Frequently Asked Questions
Our sales blueprint is designed at minimizing your (the seller’s) time, so that you can focus on running your business, while we focus on getting multiple offers and maximizing the purchase price. To accomplish that, we have you fill out an extensive questionnaire regarding your company’s operations, sales, marketing, customers, suppliers, employees. We also collect due diligence materials such as financial statements, tax returns, A/R and A/P aging, etc. We then review this with you to gain additional insight into your operations and business practices. Just as each seller’s business situation is different, so are your company’s strengths and weaknesses. We uncover it all and tailor our marketing documents accordingly to highlight the core strengths of your business.
With that done, we can now answer 99% of the questions that buyers may pose, thus minimizing interruptions to you. We prepare an Executive Overview (one page) to market to prospective buyers with a Non-Disclosure Agreement and an Offering Memorandum (30-50 pages). The Agreement goes into further details about your company and the buyer receives it after signing the Non-Disclosure. We then have several conversations with them to qualify them further. Besides targeted mailing and internet posting, we also call each and every buyer target. This is where our clients state that we are relentless. It takes between 2,500 and 4,000 calls to consummate a favorable transaction for you.
We find there are always general rules of thumb for each industry. However, we always exceed those. In general terms, very small firms sell for a small multiple of revenue, earnings, EBITDA, or assets. EBITDA is defined as Earnings Before Interest, Taxes, Depreciation and Amortization.
We put the extra effort to find a buyer who is looking to fill a “hole” in their organization that you fit in to. These “holes” may be products, services, regional presence, distribution channels, customers, higher profitability, or a business model in whole, etc.
This actually is a double-edged sword to you, the seller and is frequently one of the wrong assumptions made by sellers. Over the past 25+ years we have dealt with many industry specialists who either represent specific buyers, or claim they have contacts in the industry. Here is what we have found:
Industry specialists are transaction driven. The faster they get a deal done, the faster they get paid. When a buyer has employed an industry specialist/consultant to assist them in the deal, and we represented the seller, we have achieved, more than once, twice the offered price from these “experts”.
Don’t confuse “industry specialist” experience with one’s ability to get a transaction done. What you should be looking for is a Sell-Side Merger Expert, one who focuses on what you want and can get you multiple offers and the highest possible price!
We have completed transactions in a wide variety of industries. These include, but are not limited to: agriculture, construction, manufacturing, communications, wholesale, insurance, business services, healthcare and technology. For reasons of confidentiality, we do not list company names or sales prices. For further details, see Transactions.
What we do not do is commercial real estate, oil and gas properties, banks or financial institutions, and turnarounds or distressed situations.
We market by calling buyers first, and then utilizing the Executive Overview attached to a Non-Disclosure Agreement. In all of our documents we do not disclose a company or owner(s) name, or employee names or pay. The Executive Overview does not include the city or state of the company thus raising the confidential level. Our standard Confidentiality and Non-Disclosure Agreement is worded to protect our clients for a period of three years regarding any information that is disseminated.
There are less than a handful of true merger and acquisition firms on the West Coast. By that, I am referring to companies whose sole focus is merger & acquisitions. There are many firms whose expertise is consulting, e.g., general operations and/or sales and marketing. For them, the sale of the business comes at the end of an assignment, and although they do not have the expertise required, they imply that they do.
Our number one competitor is you, the seller. In general, you started the firm, worked 12-hour days calling on prospective customers, and made or oversaw the production of a product or service for those customers. In other words, you are the top salesperson. You know the company, its products or services, and its customers. What you do not know, you figure you will learn. Unfortunately, what you do not know will also cost you in price and terms at the time you are trying to maximize both in the sale of your company.
Each transaction has its own timeline and this is actually a hard thing to grasp by all parties involved. Clients, and company issues, have their own priorities outside of the transaction. The process from beginning to end can take from six months to one year.
Typically, the process may flow as follows:
- Documents are gathered (financial statements, tax returns, other financial documents, corporate book, etc.), then are reviewed by our firm;
- Marketing documents are created;
- Marketing commences;
- Conference calls and visits with multiple buyers occur;
- Offers are tendered;
- Prices raised;
- Due diligence occurs;
- Purchase documents are drafted by attorneys;
- Closing occurs.
We highly recommend you do not do this, as everything is completed confidentially with buyers who have signed the Non-Disclosure Agreement. Employees typically find out after a sale has occurred. As you know, employees typically do not like change and the unknown. As it may take more than six months to complete a transaction with the “best fit” buyer, you do not want to get the employees to focus on this and not on their work.
We advise our clients who do tell their employees prior to completion of a deal, that you have been approached and are now exploring various growth opportunities which a strategic buyer will bring to the company, such as new products, distribution channels, sales and marketing acumen, etc.
Preparation is a large part of the process. A seller is up against experienced buyers of companies and that is all they do: buy companies. They probably have visited your competitors and suppliers, and may in fact be in discussions about acquiring your competitors as well. These are tough negotiating guys who eat sellers for breakfast and companies for lunch. The principal of The Merger Expert has 12 years experience buying companies; he knows how buyers think and negotiate. He has also represented sellers only since 1995.
Having our firm on your team tilts the playing field to your advantage where it belongs.