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Tag: Selling a Business

Business Brokerage Consultant, Uncategorized

Selecting a Representative to Sell a Business

Oct 26, 2015 by The Montana Group 0 Comments , , , ,

“This sale is probably the family’s most financially significant occurrence, which will likely affect several generations. So, what are the important and ultimately valuable issues to consider when selecting a consultant to focus on the sale of a business?

”, says Emmett Barnes, President of The Montana Group, Inc. (www.montanagroup.com)

Experience: How many transactions has the representative successfully closed? What is the sale price range of the bulk of these transactions? What industries or specific focus are these sold companies?

Buyers: Where does the representative locate the potential buyers? What is their existing buyer database focus and how many? Can additional buyers supplement those obvious industry buyers to provide an outside perspective on value and also create competition?

Failed Transactions: Of the transactions that were listed and did not sell what cause these outcomes?

Past Sellers: Provide a list of completed transactions and the contact information for 4-6 that are available to be contacted for a reference.

Upfront Cost: Is there a retainer? Why is it necessary to pay without knowing the outcome?

Fee Schedule: Is the fee schedule formula very motivating for the representative? There should be a much larger percentage to push the price beyond an acceptable minimum.

Listing Agreement: Is the agreement cancellable at any time without penalty? If the negative outcome is apparent then why not move on?

Referrals: Does the consultant have well-qualified and experienced specialist such as merger and acquisition attorneys to recommend that have worked closely with them in the past? Wealth managers? Accountants?

Confidentiality: Would the consultant agree to provide a list of potential buyers that need pre-approval before contacting?


Issues: What operational or financial issues of the company could hold the price down and what are their recommendations to combat these?

 

Business Owners Pre-Sale Perspective
Business Brokerage Consultant, Uncategorized

Business Owners Pre-Sale Perspective

Oct 25, 2015 by The Montana Group 0 Comments , , ,

The prudent outlook of Business Owners:

As is often the case, business owners are totally focused on the constant issues of running their business. However, if they are contemplating the sale of their company it is time well spent to contemplate their business value in the eyes of the ultimate buyer.

The cash flow that the business generates is KING as this almost single-handily determines the value. The “almost” comes from other considerations like the balance sheet, the barrier to entry, and growth opportunities, to name a few. Therefore, their cash flow needs boosting, if practical. This, of course, comes from either increased sales or reduced expenses. The business owner may determine that this would require some difficult changes in direction (e.g. termination of an employee) and prefer to allow the new owner to make those tough decisions. But understand the transactional value will rarely include savings that have not yet been reflected on the income statement.

Irreplaceable business owners selling makes a business much less valuable! It is imperative for the business owners to understand that if post-closing there is no involvement in the business the potential new owner will be focused on the appropriate candidate to take over. If the buyer is an industry buyer (strategic) there could well be someone within the buyer’s organization who can run the newly acquired company. However, if the buyer is a financial buyer this candidate is more difficult to locate. Therefore, if the seller has an interest in staying involved in running the company post-sale or if there is someone else within the organization that is either now in-charge or is capable of running the company, then the buyer will more freely move forward.

Bottom Line: “Business owners should look at their business as they would if they were the buyer”, says Emmett Barnes, President of The Montana Group (www.montanagroup.com).

 

Buyer Dynamics: Strategic vs. Financial
Business Brokerage Consultant, Uncategorized

Buyer Dynamics: Strategic vs. Financial

Sep 28, 2015 by The Montana Group 0 Comments , ,
 Potential buyers of an operating business fall into one of two categories: Financial or Strategic.

Financial buyers are defined as those buyers who are strictly looking into acquiring a business as a good opportunity for an investment that is likely to increase in value. Unless a financial buyer has previously or is currently invested in a similar line of business each business stands on its opportunity to deliver a favorable return on their investment. So as a consequence each investment opportunity competes with the other such opportunities.

Strategic buyers are defined as those buyers who are already in the same line of business. This could be a direct competitor; a business that wants to expand its product offering by adding new related products; or a business operating in another trade area that wants to expand geographically.  While logically it makes sense that such a buyer would be willing and justified to pay more for the acquired company because of the economies of scale, often this is not the case when comparing their price to those of financial buyers. This can be attributed to strategic buyers inexperience in valuing a business, something a financial buyer does continually.

There is also often a stark difference in the owner’s post-sale involvement. In the case of a financial buyer it is most often a requirement that the seller who manages the business continue to run the business after the sale in order for continuity and because the buyer is not well versed in this type of business. Conversely, when the buyer is a strategic buyer the newly acquired business can incorporate the efficiencies of a similar business by eliminating management duplication, thereby increasing the overall profit of the combined businesses. So, when The Montana Group (www.montanagroup.com) is the consultant for the sale of a business we need to know the owner’s preference as to their involvement after their business is sold, which affects our selection of potential buyers.

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 and the business is making at least $2 million in pretax this is a great time to consider selling for there is pent-up demand from the buyside and the availability of companies to invest in is still lower than normal” says consultant Emmett Barnes, President of The Montana Group (www.montanagroup.com).
Business Broker Newsletter, Business Brokerage Consultant, Uncategorized

Newsletter on Selling a Business

Sep 15, 2015 by The Montana Group 0 Comments , , , ,

The Montana Group has, since 1991, consulted with business owners on how to improve the marketability and ultimately the business’ sale proceeds. This complimentary monthly newsletter focuses on issues that we have experienced while consulting with business owners on selling their business.