The Right Buyer

The Right Buyer

Finding, not any buyer, but the “Right Buyer” is the key to a smooth transaction and will contribute to the continued success and future growth for years to come. Not just any buyer will do, but one who has the passion to take the company to new levels and will be considerate of existing employees. The buyer may own other businesses in the same or complementary industry and want to expand. They may have never owned a business before but that’s OK, we were all in that same position once. Passion is important in a buyer! A restaurant has little value to a person who wants to acquire a wholesale distribution company except maybe at lunch. They probably wouldn’t have any interest even if you gave it away.

Spending time talking to a potential buyer about their background, objectives, achievements and goals you gain insight into  their personality and discover their passions. If they have the means or can get the financing to buy your company and if you can see and feel their passion about owning and growing your business ….In all likelihood you have found the right buyer.

STRAIGHT TALK – The Buyer Hurdles section below helps you understand what buyers go through in their quest to buy a business. In the Types of Buyers section you will see how each type could view your business differently. Not having the business ready for prime time is by far the #1 reason buyers walk away. It is extremely important to respond quickly to buyer interest and realize that most buyers are on a schedule that may be dictated by outside economic forces.

Buyer Hurdles

Notice hurdles and time restraints below that a Buyer may encounter in buying a business. Take special notice of how the preparation completed in the Business Valuation section meets their needs and helps them accomplish their goal in buying your business in an efficient and timely manner.

  • Often times a buyer will travel at great expense from out of state or another country, to view a business opportunity. Having all of the company information and supporting documentation is critical. Just for the record the longest distance a potential buyer has come to look at one of our businesses was over 8,000 air miles.
  • Time Limitation – A Buyer may have recently sold their business and for tax purposes has a limited time to re-invest.
  • Loss of Employment – A Buyer may have lost a job due of company downsizing and has funds or financing to buy a business.
  • Other Business Opportunities – Yes! you do have competition… There are many other business opportunities available to buyers. When a buyer tours your company you want them to stop looking!
  • Meeting Financial Institution Requirements – Buyers may want to make an offer and if they do so they will need a business valuation on the company so lending decisions can be made. Not having one can literally add months to the process. Most Buyers will not wait and will pursue another acquisition.
  • Interest Rates – Interest rates play an intricate part in business value. Higher interest rates reduce a companies’ ability to service debt resulting in lower business value unless there is company growth to offset it. Lower interest rates provide excess capital to service additional liabilities ultimately increasing business value. Even if revenues have decreased the impact on business value can be minimal. Interest rates are the most favorable they have been in many years so take advantage of it while it exists.
Types of Buyers

  • Industry Buyers: These are buyers already in the industry. They know how to run them and understand what to look for. They want a company that generates synergistic cost savings by integrating and cross selling.
  • Individual Buyer: Usually have interest in buying a business from having worked in a particular industry or have an education in a particular field. Some may have lost their job in an economic downturn and need to buy a job. Others may have saved money for years and are looking for an opportunity to buy a company.
  • Financial Buyers: Will look in many industries, for returns that can be achieved by investing and cutting expenses, increasing the revenues and economies of scale by acquiring similar companies. Plans may include taking the company public or selling it sometime in the future. They often like companies that may be in some financial troubles that may be corrected by their expertise and capital infusion.
  • Private Investment Groups (PEG’s): Most are astute; on a mission and do not waste time. When this type of Buyers find a business that fits and will give them a good return on their investment, they have capital and tend to move fast to close the transaction. Most will pay fair market value for a company that integrates well and has opportunities for future growth. Most want to keep all existing management and some have offered generous salaries or other compensation packages to former owners after the transaction has consummated.
  • Strategic Buyer: Is someone with a reason to buy a particular company and can do more with it than the seller could than if it remained a standalone entity. They know their industry, have suppliers and management in place and can quickly identify the attributes of the company they are looking at. They will determine if they buy the business and integrate it with the one(s) already owned if it will create a more profitable company. They look to combine purchasing power and phase out duplicate functions which adds significant cash flow to the bottom line.

STRAIGHT TALK – We have a potential buyer. We have discussed your business at length. They have examined the Confidential Business Profile (CBP) on your business and have determined it warrants a closer look. They want to fly down; meet you and tour the company. Owners who have never sold a business usually start getting nervous saying : “Oh my, now what? What do I….How can I…Do we need…?”  We say, “Relax… Chill out… this is why we did all the preparation upfront in the first place.  YOU ARE READY; Let’s go meet the plane.

Step Five : The Buyer Tour

 
Client Comments
Carol, thank you and Don so much. With Glendon living in Louisiana and me working in Alaska, we wanted very much to simplify our lives and work together after the hurricane hit. You helped us get settled in our new home and found us a business that turned that dream into a reality. We appreciate the way you kept us informed and put the deal together. Also thanks for meeting with me on the weekends every time I flew into town.

~G. & L. Martin (AGRI-SERVICES - CHEMICAL COMPANY)
I want to thank you Carol for helping me work with the Franchisor and Seller at the same time and keeping me abreast of all the documents needed by both parties. You simplified the buying process and streamlined the whole transaction. Thank you.

~R. Birchfield (HEALTH & RECREATION - FITNESS CENTER)
I had no idea my business was worth as much as it was. I would have left lots money on the table for sure if you had not found and organized all the expenses I had run through my business over the years. I knew some of the stuff but there was so much more that I would not have seen without your perspective. Makes me wonder what all did my accountant miss.

~G. Sanny (AGRI-SERVICES - FEED MILL & FARM SUPPLY)