Blog Archives
CAPS Trust saves client $1.2 Million
We recently saved Adam and Julie a whopping $1.2 Million when they sold their business. Visit www.CAPSTrust.com for details.
New Listing – Business Training
If you have ever wanted to own a business that allows you flexibility of time and location this is the business for you. We have just listed an excellent opportunity for the right person.
Just Sold – Car Audio Video Retail Store
Business Sales Group is pleased to announce the completion of the sale of a Car Audio Retail Store. This store was the oldest and largest store in the region and #1 in sales for many years in a row. They provide car and marine audio, video systems, breathalyzer testing equipment, upholstery, heated seats, and keyless entry systems. See: http://www.bsalesgroup.com/our-listings/car-audio-video-store-for-sale-2/
BUSINESS SALES GROUP is a Business Brokerage/Mergers and Acquisitions Firm specializing in selling good businesses with high growth potential. Rick Krebs and Heather Krebs provide sales-side and buy-side advisory services to medium-sized businesses.
USING ATTORNEYS EFFECTIVELY WHEN CLOSING A M&A DEAL
USING ATTORNEYS EFFECTIVELY WHEN CLOSING A M&A DEAL
Once again, you have worked for months to get a deal done. The Buyer and Seller are excited, a LOI has been drafted and it is time for the legal work to start. Once again, the theme of the transaction turns from excitement to adversarial. Once again, after many hours of hard work and negotiation, you get the deal closed in spite of the attorneys involved. Has this scenario ever happened to you?
Attorneys sometimes approach deals like court; you ask for and get as much as you possibly can on every issue. This approach works well in a court case, but fails miserably in an acquisition. Attorneys are generally used to scrapping. They like to fight. They operate in a world where you fight and claw your way in the battle and get every advantage you possibly can, giving up nothing without a fight because winning is about gaining every possible advantage over your adversary that you possibly can through the process. Unfortunately, the wrong attorney will use this approach to an M&A deal and it fails miserably. As an M&A professional, you need to know how to effectively use attorneys in the process. This article will help you as you maneuver the sometimes treacherous waters of using attorneys to draft the closing documents.
THE APPROACH
Tackle small issues first, then move on to large issues. Give generously on small issues in the beginning then you can hold back with important issues later. This strategy works for getting the important things you want and showing the buyer you are willing to work with him.
People want to work with people who are workable. Do not take “hard lines” on anything at first, but wait to hear from the other party about their thoughts before making demands. Using your M&A advisor during this phase is helpful.
Ask: What is my risk? If I accept the proposed changes, what is the downside? What do I give up? What is the likelihood this event will happen? Am I willing to accept this risk? What dollars would it cost?
Ask: How important is this issue? There may be a time when you are willing to accept the risk and leave the documents alone.
BEFORE YOU START
Make sure attorneys know:
- Share your approach and strategy for the transaction. The approach and strategy is much different in a business sale than other transactions because the relationship of the Buyer and Seller will have post-closing.
- Buyer and Seller have to work together post closing – need to be fair and meet in the middle sometimes. If they carry battle wounds from the negotiations, they are less likely to get along post-close.
- Inform everyone that no one ever gets 100% of what they want. Both sides need to acquiesce in order to get the deal done and negotiate a favorable outcome for both sides.
- Itemize a list of your concerns and the concerns identified by the attorney both before you start and during the drafting of the documents. Once you have a list, prioritize each item on a scale of 1-10. As you negotiate the deal knowing beforehand which items are important and less important helps you get favorable results.
- What we need to know from the attorney is:
- How important are the issues identified by the attorney in the paperwork as problematic?
- What is downside for the Seller for each of these issues?
- What do the documents lack? What needs to be changed/corrected?
- We’ve worked hard to get to this point and we need you to do everything you can to NOT KILL the deal.
- Make sure they know of timelines and they agree to meet them, even if it requires after-hours work.
- The documents do not favor one party over the other as a general rule. The documents are designed to protect parties and outline duties, warrants, and responsibilities of each party.
Remember, attorneys are experts in law and not business. Use them for what they do best. If they start giving business advice, beware of that advice. It may not be that good. A wise man once said: “don’t take financial advice from someone who makes less money than you do”.
Mergers and Acquisitions Division Closes Materials Handling Transaction
Business Sales Group is pleased to announce that our M&A Division has crossed the finish line on another transaction! The deal was a leveraged buy-out transaction with funding provided by Chase Bank. The Materials Handling Company has a dealer network in Utah, Nevada, Idaho, and Montana. The company is the largest Retail and Wholesale distributor of non-mechanized materials handling equipment in Utah. Congratulations to the new and old owners!
Recent Sales – 2 businesses sold!!!
Our Small Business Division has recently completed the sale of two excellent businesses: an Automotive Repair Business and an International Importer of Beauty Supplies including a retail store/salon. We congratulate the new owners and are looking forward to their success!
Buy a business….sell a business….Business Sales Group can get the job done!!
HOW TO PREPARE FOR A TOUR WITH A POTENTIAL BUYER
We often have questions from Sellers about what to do and how to handle a meeting with a potential buyer. This article is to help Sellers prepare for meeting a Buyer for the first time.
SITE PREPARATION
This may seem obvious, but it is important and needs to be mentioned. The saying that first impressions are lasting impressions is true. You only have one chance to make a first impression so do everything you can to make it a lasting impression. Make an assessment of where you will be meeting and then take steps to ensure that it is tidy and clean. Having the janitorial staff make an extra stop the day before the meeting is a good idea. If you own the building then make a call to your landscaper/groundskeeper and have him tidy up the outside of the building and clean up any trash that may be around. If you will be meeting in an office then clean that office. Remove the clutter from you desk; dust and organized the files that have been sitting around for a while. All of these things will help make a good first impression and lasting impression on the Buyer’s mind which is what you want to do.
DRESS
On the day of the tour you will want to dress as you normally dress when you go to work. Make sure your clothes are clean and without holes if your business is more casual. If your business requires business attire, then wear your best suit, shirt and tie. As a broker, I will prep the Buyer as to how he/she should dress to match the occasion. Believe it or not, the Buyer’s also ask me how they should dress. We try to match Buyer with Seller so both parties feel comfortable.
WHAT TO SAY
- Be natural and express the passion you have for the business.
- Highlight the good things about your business and what you do.
- Listen to the Buyer and do not talk over him/her. The conversation should be natural and not rushed.
WHAT NOT TO SAY
- Don’t point out all of the flaws of your business. Highlight the positive. Don’t elaborate on all of the reasons you are selling the business and how much you don’t like your business. There is a difference between being straightforward and being real drag. Straightforward is find, being a real drag is not.
- DO NOT LIE. Buyer’s will sniff out a lie and be onto the next business in the blink of an eye. If you do not feel comfortable telling the Seller a potentially bad piece of information then defer to the Broker.
- Answer their questions but don’t answer the questions they don’t ask. Sometimes Sellers will go on and on with an answer to a question they think is important but that Buyer did not ask. Once you have answered the Buyer’s question then stop. Let them ask another question. Don’t feel the need to blabber on and on.
- Do not talk about the terms of the deal without your Broker. You hire a Broker to represent you so let him/her do his job. You will be far better off and get more money for your business by using your Broker to handle the negotiation.
WHAT TO DO IF YOU GET A QUESTION YOU DON’T WANT TO ANSWER?
Sometimes we get a Buyer who asks a question that the Seller doesn’t want to answer. For instance: “What is the name of your top customer?” This information is proprietory and you as a Seller don’t want to divulge it. If this happens then defer to the Broker. You could say something like: “You are going to have to talk to my Broker about that”. You may also turn to your Broker and say: “What do you think about that?” This is another way of saying: HELP!
WEB SITE AND SOCIAL MEDIA
Take a minute before the tour to go to your web-site and make sure it is working properly and everything is updated. Buyer’s will do due diligence prior to the tour and going to your web-site is very common. Also, go to your Facebook account, Linked In account and any other social media account you have or your business has. Look at each of these and update the information if needed and remove anything that may not be appropriate. I recently had a deal that did not go through because one party did not have a web-site that was working. For weeks the site showed that it was under construction and the other party did not want to deal with it. He thought it was a bad sign as a representation of the Company.
KEEP THE MEETING TO AN HOUR OR TWO
You want the Buyer to see your business and have an opportunity to meet you, but you do not want to make it an all-day meeting. You have work to do and the Buyer needs to assimilate the information he receives. If you give him/her too much information it is the same as giving a person a drink from a fire hydrant—they can’t handle it.
CONFIDENTIALITY
I prep my Buyers ahead of time as to the confidential nature of the tour. Buyer’s should know that they are not to ask questions in front of the staff. The meeting should be held in a place that is without interuption and private. If this is not possible, then have the meeting at a place other than the business.
QUESTIONS FOR THE BUYER
It is a good idea for a Seller to have questions for a Buyer as well. These may include:
- How does the Buyer plan to fund the purchase?
- Does the Buyer plan to relocate to run the business or will he/she be an absentee owner?
- What is the Buyer’s experience?
- What is the Buyer’s motivation for purchasing?
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By Rick Krebs, Business Broker
Business Sales Group
Rick Krebs - Business Broker / M&A Professional 