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Category: Business Brokerage Consultant

Sell a Business yourself
Business Brokerage Consultant, Uncategorized

Sell a Business Yourself?

May 6, 2016 by The Montana Group 0 Comments ,

Sell a Business yourself?

Often a business is owned and/or run by a very good negotiator so; why not just sell it without a broker, especially when the competitor is knocking? After all, the fee can be saved and how difficult can it be? Don’t you really just photocopy the financial statements and wait for an offer? Can’t the company lawyer or CPA just take care of it as he/she has taken care of about any and everything up to this point?

The answer is yes the business owner can and often does complete the sale of the business without a broker. But, the goal is not just completing the sale. Isn’t the goal completing the sale with the best possible overall transaction? This means not only maximizing the after tax cash but also maximizing the “extras” such as deferred compensation, non-compete agreement, carried interest in the company going forward, and post-sale employment agreements. As a company’s balance sheet changes daily, these fluctuations during the time of negotiations need to be included. It’s a moving target! Plus, most (if not all) private businesses expense certain items that in effect reduce the company’s tax liabilities yet are not really necessary in the operation of the business. These obvious expenses plus more innovative ones that can be justified and added back in recast financial statements could have a substantial positive effect on the overall transaction. A good business broker is aware of these enhancements and a large percentage of the time the overall transaction increase from these “add-backs” is much greater than the fee paid the business broker. Also, a good business broker will know what information is normal to provide and in what format (e.g. Customer Lists). Would it be helpful to know if the buyer Is simply over the line in its requests?

Now let’s also be realistic. Even if this buyer is indeed the buyer of choice for the business (and ultimately buys it) does it make sense to sell the company under the market value to them? Will a competitor who thinks they are allowed to buy the company without other buyers to compete with really offer a full price? Would you? Then buyer will also get the financial benefits of the easy elimination of unnecessary expenses, not the seller.

There are many former owners who wish they had not been “penny wise and pound foolish”. As the owner will only be selling their business once isn’t it simply prudent to have someone driving the transaction that has many years of successfully negotiating transactions … not learning as they go along, as the business owner who has never sold a business would be.

“Selling a business is a once-in-a-lifetime and lifestyle change that often affects multiple generations. So, use a specialist with years of experience. While this can be done by the business owner in an attempt to be frugal, our 25 years of this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.
Thinking of Selling Your Business?
Business Brokerage Consultant, Uncategorized

Before Selling Your Business 

Apr 5, 2016 by The Montana Group 0 Comments , ,

Top 10 Considerations Before Selling Your Business

  • Are your company’s recent sales and earnings trends desirable? The ultimate purchase price is significantly increased if the sales and the earnings have been growing over the past several years.
  • If your business lost its two largest customers what percentage of its overall revenue would be lost? If there is a concentration of business with a single or a few customers and they have other options it would be advantageous to dilute this before selling your business.
  • If you, the owner, are involved in the business is there an interest in continuing in that capacity or even a reduced capacity after the normal 1-2 year post closing transition? Are there qualified management candidates within your company to take over once you, the owner, retire post-sale? If not, such a suggestion outside the company may be of importance.
  • If there is significant value in the company’s real estate it may be advantageous to distribute it to the stockholders before selling the company and have the company lease it back at market rates.
  • Understand that the purchase price takes into consideration that there will be no interest bearing debt to be assumed by the buyer.
  • What is the corporate structure and which would be preferred, selling the assets or selling the corporate stock?
  • Is the ownership willing to have their broker discuss the company with the company’s competitors? Often this is an easier sale and for more money but also there are additional risks (e.g. industry talk, customer information, product or service pricing) not found when selling within the unrelated private equity market. If a quiet sale is the goal then discussions with a competitor are usually not recommended.
  • Make sure the broker that you select is paid only when the sale is complete and with a fee structure calculated to incentivize an increased sale price. Only success is rewarded. Determine who within the brokerage company will actually be working on the marketing and the negotiations of your company. Associates are not senior partners.
  • Understand that for the time to complete a sale a reasonable target would be about 6 months. Is this a good time within your business’ seasonality or its industry cycle?
  • Is there someone within your company who can confidentially assemble the required financial data without disrupting the company’s business and without exposing the process within the company?
“Selling a business is a once-in-a-lifetime and lifestyle change that often affects multiple generations. So, use a specialist with years of experience. While this can be done by the business owner in an attempt to be frugal, our 25 years of this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.
sales process explained
Business Brokerage Consultant, Uncategorized

The Montana Group’s Sale Process Explained

Mar 12, 2016 by The Montana Group 0 Comments

Sale Process Explained:

  • Initial discussions with the Owners to allow us to get to know each other.
  • Review of historical financial statements and Company marketing material.
  • Discussions concerning price expectations.
  • Execution of the Listing Agreement.
  • Receipt of necessary material to reconstruct the financial data and to assemble the Offering Memorandum.
  • Initial “Blind” email teaser to determine which of our Private Equity Groups has a current interest in the Company that we are now marketing. Also, specific marketing within the Company’s focus if so instructed by the Seller.
  • Execute a Confidentiality Agreement with each prospective Buyer.
  • Provide the Executive Summary of the Company to the Buyers.
  • Initial discussions to determine the level of interest with each Buyer.
  • Provide the complete Offering Memorandum which includes Financial Information.
  • Discussion with each Buyer to determine those that qualify to proceed.
  • Individual conference call with Seller, Buyer and the Montana Group.
  • Buyer provides non-binding valuation range.
  • Those with acceptable valuations are allowed a visit with Seller either on premise or offsite.
  • Buyers provide an offer sheet which is discussed with the Seller.
  • A Buyer is selected and the Due Diligence process begins which includes the assembly of much information and many meetings to discuss the Company.
  • A successful closing!

 

When Selecting the Advisor to Sell your Business?
Business Brokerage Consultant, Uncategorized

When Selecting the Advisor to Sell your Business?

Feb 2, 2016 by The Montana Group 0 Comments

The spectrum of business intermediary (advisor) is vast. There are those who are members of nationwide networks who can blast a company’s information throughout the country and abroad. There are those who believe the ideal method when locating the potential buyers should be a selection based on their acquisition history, their current acquisition interest, their ability to fund the transaction, and their overall success with their previously acquired businesses. This tier tends to include those that focus on businesses with a value greater than the aforementioned nationwide network model and is the focus of The Montana Group. (www.montanagroup.com)

The relevant questions to help someone determine the advisor most qualified and best fit for a business owner are based on the intermediary’s experience and how a company will be marketed. A review of completed transactions to determine the size range, geographic and industry focus of their completed transactions, an understanding of services offered and fee structure, the duration of their listing agreement and ability to cancel, the makeup and depth of their buyers, and the level of their involvement throughout the sale process will help in the selection. Also, who specifically will be working on the transaction and their experience and qualifications?

The optimal situation would be to obtain a full and fair proposal that assures the remaining employees that their future with the company continues to remain bright. Generally, those employees that are very good will be critical to the business going forward and will be treated very well by the new owner.  Often the buyer will want the seller top remain for a period of 1-5 years with a minority ownership but this is determined by the seller’s preference. The intermediary should further define the potential acquirer based on this preference as most buyers have a preference.

Often the company owner has a few potential buyers within their industry who have made it clear that they have an interest in acquiring that business. It is rarely a situation that does not require a business broker consultant, as the buyer will realize that due to the representation there must also be other interested suitors outside their industry who are difficult to predict and therefore an opportunity to purchase the business below market should not exist. The fee paid to the consultant should be return in multiples if the selected intermediary is successful.

“Selling a business is a once-in-a-lifetime and lifestyle change that often affects multiple generations. So, use an advisor who is a specialist with years of experience. While this can be done by the business owner in an attempt to be frugal, our 25 years of this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.