Understanding M&A Purchasing Agreements

M&A purchasing agreements can have a lot of moving parts.  A recent article from Meghan Daniels entitled, “The Makings of the M&A Purchase Agreement” serves to outline a range of facts including that every M&A deal is different.  The article, which serves as a general overview, raises a range of good points. Components of the Deal It should come as no surprise that M&A purchase agreements have various components.  Everything from definitions and executive provisions to representatives, warranties and schedules, indemnifications and interim and post-closing covenants are all covered in these purchase agreements.  Other key factors included in M&A purchase agreements are closing conditions and break-up fees. Advice for Sellers In her article, Daniels includes a range of tips for sellers.  She correctly points out that negotiating a purchase agreement (as well as the different stages involved in finalizing that agreement) can be both time consuming and stressful.  As any good business … [Read more...]

Key Mistakes that Could Impact Your Sale

The old saying, “an ounce of prevention is worth a pound of cure,” most definitely applies to any business owner that believes he or she will someday want to sell his or her business.  The bottom line is that every business owner has to transition out of ownership at some point.  In a recent Inc. article, “Four Mistakes That Could Lower Your Business’s Value and Weaken Its Salability,” author Bob House explores 4 mistakes that could spell trouble for business owners looking to sell. No doubt House explores some excellent points in his article, such as that you should always have what he calls, “a selling mindset.”  The reason this mindset is potentially invaluable for a business owner is that when operating in this way, sellers are essentially forced to stay on their toes.  Or as House writes, “a selling mindset encourages continual innovation, growth, and investment, helping your business stay ahead of the competition and at the top of its potential.”  Having a “selling mindset” means … [Read more...]

Effectively Utilizing Confidentiality Agreements

Every year countless great deals, deals that would have otherwise gone through, are undone due to a failure to properly utilize and follow confidentiality agreements.  A failure to adhere to this essential contract can lead to a myriad of problems.  These issues range from employees discovering that a business is going to be sold and quitting to key customers learning of the potential sale and taking their business elsewhere.  Needless to say, issues such as these can stand in the way of a sale successfully going through.  Maintaining confidentiality throughout the sales process is of paramount importance. Utilizing a confidentiality agreement, often referred to as a non-disclosure agreement, is a common practice and one that you should fully embrace.  There are many and diverse benefits to working with a business broker; one of those benefits is that business brokers know how to properly use confidentiality agreements and what should be contained within them. By using a … [Read more...]

The Hidden Benefits of Planning Your Succession Strategy

Succession planning is something that many business owners fail to think about; however, it turns out there are benefits to succession planning that might not be immediately obvious upon first glance.  In this article, we’ll explore a recent Accountancy Daily article, “Succession Planning for Business Owners,” which details the wisdom and benefits of succession planning. Accountancy Daily polled 500 SME owners and uncovered a variety of interesting facts.  At the top of the list is that one-third of owners felt more confident about the future of their businesses when they had a coherent succession strategy.  In what can only be deemed a surprising finding, the poll discovered that 17% of respondents noted that succession planning actually brought them closer to their families.  In short, the Accountancy Daily poll found that succession planning came with a variety of unexpected benefits.  In other words, it is about more than preparing to hand one’s business over to a new party. Author … [Read more...]

Great Tips for Helping You Find a Buyer for Your Business

No one keeps a business forever.  At some point, you’ll either want to sell your business or have to retire.  When the time comes to sell, it is important to streamline the process, experience as little stress as possible and also receive top dollar.  In Alejandro Cremades’s recent Forbes magazine article, “How to Find a Buyer for Your Business,” Cremades explores the most important steps business owners should take when looking to sell.  Like so many things in life, finding a buyer for your business is about preparation.  As Cremades notes, you should think about selling your business on the day you found your company.  Creating a business but having no exit strategy is simply not a good idea, and it’s certainly not a safe strategy either.  Instead you should “build and plan to be acquired.”  For Cremades, it is vital to decide in the beginning if your preferred exit strategy is to be acquired.  If you know from the beginning that you wish to be acquired, then you should build your … [Read more...]

The Variety of Variables Involved in Selling Your Business

Selling a business is more than a big decision, as it is also quite complex.  Finding the right buyer for a business is at the heart of the matter.  In the recent Forbes article, “Ready to Sell Your Business? Follow These 3 Tips to Find the Best Buyer,” author Serenity Gibbons outlines that selling a business is a multifaceted process with a lot of moving parts. A central variable for those looking to sell a business is to have a coherent and well thought out exit strategy in place.  She points out that at the top of your to-do list should be selling your business the right way, and that means having a great exit strategy in place.  In fact, many experts feel that you should have an exit strategy in place even when you first open your business. Another key variable to keep in mind is that, according to Gibbons, only an estimated 20% to 30% of businesses on the market actually find buyers.  This important fact means that business owners, who usually have a large percentage of their … [Read more...]

Dealing with Inexperience Can Ruin the Deal

The 65-year old owner of a multi-location retail operation doing $30 million in annual sales decided to retire.  He interviewed a highly recommended intermediary and was impressed.  However, he had a nephew who had just received his MBA and who told his uncle that he could handle the sale and save him some money.  He would do it for half of what the intermediary said his fee would be – so the uncle decided to use his nephew.  Now, his nephew was a nice young man, educated at one of the top business schools, but he had never been involved in a middle market deal.  He had read a lot of case studies and was confident that he could “do the deal.” Inexperience # 1 – The owner and the nephew agreed not to bring the CFO into the picture, nor execute a “stay” agreement.  The nephew felt he could handle the financial details.  Neither one of them realized that a potential purchaser would expect to meet with the CFO when it came to the finances of the business, and certainly would expect the CFO … [Read more...]

The Variables that Drive and Influence Business Valuations

If you’ve never bought or sold a business before, then the factors that drive and influence business valuations likely seem a bit murky.  In a recent Divestopedia article from Kevin Ramsier entitled, “A Closer Look at What Drives and Influences Business Valuations,” Ramsier takes a closer look at this important topic.  Business brokers and M&A advisors play a key role in helping business owners understand why their business receives the valuation that it does.  No doubt, the final assessed value is based on a wide array of variables.  But with some effort, clarity is possible. In his article, Ramsier points out that “value means different things to different buyers” and that the “perceived value depends on the circumstances, interpretation and the role that is played in a transition.”  It is important to remember that no two businesses are alike.  For that reason, what goes into a given valuation will vary, often greatly.  Looking to EBITDA Ramier points to several metrics including … [Read more...]

7 Big Questions to Ask Yourself Before Moving Forward

The first step towards successfully selling a business is finding a qualified business broker to work with.  Sellers should also ask themselves an array of important questions.  A recent article, “7 Questions to Answer Before Selling Your Business,” published by Good Men Project, has a great overview of questions sellers should answer before moving forward. Author Troy Lambert believes that at the top of the list is one very simple and powerful question, “Are you ready?”  For example, your financial reports should be ready to show. The second question is, “What’s it worth?”  Determining what a business is worth means you’ll need a professional business valuation.  A great deal can go into evaluating your business and you need an expert to help you determine that value. Third, Lambert believes that prospective sellers should ask themselves, “How’s the health of my industry?”  He emphasizes that honesty is key here for a variety of reasons.  If your industry is in a transition period, … [Read more...]

The Historic Levels of Small Businesses Being Sold Drops Slightly

The number of small business transitions continues to be strong for the first quarter of 2019.  In fact, despite a small decline, small business transitions remain at historically high levels. Looking at the Statistics According to a recent BizBuySell article entitled, “Number of Small Businesses Changing Hands Dips Slightly, But Market Remains Ripe for Buyers and Sellers,” now is still very much the time for both buying and selling a business.  It is true that the number of businesses sold in the first three months of 2019 dropped by 6.5% when compared to 2018.  Yet, it is important to keep in mind that the number of completed transactions remains very strong.  Likewise, inventory is increasing, with a 6.1% increase in listings in Q1 of 2019 when compared to the same period in 2018. While the market is indeed strong, the BizBuySell article did note that some experts feel that there are signs that the market could become more challenging moving forward.  In part, this is due to the … [Read more...]

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