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Mergers & Acquisitions, Business Valuations, Profit Improvement, Refinancing



Phone: 484-645-4866

M & A Tips

Staging a Business for Sale

One of our primary services is making your business look as attractive as possible to potential buyers. Similar to staging a house for a quick sale, we can help you stage your business to get more and higher offers.

Staging a business is like a fireworks show, it helps grab attentionEach company is unique, and presenting the financial history in the most positive way is a skill and a process we've perfected to help attract buyers. Also, your position in your market and your customer base should be accentuated.

Staging, like a fireworks show, helps you to grab attention and build excitement in the opportunities your business can provide to new buyers by showcasing its potential!

We have had decades of experience in knowing what makes businesses sell at the optimum price and we can bring our knowledge to help you sell quickly and at the highest price.

Why Do You Need to Stage Your Business?

When an entrepreneur decides to sell the business, probably the most important thing they can do is to “stage” the company. If you’ve ever sold a house or a home, the realtor may have told you to do several things before putting it on the market.  For example, replace appliances, remove some shrubbery, put in new flooring, etc.  The real estate industry refers to this as staging the property.  Hopefully, this will attract more buyers, increase the value and sell quicker—all the things a business owner dreams of.

Staging a business for sale is very similar - make it more appealing.  Sure, signs can be painted, new lobby furniture secured, etc.; and should be done if necessary. However, the real value in any company is the financial return to the buyer.

Just like selling a home, selling a business can either happen quickly and efficiently or drag on for a long time. Don't waste time, and above all don't confuse the buyer by changing information during due diligence. Highlight the most attractive features of your company's financial history and the soundness of your market and customer base before you look for a buyer. It will not only attract more potential buyers but it will also result in a higher price for your company.

We consult with you to make sure the factors most buyers look at when buying a business look favorable—right from the start!

Contact us today at 484-645-4866 for assistance with
Staging Your Business for Sale!




How to Sell a Business:

Some questions to ask yourself before you offer your company for sale:

  • Is the company staged properly?
  • What items in the financial statements need to be addressed?
  • Do I know where my business is going?
  • Have I expressed it clearly in my business plan?
  • Do I know where to find and qualify a buyer?
  • Are my personnel and professionals ready to answer a buyer’s questions?
  • Am I ready to negotiate the terms and conditions?
  • Am I ready to sell?
  • Can my family run the business if I’m not around?

It’s important to know the answers to the above before starting the process. 

Here are some hints to get you started in selling your business.

Restructure P&L:

Several things should be done before the business is offered.  A review of the financials for the last five years needs to be done.  There are generally several expense items that need to be analyzed and adjusted.  Perhaps inventory, bad debts, prepays, etc. need to be addressed.  This doesn’t mean a wholesale change in the P&L, but rather a restructuring of the sales and expenses to be presented to the buyer along with the published financials and tax returns. 

The buyer will want to see the historical documents before any deal is consummated.  Giving the buyer the knowledge that more profit can be realized than what they see on the tax return is always favorable.

Projections:

Once the financials have been restructured, a cash and profit projection needs to be developed for future years.  This should be based on the best sales information available along with only the expenses that are absolutely necessary to allow the company to function.  These two pieces, restructured financials and financial projections are by far the most important documents to the buyer.  From these, they can assess the value and expected return that they can expect to get from the purchase.

Business Plan:

The next step is to prepare other necessary documents in a traditional package.  Things like a description of the company, the historical background, the company’s place in the industry, who or what market(s) the company serves, backgrounds on the key management personnel, etc. 

Each company will have its own unique elements in the package in order to better identify and explain to the buyer what they need to know before they make the purchase.

Finding a Buyer:

How to find a buyer can then be either very difficult or relatively easy.  A campaign to solicit any potential buyer in the world will take time and a lot of resources.  If done properly, it will usually result in the highest price.  However, quite often the buyer willing to pay the highest price is someone who already knows your company—and you probably already know who they are! 

Don’t rule out customers, vendors, competitors, employees, etc.  They may already be  interested.  The trick is not to let them know you have decided to sell until you can get a price agreed to.  How is that possible?  Engaging an intermediary to solicit their interest level can be quite effective.  It hides your identity until you find out if they have an interest and at what price.

Once a serious buyer has been identified and qualified, they need to sign a Confidentiality Agreement.  When this is executed, they are presented the package of information and allowed to view the facilities.  The next step is theirs.  Typically, a Letter of Intent is then received from the potential buyer.  If the seller concurs, the process shifts gears.

Due Diligence:

Next comes the tedious part—due diligence.  The buyer, with the “package” in hand, will then send a team of people to review and validate the information provided.  This can be very disruptive not to mention time-consuming if not managed well in the beginning by the owner. Specifically, books and records will be reviewed, equipment and vehicles assessed, real estate appraised, engineering studies analyzed, etc. 

Explanations will be needed and should only be provided by competent, knowledgeable people in the organization or qualified professional outsiders who have done their own due diligence beforehand.

When the buyer feels comfortable and has verified that the company is in an industry and position that make sense to their business and financial objectives, a formal offer is presented.  Remember, in a transaction involving a buyer and seller of a business, generally the seller sets the price and the buyer sets the terms.  Therefore, the offer is generally not just a number. 

Negotiations almost always follow a formal offer.  These can be done from a distance, but it will be to the seller’s benefit if they can be face to face in the owner’s facility or at least in their attorney’s office. 

Negotiations:

These negotiations don’t necessarily need to be tense and stressful.  However, they can be, especially if the owner(s) do the negotiating themselves. Remember the old adage that any individual who represents themselves in court has a fool for a client.  Well, that most certainly applies in a business sale. Fedirka Associates thrives on the negotiations, amking sure you get maximum value. 

All of our professionals have bought and sold their own companies, and anyone who has been through it themselves will tell you that there is too much emotion involved for an owner to always make logical, rational decisions. That doesn’t mean that the seller MUST complete the transaction at any price, but rather they will have the most realistic current information when making a final decision.

More potential deals are NOT made than are actually closed.  Human nature being what it is, many owners only THINK they want to sell.  People like to kick tires; sometimes their expectations are unreal; often, it’s just that the market is not ripe; sometimes it’s the 15% capital gains tax that has an appeal.  In any event, you, the owner, are always in control.

Closing the Deal:

Assuming that a deal is structured and agreed to, a Purchase and Sale Agreement will be prepared—generally by the buyer’s counsel.  This must also be reviewed by the owner’s attorney to ensure that it meets with their approval and conforms to what was negotiated.  There are also numerous boilerplate clauses designed to protect not only the buyer but also the seller.

Sounds simple, doesn’t it?  Well, as anyone who has been through it will tell you, there are myriad of problems that will occur and numerous pitfalls that the unsuspecting can fall into. 

Surround yourself with competent professionals like your lawyer and accountant.  In addition, professional facilitators who have a proven track record in M&A can be invaluable.  They can be not only a valuable partner but the more knowledgeable they are of your company, the more successful they can be in maximizing the price you receive while making the process run smoothly and efficiently, and ultimately much more enjoyable and rewarding for everyone.

Contact us today at 484-645-4866 for assistance with
Selling Your Business!




How to Buy a Business:

If you’re reading this section, chances are that you’ve already identified a candidate company that you might like to purchase. 

Some questions to ask yourself before you make an offer to buy a company:

  • Does the company complement or add to my current operation?
  • If I don’t currently own a company, is this company in an industry that I’m familiar with and/or does it present me with an opportunity that I can improve and capitalize on?
  • What items in the financial statements need to be addressed and further understood?
  • Do I understand the industry and do I know where it is going?
  • Does this company have the reputation and resources to keep it moving and growing—with or without you or your company’s involvement?
  • Do they have a business plan and is it informative and well documented?
  • Do I know where to find a quality company and is it for sale?
  • Are my personnel and professionals ready to ask the necessary questions of the seller?
  • Am I ready to negotiate the terms and conditions?
  • Am I ready to buy?
  • Can my family run the business if I’m not around?
  • Can I get out of this business at some future date?

It’s important to address and know the answers to the above questions before entering into the process.  Perhaps the last question should be the first.  Remember, it’s EASY to BUY a company; it’s much harder to sell a company.

Here are some hints to get you started in buying a business:

Finding a Seller:

How to find a seller can be either very difficult or relatively easy.  First, you need to analyze your situation as well as narrow your selection.  A campaign to solicit any potential seller in the world will take time and a lot of resources.  Even if you limit your search to an industry, the results could be overwhelming.  If you look only for those companies that are currently being offered for sale, as opposed to the total in the selection sample, that will reduce the volume.  However, how do you find those available for sale?  How do you approach them?  If done personally, and if they are not on the open market, it will usually result in the asking price being quite high.  There may be easier and more effective ways.

Companies currently being offered for sale through traditional brokers have usually been “picked over.”  Typically, an owner will first try to sell his or her company privately.  This is usually the easiest and best way if someone interested can be found.  After they’ve exhausted their efforts in this manner, they will then turn toward hiring a business broker.

Although, sometimes contacting brokers can be a source of finding the company you are looking for, there are other methods that have proven successful.   For example, don’t rule out customers, vendors, competitors, etc.  They may already be interested in selling.  If not, they might some day.  The trick is not to let them know you have an interest in buying them until you can get a price agreed to.  How is that possible?  Engaging an intermediary to express an interest level (blindly, on your behalf) can be quite effective.  It hides your identity until you find out what price they are asking or expecting.

Once an interested seller has been identified and qualified, you will both need to sign a Confidentiality Agreement.  When this is executed, you will be able to secure the package of information (Business Plan) and will be allowed to view the facilities.

Business Plan:

The Business Plan must be thoroughly reviewed.  A traditional package should contain the necessary and meaningful documents to evaluate the asking price.  Things like a description of the company, the historical background, the company’s place in the industry, who or what market(s) the company serves, backgrounds on the key management personnel, etc.  Probably the most important element will be the financial statements, both historical as well as the company’s forecasted projections.

Each company will have its own unique elements in the package in order to better identify and explain to the buyer what they need to know before they make the purchase.

Projections:

Once the historical financials, as well as the tax returns, have been analyzed, a cash and profit projection needs to be developed for future years.  This should be contained in the package, but if not, you will need to develop it for yourself.  This will not only tell you if the business has the required return that you want, but also will tell you how much money you will need to invest/borrow in addition to the purchase price.  This projection should be based on the sales information provided.  You need to validate these projections and adjust them as you deem necessary.

Also, a part of this process is to determine the expenses that are absolutely necessary to allow the company to function.  There are generally several expense items that need to be analyzed and adjusted.  Perhaps inventory, bad debts, prepays, etc. also need to be addressed.  This information can be developed after Due Diligence (see below) provides you with the information to identify the “extraneous” expenses that the company incurs for the personal benefit of the owner(s).  These two pieces, the seller’s restructured financial statements and the cash projection are by far the most important documents to you, the buyer.  From these schedules, you can assess the value and expected return that you can expect to get from the purchase and develop your offering price.  These documents need to be developed not only from an accounting point of view, but more importantly, from a business and marketing vantage point if you are to be successful in achieving the gains you initially saw for the business.

Letter of Intent:

Before Due Diligence is performed, an interim step needs to be initiated by the buyer—a Letter of Intent.  Once you have reviewed the necessary documentation, and initially visited the facilities, you will need to prepare a Letter of Intent and provide it to the seller.  In this short document, you will profess your interest in the company and address the asking price. You will provide some clauses limiting your liability at this point.  This letter assures the seller of the sincerity of your interest.  When the seller accepts and concurs, the process shifts gears.

Due Diligence:

The most tedious part in any merger or acquisition is the due diligence.  With the Business Plan in hand, you will then need to send a team of professionals to review and validate the information provided.  This can be very disruptive, not to mention time-consuming if not managed well in the beginning by the owner and yourself.  Don’t expect the owner to be prepared.  If he/she is, that’s great.  If not, you will need to organize the elements before you begin.  Specifically, the books and records will need to be reviewed, equipment and vehicles assessed, real estate appraised, engineering studies made, etc.  Send the seller a list of the things you will want to review in your investigation.  Each case is different.  Some of the items are listed above, but there will almost always be unique schedules that you will also want prepared by the owner for you to examine and review.

Explanations will be needed and should be provided by competent, knowledgeable people in the seller’s organization or by the seller’s qualified outside professionals who have done their own due diligence beforehand.

When you’ve completed your review, feel comfortable, and have verified that the company you are seeking to buy is in an industry and in a position that makes sense to you and your business and financial objectives, a formal offer is prepared and presented.  Remember, in a transaction involving a buyer and seller of a business, generally the seller sets the price and the buyer sets the terms.  Therefore, the offer is generally not just a number, but may contain other provisions and terms including clauses protecting you, the buyer, from any misrepresentations, unknown liabilities, etc.

Negotiations will almost always follow a formal offer.  These can be done from a distance, but it will generally be to the buyer’s benefit if these discussions can be face-to-face in the owner’s facility or at least in their attorney’s office.

Negotiations:

These negotiations don’t necessarily need to be tense and stressful.  However, they can be, especially if the buyer(s) do the negotiating for themselves.  Remember the age-old adage that any individual who represents themselves in court has a fool for a client, that adage most certainly applies in a business sale. Fedirka Associates have an excellent track record in working towards your best interest in the negotiation process.

All of our professionals have bought and sold their own companies—but have had professional help to assist them.  Anyone who has been through a merger or acquisition themselves will tell you that there is too much emotion involved for a buyer (or seller) to always make logical, rational decisions.  An outside professional who understands the process, analyzes the data and personnel, and has valuation knowledge and experience will materially aid the buyer in his/her quest.  That doesn’t mean that the buyer MUST complete the transaction at any price, but rather the buyer will have the most realistic, current information and receive a thorough explanation of the situation before making a final decision—one way or the other.

More potential deals are NOT made than those that are actually closed.  Human nature being what it is, many buyers only THINK they want to buy.  People like to kick tires; sometimes their expectations are unreal; often, it’s just that the market prices are inflated.  In any event, you, the buyer, can write a check or retract your offer at any time.

Closing the Deal:

Assuming that a deal is structured and agreed to, a Purchase and Sale Agreement will be prepared—generally by the buyer’s counsel.  This must also be reviewed by the owner’s attorney to ensure that it meets with their approval and conforms to what was negotiated.  There are also numerous boilerplate clauses designed to protect not only the buyer but also the seller.

Sounds simple, doesn’t it?  Well, as anyone who has been through it will tell you, there can be a myriad of problems that will occur and numerous pitfalls that the unsuspecting buyer can fall into. 

Surround yourself with competent professionals like your lawyer and accountant. In addition, a professional facilitator who has a proven track record in M&A can be invaluable. If they are knowledgeable in valuing a company, and skilled in the art of negotiations, they cannot only be a valuable partner but the more knowledgeable they are of your target company, the more successful they can be in minimizing the price you pay. In any event, Fedirka Associates has helped many buyers to make the process run smoothly and efficiently and ultimately much more enjoyable and rewarding for everyone. Remember, a fair deal is the ONLY good deal!


Contact us today at 484-645-4866 for assistance with
Buying a Business!