| "body"> | | | | many companies match or come close to your |
| You've thought seriously about selling your | | | | company's revenue stream.o References, and |
| business but you really don't know where to start. | | | | you must check them, are excellento What |
| You have heard some horror stories about | | | | industries do they specialize ino What is the size |
| different selling processes, paying an upfront fee | | | | of their firm? You don't want to be a little fish in |
| and settling for less than what you really wanted | | | | the ocean but you also don't want to be a whale |
| but people get so far into the process that they | | | | in a pond.o How many active qualified buyers do |
| can't turn back. You're not really big enough to | | | | they have in their data base? It should be |
| hire one of the Wall Street investment bankers | | | | hundreds if not thousands.o How many private |
| and you don't know any reputable mergers and | | | | investment funds are they connected to? |
| acquisition firms. | | | | . |
| Does this sound familiar? Don't despair, you are | | | | TIP #5 The Basic Steps in Concluding a Sale. |
| not alone. Most owners of small businesses with | | | | Things are going to get both exciting and |
| sales revenue ranging from $5 million on up to | | | | frustrating. Again, the following steps apply |
| $100 million face these same questions and these | | | | regardless of who sells your business but are |
| same doubts. Hopefully the following tips and | | | | primarily the steps utilized by an M&A firm |
| steps will help put your mind at ease and provide | | | | taking your business to market. |
| some direction as to what actions you may or | | | | Step #1. TARGETED BUYER SEARCH |
| may not want to take. | | | | A targeted buyer search is performed from a |
| TIP #1 - Preliminary Assessment of Company | | | | data base of potential buyers and investment |
| Value | | | | funds. If you are using an M&A firm this data |
| Preliminary is the key word here. Most owners | | | | base will more than likely be over 10,000 in |
| have an idea of what their business is worth and | | | | number. A list of potential synergistic buyers will |
| what they would settle for if they decided to sell. | | | | be the result of this search. This list is reviewed |
| Unfortunately, statistics show that most owners | | | | by ownership to discard any obvious mismatches |
| have an opinion of value that is generally higher | | | | or personal owner concerns about anyone on the |
| than what the market will bear. So before you go | | | | list. A second formal valuation that includes |
| off and hire that New York M&A firm or go | | | | equipment and property appraisals may be a |
| to that seminar about selling your business talk to | | | | desirable option at this point. |
| your accountant, a favorite consultant that you | | | | Step #2. INITIAL BUYER CONTACT & |
| know or have done business with, your banker or | | | | DATABASE PLACEMENT |
| even your attorney. Do some networking and | | | | Targeted Buyers & Investment Funds are |
| you may find that you can get a preliminary | | | | contacted via mail, which includes the Confidential |
| valuation done for a much smaller fee ($1700 to | | | | Profile. Concurrent with the above activity, the |
| $2500). This will at least give you a platform value | | | | client company is listed on the Merger & |
| and some knowledge to determine your next | | | | Acquisition on-line database, presenting the |
| steps. (E-mail for more information on a | | | | acquisition opportunity to the database's |
| preliminary valuation utilizing industry methodology) | | | | registered buyers. Interested buyers and other |
| TIP #2 - Have a Strategic Business Review | | | | M&A intermediaries generally will respond via |
| Performed | | | | E-mail. .Personal Follow-up to determine potential |
| You had a preliminary valuation done and you are | | | | buyers' interest in obtaining The Confidential |
| comfortable enough to take the process to the | | | | Strategic Business Review Report is conducted to |
| next level. That means you need to have a | | | | ascertain interest. |
| strategic assessment completed. This can be | | | | Step #3. INTERESTED BUYER CONTACT and |
| performed by you as the owner and any family | | | | FOLLOW UP |
| or confidant that you have in the business. | | | | Upon receipt of an endorsed Non-Disclosure |
| However, it is recommended that you have an | | | | Agreement, The Confidential Strategic Business |
| outsider perform this assessment. As owners | | | | Review Report is sent to interested buyers |
| working in the business on a daily basis, it is often | | | | investors. The M&A firm or your |
| difficult to see the broad scope of the | | | | representative follows up with interested buyers |
| organization in total. You need to know just how | | | | and provides additional information as may be |
| ready your business is for the selling process. | | | | required. Buyer's credibility (ability to buy) needs |
| There are numerous readiness factors to explore | | | | to be verified at this point. A buyer visit is |
| before you make that final decision to sell. Failure | | | | arranged to view the premises and speak with |
| to go through this assessment and correct or | | | | ownership. This visit can be arranged for after |
| compensate for any issues that may be | | | | hours if ownership is concerned with |
| uncovered can cost you hundreds of thousands | | | | confidentiality. |
| of dollars in the selling process. You can have a | | | | At this point discussion and counsel needs to |
| strategic business assessment done by any | | | | occur to prepare relative to pending buyer visit |
| number of wholesale distribution consultants. Prices | | | | and preparation of buyer visit agenda with |
| will range from $5,000 up to $15,000 for this | | | | meeting objectives that have been |
| process. You may decide after reviewing this | | | | predetermined. (Management presentation, |
| assessment that the time is not right to maximize | | | | facilities tour, additional documentation required, |
| share holder value by selling the company. It could | | | | buyer-client interface & discussion guidelines |
| make more sense to continue to grow the | | | | and other relevant details to ensure a positive |
| business by following the recommendations | | | | image and successful meeting). |
| outlined in the assessment. | | | | Step #4. Getting a Letter of Intent |
| TIP #3 - Who is My Buyer? | | | | Confirmation of buyer(s)' interest in pursing a |
| You had an assessment, you put lipstick on the | | | | transaction and obtaining of a Letter of Intent is |
| pig (fixed any issues uncovered) and now you | | | | the number one objective. Ideally several offers |
| decided to take your baby to market. Don't jump | | | | presented for comparative purposes and obtaining |
| right into the M&A arena and hire that big | | | | the most favorable price and terms will maximize |
| mergers and acquisition firm. Chances are very | | | | the value of the sale. Of course you are not |
| good that you already know who the buyer or | | | | obligated to accept any offer presented. A letter |
| buyers might be. Is it your biggest local | | | | of intent is a basic contract that states the buyer |
| competitor, one of the national firms, one of your | | | | will acquire the business at a suggested price |
| suppliers or customers looking for vertical | | | | assuming all details and financial information |
| integration or could it be one of the many | | | | submitted is accurate and passes due diligence on |
| investment groups. Do your homework before | | | | the part of the buyer. |
| you commit to paying the type of commission | | | | Your representative should interface with your |
| you will end up paying with even a smaller | | | | professional advisors (CPA, attorney, financial |
| M&A firm. Explore the internet and look at | | | | planner etc.) as may be required in providing their |
| businesses for sale or companies that are looking | | | | assessment of a proposed transaction. Guidance |
| to buy. Talk to your association. You may end up | | | | should be provided relative to negotiation of deal |
| with several interested parties that can drive up | | | | points and other issues as may be required. |
| the price without paying high commissions. (Of | | | | Step #5. Due Diligence and The Deal |
| course, the minute you start discussing a sale | | | | Consummation |
| with any potential buyer be sure to get your | | | | Assistance should be provided to prepare for the |
| attorney involved) | | | | buyers due diligence. Don't try to conceal or hide |
| TIP #4 - I'm Ready to Sell, What Now? | | | | the dirty underwear. Own up and show what has |
| Whether you do it yourself because you know of | | | | been done to put it in the wash. Honesty is |
| numerous prospective buyers or you decide it's | | | | essential. Generally speaking, the process is |
| too much hassle and look for professional | | | | predominantly financial. However, employee |
| M&A help, the next step is to create a | | | | concerns and other issues may arise. Your |
| comprehensive document, The Confidential | | | | representative should be available or on cite |
| Strategic Business Review Report. This document | | | | throughout the process. A thorough inspection of |
| describes your company in detail. It includes recast | | | | inventory and accounts receivable are a key part |
| financials. (Financials that are adjusted to create a | | | | of due diligence. Experience tells us that inventory |
| realistic EBITDA taking out owner perks that | | | | value is always a bone of contention. What is |
| would not be costs to a new owner) EBITDA is | | | | aged, ailing and dead inventory valued at? Be |
| earnings before interest, taxes, depreciation and | | | | prepared for further negotiations. Have a heart to |
| amortization. Acquisitions are often made as a | | | | heart with your advisers. Make sure they have a |
| multiple of EBITDA. | | | | comprehensive understanding of your objectives. |
| If an M&A firm represents you, preparation | | | | Keep in mind that although most good attorneys |
| of a one-page Confidential Profile which highlights | | | | are deal makers, some are deal breakers. |
| the acquisition opportunity without disclosing the | | | | This process sounds more complicated than it |
| name and location of your company is essential. | | | | really is. The real difficulty lies in the initial decision |
| This profile is used during the initial buyer/Investor | | | | on whether you should sell your business or not. |
| contact phase. | | | | Although this article indicates that selling your |
| At this point, make sure that the firm you pick | | | | business yourself is possible, and it is, make no |
| matches your company and even more | | | | mistake it is not recommended that you attempt |
| important, make sure you are comfortable with | | | | to sell your own business without proper |
| them. Factors you should consider when selecting | | | | consultation from professionals that know the |
| an M&A firm include:o How many companies | | | | mergers and acquisition business. |
| have they sold in wholesale distributiono How | | | | . |