When sellers prepare to sell their business, some are quick to take a defensive role relative to the buyer. After all, buyers conduct the due diligence, buyers make the offer, buyers request the necessary financial information, buyers make demands during negotiations, etc. The subservient role can be a difficult phase of the business sale and acquisition process. The seller feels like they have a good business to sell and the buyer is being picky and scrutinizing. But in a business sale and acquisition buyers have rights, too. They have a responsibility to themselves and to their lender to protect and defend their interests and investment.
Buyers Don’t Underestimate Your Power!
The majority of business buyers acquire a business only once in their lifetime. The same can be said for someone selling a business…they typically only do it once. But, a strategic, corporate or equity seller, is likely to have been involved in quite a few business sale transactions – some that worked and some that did not. What does this mean for the buyer? It means that sellers selling their business could have an experienced team of mergers & acquisitions advisors helping them or, have been through a business sale or business acquisition transaction process many times. This can result in a lopsided negotiating arrangement – the amateur (acquisition candidate) versus the professional (the seller).
Should a buyer find themselves in this situation, the topics addressed below can go a long way to even out the playing field.
•Making a business acquisition is not like acquiring real estate. Confidentiality is, in all cases, critical. A seller does not want employees, suppliers, and customers/clients to be aware of a possible sale. Sellers to great lengths to protect the confidentiality of their business information. When potential buyers inquire about a business for sale, the seller typically shares very little information about the business for sale.
•The typical business sale and acquisition process is created is created in a way that cannot distract the owner(s) from managing the day-to-day operation of the business. Buyers need to be very sensitive to the sellers time and concern for confidentiality. It is very likely that a seller is working with multiple acquisition candidates and it is safe to assume that the seller is easily spending 20% of their typical work week on business sale and acquisition matters.
•Some deals come unraveled when a bank requests that the seller increase their seller financing and or that the seller note be subordinate to the terms of the bank note. Buyers should verify early-on in the deal about the bank on seller financing All acquirers should be able to show the seller they have the financial resources to make the deal. Also as buyer be prepared to show financial statements to prove your cash injection into the business acquisition. should be made available.
•Due diligence on a business is the most important part in a business acquisition. The seller will perform their own due diligence on you as a buyer. Likewise as a business acquisition candidate you should perform a due diligence and self assessment of your skills and capabilities to make sure that you can successfully operate the target business. Are you a good good fit for the business, it’s customers, vendors and employees? Do they have experience in the businesses industry? What are your goals in acquiring the company? It is extremely important to screen yourself as much as you screen the target acquisition. Since the seller will likely employ qualified advisors to assist them with the sale of the business it is very critical that you hire a qualified Business Acquisition Advisor (expert) to assist with all all the phases of the business acquisition.
•A buyer should also check for information about any prior business sale transactions the seller might have been a part of. This would include any previous financing contacts. Talking to a previous buyer can reveal how their deal went; how the seller was to work with; whether they did everything they said they would; etc. Talking to managers of previous business sale transactions by the seller can tell a buyer how employees were treated, etc.
•Chemistry between a buyer and a seller is important. Do you communicate well? Is information comfortable shared? Are questions openly asked and answered by both parties? If the seller is staying with the company for an extended period of time, it’s also critical that he/she is comfortable not only with the buyer, but also with the new management team if it’s not the people who are doing the deal. It is very important to carefully consider the skill and knowledge a professional Business Sale & Acquisition Advisor can bring to the table. Without utilizing their services, less-than-ideal circumstances can take place. Buyer may receive less than fair deal on the acquisition or be involved in a difficult acquisition experience. Professional advisors such as Business Sale & Business Acquisition Advisors, Business Intermediaries, Lawyers (only those with deal experience) and Accountants can bring much value to the whole business sale and acquisition process.
We know how important it is for you to buy a business that matches your skill sets and personal goals. You will benefit from our knowledge of contracts, accounting, business, deal structuring, mergers and acquisitions and negotiation skills. You can depend on our experience and expertise to help you evaluate and perform detail due diligence of your business acquisition. We will also professionally value the business and help you buy a business at the best possible price and terms. Our services include standard and custom programs or hourly consulting. The following is a short list of business acquisition services and solutions.
American Fortune Mergers & Acquisitions helps the following groups on how to successfully buy a business: investors, financial business buyers, industry buyers, individual business buyers and strategic business buyers to help them find, evaluate and buy all or part of a business. Here is how we assist individuals and companies to buy a business successfully:
•Development of business buying parameters
•Target screening of potential businesses
•Help to get sellers past unrealistic valuations
•Negotiation and structuring of deal to benefit the business buyer
•Seek out Innovative, non-traditional financing for buyer
•Ongoing business acquisition services
•Strategy development and of due diligence oversight
Choosing the right acquisition support program and valuation depends on three factors: 1) the level of difficulty and complexity of the business and the acquisition parameters, 2) if the asking price of the business is too high and the buyer will have to prove a lower price via a very defensible valuation and effective negotiation tactics, 3) the strength and effectiveness of the sell side team.
1.Business Buy Review This is a review of the business being sought for an acquisition. The review includes advice and support by one of our expert Merger & Acquisition Advisor. This review assures that the business buyer is making the right decision in buying a given business. Price for a buy review starts at $1,000.
2.Business Value Analysis This value analysis report yields true market value of a business. This is a very valuable tool for confirming business value and help assure that your are buying a business at a fair price. This report is a effective tool in challenging a sellers asking price as well as a great tool for negotiating the deal. This custom report consists of a 30-35 page report. Price of only $1,750.
3.Formal Business Value Analysis This is a very detailed and defensible business valuation for small to midsize businesses. Price for this valuation is $3,500
4.Comprehensive Acquisition Report The report provides detail review and analysis of the target business. It also includes a formal valuation as well as deal structuring recommendations to benefit the buyer. This custom report consists of 60-75 pages. Price for report is $4,500.
5.Comprehensive Business Acquisition Services Program This program includes a formal business value analysis, financial analysis, evaluate ROI, financial and cash flow projections, business due diligence, deal negotiation, deal structure. This program includes advisory support by one of our Merger & Acquisitions Advisors to assure a very successful acquisition. The package also includes a Comprehensive Acquisition Report consisting of 60-75 pages. Price ranges from $6,000 to $7,500.
6.Business Acquisition Services We help client buyers buy a business for the best price and terms. These services are available on a $175 per hr.
Points for a Successful Business Acquisition
Although a great deal of time, talent, and money can go into making sale, acquisition or merger of a business, the transaction is not an end in itself. A successful outcome to a business acquisition process begins with the formulation of “value drivers” and benefits from the actual transaction which extend beyond the closing until the desired benefits have been obtained by the acquirer or merger.
Companies seeking to formulate value drivers and financial criteria in mergers & acquisitions look much deeper at the pre-acquisition and post-acquisition picture. They ask critical question: What exactly do we want to accomplish through the growth strategy of Mergers & Acquisitions?
Contact American Fortune Business Acquisition Services for expert help in business acquisitions at 502-244-0480.