other societies. Historical incidents such as foreign invasions, trade relations and colonialism have also played a role in introducing certain foods to the country. For instance, the potato, a staple of the diet in some regions of India, was brought to India by the Portuguese, who also introduced chillies and breadfruit. Indian cuisine has also shaped the history of international relations; the spice trade between India and Europe is often cited by historians as the primary catalyst for Europe’s Age of Discovery. Spices were bought from India and traded around Europe and Asia.
The Buyer is available for Co-Brokerage
Down payment available: $ 1,200,000
A financial statement is available for this buyer.
Preferred Location: Southwest (OK, AR, LA, TX) / TX
Restaurant Buyer, Experienced food operator has sold their restaurant and seeks established casual dining or fast food opportunity located in Frisco, Plano, Allen or Dallas general areas. Looking for location grossing over $1,000,000.
Not the buyer you’re looking for? Search other buyers at SEARCH OUR BUYERS, email or call us to discuss your opportunity. It may fit an active buyer’s search criteria.
The Restaurant Buyer is available for Co-Brokerage
Downpayment available: $ 2,000,000
A financial statement is available for this restaurant buyer.
Preferred Location: Southwest (OK, AR, LA, TX) / TX
Experienced multi-unit food operator seeks existing conversion opportunity located in Dallas Fort Worth Metroplex including Frisco, Plano, Allen or McKinney. Looking for location grossing over $1,000,000. Concept is American meals, craft beers, cocktails. Prefer rooftop Patio
Not the Conversion Restaurant Buyer you’re looking for? Search other buyers at SEARCH OUR BUYERS, email or call us to discuss your opportunity. It may fit an active restaurant buyer’s search criteria.
For information, contact us and reference Conversion Restaurant Buyer MB6033
Not the Indian Restaurant Buyer you’re looking for? Search other buyers at SEARCH OUR BUYERS, email or call us to discuss your opportunity. It may fit an active buyer’s search criteria
KEY WORDS: pub sportsbar beer whiskey liquor alcohol craft draft craft billiards pool grill tavern inn local neighborhood lounge country microbrewery brewery bartender cowboys rangers dallas stars NFL NBA Soccer NHL ESPN games superbowl stanley cup Sell my sports bar For Sale
Bar (also known as a saloon, tavern, pub or club) is a retail business that serves alcoholic beverages, such as beer, wine, liquor, cocktails, and other beverages for consumption on premises. Some types of bars, such as pubs, may also serve food from a restaurant menu. Bars provide stools or chairs that are placed at tables or counters for their patrons. Bars that offer entertainment or live music are often referred to as music bars, live venues, or nightclubs. Types of bars range from inexpensive dive to elegant places of entertainment often accompanying restaurants for dining. Many bars have a discount period, designated a happy hour to encourage off-peak-time patronage. Bars that fill to capacity sometimes implement a cover charge or a minimum drink purchase requirement during their peak hours. Bars may have bouncers to ensure patrons are of legal age, to eject drunk or belligerent patrons, and to collect cover charges. Such bars often feature entertainment, which may be a live band, vocalist, comedian, or disc jockey playing recorded music.
The Buyer is available for Co-Brokerage
Downpayment available: $ 800,000
A financial statement is available for this buyer.
Preferred Location: Southwest (OK, AR, LA, TX) / TX
Experienced food operator seeking established Indian restaurant or conversion opportunity located in Dallas Fort Worth, Irving, Grapevine, Plano, Frisco. Will convert to Indian Vegetarian restaurant.
KEYWORDS: restaurant, food, vegetarian Catering, biryani, biriyani Indian recipe, curry, south north cuisine spice spicy Asian Chinese Tandoori lamb goat mutton chili Tikka Masala Kofta Kabab Bhuna kashmiri sweets
Not the Vegetarian Indian Restaurant Buyer MB6032 you’re looking for? Search other buyers at SEARCH OUR BUYERS, email or call us to discuss your opportunity. It may fit an active buyer’s search criteria.
For information, contact us and reference Vegetarian Indian Restaurant Buyer MB6032
Not the Indian Restaurant Buyer you’re looking for? Search other buyers at SEARCH OUR BUYERS, email or call us to discuss your opportunity. It may fit an active buyer’s search criteria.
Indian cuisine encompasses a wide variety of regional and traditional cuisines native to India. Given the range of diversity in soil type, climate, culture, ethnic group and occupations, these cuisines vary significantly from each other and use locally available spices, herbs, vegetables and fruits. Indian food is also heavily influenced by religious and cultural choices and traditions. There has also been Middle Eastern and Central Asian influence on North Indian cuisine from the years of Mughal rule. Indian cuisine has been and is still evolving, as a result of the nation’s cultural interactions with other societies. Historical incidents such as foreign invasions, trade relations and colonialism have also played a role in introducing certain foods to the country. For instance, the potato, a staple of the diet in some regions of India, was brought to India by the Portuguese, who also introduced chillies and breadfruit. Indian cuisine has also shaped the history of international relations; the spice trade between India and Europe is often cited by historians as the primary catalyst for Europe’s Age of Discovery. Spices were bought from India and traded around Europe and Asia.
The Buyer is available for Co-Brokerage
Downpayment available: $ 750000
A financial statement is available for this buyer.
Preferred Location: Southwest (OK, AR, LA, TX) / TX
Expanding Indian restaurant seeking established Indian restaurant or conversion opportunity located in Dallas Fort Worth, Austin, Houston. Will convert to Indian restaurant. KEYWORDS: restaurant, food, vegetarian Catering, biryani, biriyani Indian recipe, curry, south north cuisine spice spicy Asian Chinese Tandoori lamb goat mutton chili Tikka Masala Kofta Kabab Bhuna kashmiri. Sell my Indian Restaurant For Sale
Not the Indian restaurant buyer you’re looking for? Search other buyers at SEARCH OUR BUYERS, email or call us to discuss your opportunity. It may fit an active buyer’s search criteria.
Indian cuisine encompasses a wide variety of regional and traditional cuisines native to India. Given the range of diversity in soil type, climate, culture, ethnic group and occupations, these cuisines vary significantly from each other and use locally available spices, herbs, vegetables and fruits. Indian food is also heavily influenced by religious and cultural choices and traditions. There has also been Middle Eastern and Central Asian influence on North Indian cuisine from the years of Mughal rule. Indian cuisine has been and is still evolving, as a result of the nation’s cultural interactions with other societies. Historical incidents such as foreign invasions, trade relations and colonialism have also played a role in introducing certain foods to the country. For instance, the potato, a staple of the diet in some regions of India, was brought to India by the Portuguese, who also introduced chillies and breadfruit. Indian cuisine has also shaped the history of international relations; the spice trade between India and Europe is often cited by historians as the primary catalyst for Europe’s Age of Discovery. Spices were bought from India and traded around Europe and Asia.
The Buyer is available for Co-Brokerage
Downpayment available: $ 800,000
A financial statement is available for this Indian Restaurant buyer.
Preferred Location: National / TX
Expanding Indian restaurant buyer seeking established Indian restaurant or conversion opportunity located in Dallas Fort Worth, Arlington, Keller, Grapevine, Irving, Frisco or surrounding communities. Will convert to North Indian restaurant.
KEYWORDS: restaurant, food, vegetarian Catering, biryani, biriyani Indian recipe, curry, south north cuisine spice spicy Asian Chinese Tandoori lamb goat mutton chili Tikka Masala Kofta Kabab Bhuna kashmiri
Contact Jeff Adam, PE, MCBC, FRC, CBB reference Indian restaurant Buyer MB6024
Not the Indian restaurant Buyer you’re looking for? Search other buyers at SEARCH OUR BUYERS, email or call us to discuss your opportunity. It may fit an active buyer’s search criteria.
At least once a week, we find ourselves looking through adjustments made to earnings before interest, taxes, depreciation and amortization (EBITDA) on a business for sale, and saying, “What in the world…?”
Adjustments can be perfectly acceptable. Owners run excess personal expenses through their business that would not be assumed by a future owner (i.e., fun trips, memberships). Sometimes, family members are paid far-above-average salaries and will not be continuing with the company. On justifiable adjustments, you’ll hear no contest from us. However, just because adjustments are justified, doesn’t mean they’ll leave a good impression on investors. We recently saw a business barely breaking even with a sizable adjustment for private air travel; such adjustments speak volumes about priorities.
Lately, we’ve started tracking some of the bogus adjustments people try to deduct out of companies. Here are some anecdotes illustrating how wishful thinking intersects with the bottom line.
Owner Compensation
The most common add-back is completely subtracting owner compensation, boosting the supposed bottom line by between $200,000 and more than $1 million. Yet, they are usually the leader(s) of the company.
Some owners work full-time, while others are serving in more of an advisory capacity, but unless they permanently reside in another state without any oversight of or contact with the business (including financial), they are doing something worth a dollar amount. That figure may not be the same amount they’ve been paying themselves, but it’s definitely not $0.
Leadership Compensation
A 150-person company had a leadership team of five people. All the leaders were paid quite well, based on below-market salaries and generous performance-based incentive compensation. The CIM argued that they were paid too well for the industry. So, each person’s salary was adjusted down to an industry average, reducing the overall leadership compensation pool by more than $600,000. When we inquired as to whether the current team would be staying post-transaction and under what conditions, the intermediary explained that the adjusted salaries were meant as a starting point and that each leader expected to renegotiate his/her total compensation with the new owner, including base salary, incentives, and equity.
Imagine walking into a company and saying to one of the key leaders, “Hi, we’re your new owners. We’ve heard you’re an essential leader within this company we need to work hard to keep, but we’re going to reduce your salary down to the industry average.” Would you stay? Why should a buyer account for less than anticipated compensation?
Sub-Contracted Labor Costs
A manufacturing company kept a lean full-time team, and used sub-contracted labor during seasonal periods, which is perfectly reasonable. What was not reasonable was the more than $200,000 adjustment for “excess costs of sub-contracting.”
A company can’t have it both ways. A bigger team means bigger year-round operational costs. A lean team means you take a hit when extra labor is required. Pick the operating style and own it.
Marketing Expenses
A particularly courageous CIM presented a list of adjustments that included more than $200,000 in marketing expenses. We immediately requested further explanation and were told that it was an ineffective online marketing campaign the company had run the previous year for a new product line introduction.
Ineffective spending is still real spending. Enough said.
“One-Time” Expenses
Adjustments related to one-time expenses are quite common. Two examples of creative implementation include the cost to develop a company’s website and inventory write-offs conducted every year.
There are occasional one-time expenses that should be adjusted out, but they are rare. We often find lots of recurring non-recurring expenses. More often, these expenses represent necessary costs of doing business above and beyond the line items that normally appear on a company’s annual income statement. The bottom line is that, regardless of whether it’s normal, if it’s a necessary cost of doing business, it shouldn’t be adjusted out.
Research & Development Expenses
Companies seeking to grow must engage in ongoing investment, including R&D. In one recent case, the revenue from a new product line was included, but the associated costs of developing that line were adjusted out.
New revenue streams aren’t delivered by stork. Sustainable businesses require ongoing investment, which a buyer will have to invest in as well.
Retroactive Change Benefit
Two recent CIMs added back projected savings from recent, or even yet-to-be-fully-implemented, changes in process or software retroactively to previous years.
You can’t change the past. The best way to present effective change improvement is to provide evidence of its actual impact and how it might look in the future.
Legal Fees
A company had an unfortunate two-year legal battle. The CIM adjusted out over $700,000 in legal fees related to the “one-time litigation event.”
If a company must enforce its position by legal action, or if its customers, suppliers, or competitors initiate suits against it, the company must spend real money. That won’t change with ownership, and evidence of a substantial legal history will tell a prospective buyer that such events must be accounted for in projections and valuation.
A productive question to ask in making EBITDA adjustments is whether a public company could deduct such expenses to boost earnings presented to shareholders. Can a CEO be adjusted out? Can a leadership team’s salaries be calculated as industry averages rather than what a company actually pays them? Can a website exist, be regularly updated, but not actually cost anything? No, unless you’re Enron.
Including EBITDA adjustments from Crazytown may help you feel like you’re presenting a better illustration of the company’s earnings potential for a prospective buyer, but it’s counterproductive. These types of adjustments create distrust with prospective buyers. And buyers are generous in estimates they must make independently. If you leave a gap, such as assuming there will be no acquisition costs in hiring competent leadership, the buyers will inevitably insert a big round figure into their formula to cover all unknowns.
The best advice on creating a list of adjustments? Be honest and conservative. The relationship with buyers will start out on a much warmer and productive path.
ABOUT THE AUTHOR
NAME: Brent Beshore
Brent Beshore is the founder/CEO of adventur.es, a family of companies investing in family-owned companies throughout North America
Are You Following These 4 Digital Marketing Rules?
By Dan Hammaker, Axial
It’s a new year, and with the swapping of calendars comes a great opportunity to evaluate how you’re being perceived online.
Like it or not, digital branding has never been more important to dealmaking. Here are a few easy digital marketing rules to help make your brand as attractive as it can be online:
1. Know Your Audience
According to the US Census Bureau, internet users skew towards being younger, wealthier, more urban, and better educated than the average American. Your digital brand, therefore, will need to be able to attract the attention of that cohort.
Users with higher education levels will comparison shop, so avoid hard and fast sales tactics to attract attention. Those actions will also cheapen your brand, and within an affluent crowd, price is less likely to be a primary buying factor. Instead, focus on customer service and building evangelists for your firm. Favorable client testimonials are nice to reference offline, but online, they’re crucial. You have no credibility on the internet without clients who can testify to the positive experience they’ve had working with you.
2. Give to Get
With competitors’ websites no more than a few clicks away, it can be hard to distinguish yourself in the eyes of a potential client you have no relationship with. Fortunately, the internet offers tools and a distribution channel you can use to build beginner-level relationships en masse.
A great way to start a new relationship online is by giving away something for free. It doesn’t have to be a physical product – instead, consider sharing a digital asset that costs nothing to reproduce. Whitepapers, webinars, and industry insights not only provide value to these potential clients, but also serve as great digital icebreakers to begin interactions between them and your brand. As visitors show more interest in your content, you’ll learn more about them, and all of a sudden you’ll be “getting to know each other.” From there, your conversation is more likely to advance and blossom into new business.
3. Interact Consistently
Inbound dealflow is a sign of a strong digital brand, but that doesn’t happen without outbound interaction to match. As with any relationship, the one you build between potential clients and your digital brand cannot be a one-way street. In order to draw people in, you need to be willing to put yourself out there.
Reaching out to people proactively can also be a great way to gather feedback on your other brand-building efforts. For instance, if you meet someone new at a conference, use LinkedIn or Axial search to learn more about that person, follow up, and reinforce your in-person conversation using digital collateral. Additionally, use posts in places like LinkedIn or Axial as opportunities to test and refine your message. Not only will you begin to better understand what your target clients want to hear from you, but, perhaps even more importantly, you’ll begin to understand what they don’t want to hear from you.
4. Show Personality
People don’t identify with firms — they identify with personalities. As a result, if your digital brand is going to successfully foster relationships, it’s going to need a personality of its own.
In the spirit of authenticity (another internet must-have), develop a personality that is consistent with your corporate mission and values. Avoid any attempts to pander or placate, however — they’ll be sniffed out and will ultimately backfire. Instead, look for issues and news that matter to you, develop a perspective on them, and find thoughtful, creative ways to share that perspective. What you’ll find is that you’ll begin to attract like-minded individuals that form bonds with your brand because they agree with it. Those kinds of bonds become galvanized by dissenters, helping you to carve out a niche of thought-leadership. The people that see things the way you do should cost less time and fewer resources to turn into clients.
ABOUT THE AUTHOR
NAME: Dan Hammaker COMPANY: Axial
Dan Hammaker is a Product Marketing Manager at Axial, where he helps CEOs and executives of private companies understand their options for growing and maximizing the value of their businesses. Dan graduated from New York University’s Stern School of Business with a degree in Finance.
Often when you decide to sell your business, you’ll find that many aspects of the business are not ready for a sale. Whether it’s incomplete financial statements, disorganized tax history, or simply miscommunication, the sale process can quickly become complicated and difficult. While it’s possible to prepare your business for sale rather quickly, these band-aid fixes will not be overlooked by diligent buyers.
The lack of planning unfortunately leads to lower sale prices and money being left on the table. Ryan Guthrie, Director of the Private Equity Practice, BDO USA, said, “The majority of business owners who sell their business don’t plan ahead in preparation of a sale. In most cases, a lot of things that could have increased the value of the business and decreased the risk for buyers were not done.”
So what can be done to prepare for an exit with an uncertain time horizon?
1) EXECUTIVE MANAGEMENT
The most essential step that a founder can take to prepare the business for sale is to build out a full management team that can run the business without you. While it takes significant time and attention to prepare a competent management team, it’s one of the most necessary ingredients for a profitable exit. With a strong management team, interested buyers can feel confident that the business will be prepared for most transitions, including the departure of a CEO. If a buyer doubts the ability of the company to run in the absence of the founder, it can prove an insurmountable deterrent.
These concerns are not limited to owners near retirement age either. Young owners have little incentive to remain involved once the business has been sold. Scott Humphrey, Executive Managing Director and Head of U.S. Mergers & Acquisitions of BMO Capital Markets, said, “In the case of an exiting owner, the buyer needs to come in and not only get comfortable with the business, but ensure the business will continue to grow without the owner. This increases risk greatly.”
2) MIDDLE MANAGEMENT
Larger middle-market companies often prepare for a sale by bolstering management, but far fewer companies take the initiative to develop a strong set of middle management talent. Expanding the management capabilities beyond the executive level reassures buyers and ensures a seamless post-sale transition. Many buyers of businesses are looking for well-run companies that have fairly independent and strong business units that will transition nicely after the sale.
3) FINANCIALS
While a common best practice is to prepare an audited set of financial statements two years before a sale, there are also financial preparations that can take place much earlier that will help ready a business for an exit. Foremost among them is the process of separating out the company’s real estate holdings from the rest of the business. Robert Snape, managing director at BDO Capital Advisors, said “we’ve often seen owners carve out the real estate from the business and sell the business to one party and sell the real estate to a separate buyer.” However, if an exit is a possibility in the next five years, Guthrie at BDO advises against making dramatic changes like relocating a factory or any other business change that would appear to disrupt a growth trend. If the real estate is held separately from the business, often you can sell the business and then lease the factory or warehouse back to the business owner to retain some of the earnings even after you exit the company.
4) CUSTOMERS
When there is a long-term horizon of sale, it is also beneficial to look at ways to add to the sustainability of earnings. Buyers want to see customer diversification and reduce the risk of losing key customers that would depart with the founder, especially if those customers make up a significant portion of the revenue. Data from Axial shows that the average amount of interest in purchasing a business is lower whenever there is significant concentration in a few larger accounts.
5) CORPORATE STRUCTURE
It is important to examine the corporate structure of the company. There are important tax consequences that come with selling C-Corp and S-Corp businesses. Guthrie advises company owners to keep the end in mind and to determine what the optimal corporate form would be for the business. “There’s not a lot you can do a year before the sale,” he warns. “But there’s a whole lot more you can do 10 years before the sale.” Checking with your accountant to ensure everything is set up correctly for a potential sale can have an effect on the final valuation of your business.
It is more crucial than ever for owners to plan ahead to maximize the enterprise value of their company. If the past several years have provided any lesson to sellers, it is that company valuations are at the mercy of the marketplace and business owners will want to be ready to take advantage of market timing.
Selling a company is a long and complex process. Preparing for a sales process takes at least 12 months, and then the actual process itself can take another 12 months. If you think of selling your business as something similar to a very long multi-year enterprise sales cycle, you’ll begin to realize that a business sales process is like any other sale process in that it can be broken down into its core component stages and elements.
This article provides an overview of the key stages of an M&A sale process, whether it’s for a lower middle market company, a large public company, or anything in between.
STAGE 1: DEFINING POTENTIAL OPTIONS AND EXIT STRATEGIES
When considering the sale of a business, there are potentially a wide variety of transaction options. These options must be understood and evaluated by the CEO, owner, and/or board. Understanding these options and the decisions they lead are the most strategic decisions a company will ever make when it comes to realizing value. Leveraged buyout, strategic M&A sale, minority recapitalization, ESOP, etc — these are all fancy investment banker terms but they essentially boil down to various methods by which a company sells itself or part of itself or to whom it sells. Buyers break down at a high level into two categories: financial buyers and strategic buyers. They both have their pros and cons. Neither one is better by nature, it’s highly situational. A good M&A banker will work with the business owner to understand the selling requirements, the range of valuation expectations, and strategic goals. This also includes defining: exit strategy alternatives; thinking through the most appropriate types of acquirers; timing of sale; tax consequences and owner’s desire for future involvement with the company (or lack thereof).
STAGE 2: DETERMINING A VALUATION RANGE FOR THE COMPANY
Determining a reasonable valuation range is a critical step in the process. If the banker thinks they can achieve a valuation range that isn’t acceptable to the owner, the process should stop right there. Too many deals get derailed by sellers and buyers having completely different expectations about business value. While it’s the job of the banker to close that gap with negotiation prowess and transactional expertise, immense gaps can’t be bridged no matter how skilled you are. Valuation technique ranges from the highly academic and analytical methods of discounted cash flow and dividend discount models (DCF and DDM) to the more pragmatic comparable company valuation methodologies. Unfortunately, none of them is a replacement for the actual process of engaging with high quality and highly relevant buyers. Analysis and number-crunching is necessary but not sufficient, and will only take you so far. In the end, the price is determined in the market by the buyers and the quality of your engagement with them.
STAGE 3: PRE-MARKETING VALUE ENHANCEMENT
Often, Advisory firms will review a company’s strategic and financial condition and have suggestions for how the company, over a 6-12 month period, can make some changes to make it more desirable. These should not be massive changes in strategy because those take too long and are risky, but should be valuable changes to management team or business strategy that make the business more attractive in a reasonably short period. Sometimes a trigger-happy CEO just wants to sell the company, but the best thing to do is make some changes and adjustments first before going to market. Again, working with a knowledgeable banker or informed board members that have relevant industry experience and business strategy context can be very valuable.
STAGE 4: INFORMATION GATHERING, DATA COLLECTION, AND PRESENTATION
Spending the time to properly aggregate, interpret, and present a company’s financial and business history and future projections is a crucial element of the sale process. This requires trust between a business owner and his M&A Advisor because at this point, the kimono is being opened. The engagement letter should reflect the confidentiality that an investment bank commits to before they have access to such sensitive information. Business owners typically prepare their financial statements for tax purposes, not for business sale purposes. Using tax statements for business sale presentation is a major mistake, as it usually obscures the earnings capability of a business. Taking the time properly present a company’s earnings power can have a big impact on how the buyers view the opportunity. Of course, the seller can go too far here and lose credibility, which is also a big mistake in the other direction. However, making sure that the appropriate financial adjustments are made is an important step and takes time and analysis by the CPA and the M&A team.
STAGE 5: MARKETING MATERIALS PREPARATION
When potential acquirers evaluate a company, they expect the records and facts to be properly organized and documented. Disorganized or poorly collated material on a business delays the process, looks sloppy, and therefore hurts the seller tremendously. It’s another area where many sellers are pennywise and pound-foolish and pay a terrible price for trying to save money in the wrong place. Well-packaged and presented business summaries increase a buyer’s confidence and comfort level and increase the likelihood of a successful sale. A business owner spends years establishing name recognition, market niche, vendor relationships, operation & production systems, management, personnel, distribution channels, customer loyalty and numerous other intangibles. This is a story that needs to be properly told to educate potential buyers.
STAGE 6: BUYER RESEARCH AND BUYER OUTREACH STRATEGY
While large multi-billion dollar companies often have only a handful of relevant and sufficiently capitalized potential acquirers, lower middle market companies (this generally refers to businesses whose value ranges generally between $10M and $250M) often have an enormous number of potential buyers. Some of these potential buyers are known to the business owner, some might be known by the Advisor, but no one’s rolodex is usually broad enough to know every potential buyer. This means that the banker and the business owner must have tools and resources to research and access the largest and most qualified data set of relevant buyers. Databases and tools of varying qualities exist out there, but there is no silver bullet. This research process should be exhaustive, not rushed. The banker should review competitors, customers, strategic buyers, private equity firms with relevant expertise, and other sources of highly suitable capital and partnership. This is one of the most time-intensive elements of the process but it often determines the overall success of the sale process. If you don’t approach the best buyers, how can you get the best outcome?
STAGE 7: QUALIFICATION OF POTENTIAL BUYERS
Many potential buyers that express interest in a business will not be qualified to purchase the company. These companies are referred to as tire-kickers. A good banker will know the right questions and have enough market intelligence and expertise to smoke these buyers out and pre-qualify the right potential acquirers before the tire-kickers impact the CEO or management team’s time and attention. This isn’t a particularly complex or time-intensive step, but if it isn’t done, the CEO will waste a lot of time and effort speaking with unqualified buyers and increasing the confidentiality risk of the entire process.
STAGE 8: NEGOTIATION PROCESS
There are many schools of thought on how to run the negotiation and buyer engagement process. Some Advisory firms suggest a negotiated process with only one highly targeted buyer. This strategy has tremendously high risk but can be extremely expedient if it works out. In general, Sellers are more likely to achieve a stronger outcome when negotiating with multiple qualified buyers, rather than just one or a handful. This can of course be taken too far as well, where every buyer feels like they are part of a huge auction process, in which case they walk away for fear of over-paying. Competition in a sale process does typically drive up purchase price and quicken the pace and accountability of buyers, but it should be handled carefully, respectfully and professionally.
STAGE 9: TRANSACTION STRUCTURE
The sale of a business has many financial and professional considerations for the management team / owner. The purchase price is only one component of the overall result. Other decisions and considerations include: stock sale versus asset sale; earnout; terms and interest rate on financing; liabilities assumed by the acquirer; employment contracts; non-compete agreements; current assets retained by the seller; stock ownership and equity options packages; relocation; employee preservation versus redundancy layoffs, etc.
STAGE 10: IOIS, LOIS, AND PURCHASE AGREEMENTS AND CLOSING
Typically, buyers express interest in a company at three stages through three documents: the IOI, LOI and Purchase Agreement. The IOI is non-binding and provides the proposed terms, valuation and structure for a transaction. The owner will review this with their banker and make a determination as to whether or not to invite the buyer to learn more about the company and become more serious. LOIs (letters of intent) are a more serious signal of interest by the buyer; once they are jointly executed, the seller is typically under exclusivity with that buyer, such that they are not able to meet with other buyers during a stated period of time. Meanwhile, that buyer is beginning to conduct heavy due diligence on the business with the intent of acquiring it. During the exclusivity period, the buyer must move quickly to determine if they want to proceed. If so, the purchase agreement must be drafted to define all the details of the transaction: legal, financial, representations, warranties, etc. The purchase agreement is the definitive document outlining the terms of the sale.
STAGE 11: POST-CLOSING ISSUES & BUSINESS TRANSITION
The transition period typically involves a period of cooperation during which time the seller will assist the acquirer in transition. There are instances in which the seller is specifically not interested in doing this, however a lack of willingness to ease the transition typically lead to a lower valuation and in plenty of cases can derail the deal process entirely. Sellers should proceed with extreme caution if they elect to have no post-closing commitment. Post-closing commitments often include transferring customer relationships, explaining key management or market dynamics, and other proprietary information and trade secrets needed to operate the business optimally.
