• 2870 Peachtree Road #504 Atlanta, GA 30305 USA
  • Free Consult(404) 816-7878 x205
  • E-Mail info@montanagroup.com

Is the business ready to sell?

Search Results for:

Uncategorized

Is the business ready to sell?

Jul 13, 2019 by The Montana Group 0 Comments , , ,

Practically every business goes through cycles that are caused by competitive pressure, the economy, or other external reasons. So when the time is right to sell it’s best to start the process before a downturn reappears.

  • Have the sales increased yearly for a few years? Upward trends in revenue are very important as they reflect an increasing demand for the company’s product.
  • Have the operating margins remained constant or even improved over these past few years? If not, make sure to explain in such a way that the potential buyers are not as concerned with this indicator that often points to increased competition.
  • Do these increases above have a likelihood of continuing in the near future? A buyer wants to avoid buying a business at its peak.
  • Is there a concentration of business in a couple of customers? If that is the case it would be advisable to add other customers to the total revenue, which will dilute the concentration. If it is not, a buyer will appreciate this spread of business.
  • Buyers prefer to purchase the business assets as this provides an income tax benefit in the future and also this significantly reduces the issue of unknown liabilities surfacing after the sale. If the company has elected “S” or “LLC” then selling the assets rather than the corporate stock can be provided to the buyer without significant tax detriment to the seller.
  • If the real estate is not company owned make sure to have a lease that is or can be extended to continue the new owner in the location.
  • Are there any significant capital expenditures that soon need addressing? If so, determine the cost and the financial benefits of the purchase and reflect this in the financial projections.
  • Are there any unnecessary costs that can be eliminated or reduced? If so, a business is value on the cash flow that it generates so seriously consider making these changes or least add them to the financial projections.
  • What are the growth opportunities? This could include industry expansion, weakness of competition, or simply improved business practices. A buyer will want this desirable option.
  • Is there existing management that can continue the business on its current path of growth? If so, this expands the potential buyer list, which should increase the price offered.

“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 with this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a success-based consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.

Business Pricing Issues
Uncategorized

The Montana Group – The Best Option

May 30, 2019 by The Montana Group 0 Comments , ,

What makes The Montana Group the best option for selling a business?

There are many various options when selling a business. Of course, one option is selling the business without representation. While this does indeed “save” the transaction fee the money saved is costly, as an accomplished intermediary will increase the sales price significantly over the fee saved. Another option would be to use a business owner’s attorney or accountant to act as the intermediary. This too can also prove costly as it is unlikely that these advisors have extensive experience is selling operating businesses and are unlikely to have the database and relationship with those additional buyers needed to create a competition necessary to increase the price for the seller.
 
The Montana Group has for 25 years sold profitable operating businesses with at least $2 million of pre-tax profits that are in the manufacturing, distribution, or service sectors. As our website (www.montanagroup.com) will illustrate we have sold businesses throughout the United States. We have a thorough database of 100’s of buyers with an understanding of their acquisition criteria, thus enabling us to contact well funded potential business acquirers. The Montana Group offers its services on a success based fee structure (no retainer) that aligns its interest with the owner’s, the transaction structure and price. This fee structure is highly unusual in the business brokerage world. These services include an accountant review to allow for the financial presentation in the format that best promotes the company and this includes the recasting of the historical income statements which increases the value of the business. As consultants The Montana Group has recommendations of those needed throughout all aspects of the sale process in order to increase the likelihood that the transaction indeed closes to the satisfaction of all.
 
It should also be reinforced that because The Montana Group does NOT charge a retainer then it is apparent that they feel confident in their ability to initiate and complete the sale of a company as only this results in a fee paid. It should also be noted that The Montana Group’s listing consulting agreement allows either party to cancel the agreement with a 30-day notice. This termination is also very unusual.

“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 with this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a success-based consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.
The Estimated Timing of Selling a Company
Uncategorized

The Estimated Timing in Selling a Company:

Apr 29, 2019 by The Montana Group 0 Comments

After executing an agreement to work with the representative firm here is the ballpark timing estimate:

  • The consultant will supply a list of financial data necessary to properly present the company’s historical, current, and future expectations. While this sounds very basic it really is an opportunity increase the ultimate price of the business, so merger and acquisition experience is ultra important. There will also be a list and conversations that will allow the presentation to provide an understanding of the company’s focus, method of operation, and makeup. This information is often time consuming to assemble however, it is critical to the ability to attract the proper acquirers who should make very competitive offers. The process really does not begin until this information is provided and the time required to assemble varies from days to weeks.
  • The consultant uses the information from the prior paragraph and assembles a memorandum presenting in a clear and encouraging format, which is based on their experience in selling similar businesses. This should be completed within a week to ten days.
  • The consultant approaches potential buyers based on the authorization of the seller. This starts with an initial thumbnail summary that is intended to remain anonymous and an initial conversation to understand the reason for the interest is followed by a Confidentiality Agreement (also known as a Non-Disclosure Agreement). After answering questions and supplying additional insight to the investment opportunity the non-binding valuations are presented. This phase should take 30-45 days.
  • The consultant and stockholders decide which valuations are attractive and appear to be a likely candidate. Conference calls between these suitors, the stockholders, and the consultant are made to present the company in more detail and to learn more of the suitors. This should be completed within 2 weeks.
  • Of those suitors who remain in the process are invited to tour the facilities. The interview goes both ways. Depending on schedules and the number of dates required this could take several weeks.
  • The consultant then discusses with the potential buyers their interest in proceeding, which is a Letter of Intent. Once the stockholders review these offers and the consultant negotiates to enhance the preferred proposals then one is selected. This could take from one to several weeks.
  • The due diligence process begins which is an extremely detail assemblage of information, visits from the buyer’s representatives and lenders, and the legal document negotiation and assemblage.  This could take two+ months.

Of course, every transaction is unique so this is only an educated guess. We at The Montana Group advise that six months is a good target and we strive for as expeditious as possible.

“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.

What makes The Montana Group the best option for selling a business?
Business Broker Newsletter, Business Brokerage Consultant, Selling a Business

What factors make NOW the time to sell?

Feb 9, 2019 by The Montana Group 0 Comments , ,
What factors make NOW the time to sell?

In an effort to explain why now (2019) is a great time to sell here is a basic understanding of the financial buyers, also known as private equity groups, their funding, and their motivation.

Private equity groups (PEG) are numerous and represent another asset class investment option, which is owning private operating established businesses. Their sources of funds include endowments, pension funds, wealthy investors, corporate funds, and their own funds. This asset class provides a semi-liquid investment that has frequently outperformed many other options such a publicly traded securities, public and corporate debt, and real estate. There is, of course, risk when investing in operating businesses and consequently the acquisition price is relative to this risk.

Private equity groups raise their money by obtaining commitments to invest when an acceptable acquisition is identified. These commitment sources often pay an annual fee to cover PEG’s overhead, a transaction fee to the PEG at the time of each acquisition, and a percentage of the ultimate resale profit once their equity investment receives a preferential return. So, the annual overhead fee paid focuses the equity sources to encourage their private equity group to actually invest their committed capital, in order to recover these fees plus have an opportunity to receive an attractive investment return. However, during the recent recession there were fewer acceptable businesses available as selling a business when its financial trends are down is not prudent and also potential buyers were understandably cautious from the economic conditions. So, overhead fees were paid by their capital commitment sources, yet investments were scarce and their overall investment returns were often less than expected.

Now that private corporate earnings are trending upward, a focus on selling a business is certainly more prudent. Particularly so, when well-funded buyers are numerous, the interest rates for acquisition debt is historically very low, and the recent economic improvement makes the business’ future appear brighter. In conclusion, “If your business is performing well financially, has upward increases in revenue and cash flow, and is making at least $2 million in pretax this is a great time to consider selling” says consultant Emmett Barnes, President of The Montana Group (www.montanagroup.com).