IBBA and M&A Source Market Pulse Survey Report Predicts Major Changes

The IBBA and M&A Source Market Pulse Survey Report for the fourth quarter of 2018 has a range of interesting insights.  The survey’s purpose is to provide an “accurate understanding of market conditions for businesses being sold in Main Street (values $0-$2MM) and the Lower Middle Market (values $2MM-$50MM).  This national survey was designed as a tool for business owners and their advisors and has the support of both the Pepperdine Private Capital Markets Projects and the Pepperdine Graziadio Business School. One of the most striking facts to leap out of the report is the fact that a full one-third of advisors fully expect the strong market to end this year.  Overall, advisors are not optimistic that the current climate will continue through 2020.  In fact, advisors are encouraging sellers to consider placing their businesses on the market now, while the market is still strong.  This is according to Craig Everett, PhD and Assistant Professor of Finance and Director of the Pepperdine … [Read more...]

Thinking About Succession Planning

If you haven’t been thinking about succession planning, the bottom line is that you should be. In the February 20, 2019 Divestopia article, “All Companies Need to Look at Succession Planning,” author Brad Cherniak examines the importance of succession planning. Owning and/or operating a business can be a great deal of work, but it is imperative to take the time to develop a succession plan. Succession Planning is for Businesses of All Sizes Author Cherniak wants every business owner to realize that succession planning isn’t just for big businesses. Yet, Cherniak points out that the majority of small-to-medium sized businesses, as well as their senior managers, simply don’t focus much on succession planning at all. Many business owners see succession planning as essentially being the same as exiting a business. Cherniak is quick to point out that while the two can be linked and may, in fact, overlap, they are by no means the same thing. They should not be treated as … [Read more...]

Could the Red-Hot Market for Businesses Be Cooling Down

The economy is red hot, and that fact is translating over to lots of activity in businesses being sold.  However, it is possible that this record-breaking number of sales could cool down in the near future. In a recent article in Inc. entitled, “The Hot Market for Businesses is Likely to Cool, According to This New Survey,” the idea that the market for selling business is cooling down is explored in depth.  Rather dramatically, the article’s sub header states, “Entrepreneurs who are considering selling their companies say they’re worried about the future of the economy.” The recent study conducted by Pepperdine University’s Graziadio School of Business as well as the International Business Brokers Association and the M&A Source surveyed 319 business brokers as well as mergers and acquisitions advisers.  And the results were less than rosy. A whopping 83% of survey participants believed that the strong M&A market will come to end in just two years.  Perhaps more jarring is the … [Read more...]

What Kind of Buyers are You Most Likely to Meet?

Selling a business can be an exciting and rather lucrative time.  But going through the sales process means embracing the notion that you’ll have to be very prepared for whatever might be thrown your way.  A key aspect of preparing to sell your business is to know what types of buyers you’re likely to encounter. It is only logical to anticipate the types of buyers you may be dealing with in advance.  That will allow you to plan how you might potentially work with them.  Remember that each buyer comes with his or her own unique desires and objectives. The Business Competitor Competitors buy each other all the time.  Frequently, when a business is looking to sell, the owner or owners quickly turn to their competitors.  Turning to one’s competitors when it comes time to sell makes a good deal of sense; after all, they are in the same business, understand the industry and are more likely to understand the value of what you are offering.  With these prospective buyers, a great … [Read more...]

Considering All of Your Business Real Estate Options

In a recent December 2018 article in Divestopedia entitled, “Options for Business Real Estate When Selling a Company,” the topic of business real estate was explored at length. One of the key points of the article was that understanding one’s business real estate options would ultimately help in achieving “the goals desired in a transaction.”  The article is correct to point out that many, or even arguably most, business owners simply don’t know what real estate options are available to them when it comes time to sell the company. In particular, there are two big options: Sell everything including the real estate. Hold onto the real estate for the rental income. In the Divestopedia article, the authors correctly point out that if you, as the business owner, personally own the real estate in a separate entity, then you are good to go.  You should have a “clear path to valuation.” However, if your company owns the real estate, then things get a little more complicated.  If this is … [Read more...]

Four Significant Issues You Need to Consider When Selling Your Business

The process of selling a business can be very complex. Whether you’ve sold a business in the past or are selling a business for the very first time, it is imperative that you work with an expert. A seasoned business broker can help you navigate through what can be some pretty rough waters. Let’s take a closer look at four issues any seller needs to keep in mind why selling a business. Number One – Overreaching If you are both simultaneously the founder, owner and operator of a business, then there is a good chance that you are involved in every single decision. And that can be a significant mistake. Business owners typically want to be involved in every aspect of selling their business, but handling the sale of your business while operating can lead to problems or even disaster. The bottom line is that you can’t handle it all. You’ll need to delegate the day-to-day operation of your business to a sales manager. Additionally, you’ll want to consider bringing on an experienced business … [Read more...]

The Importance of Understanding Leases

Leases should never be overlooked when it comes to buying or selling a business.  After all, where your business is located and how long you can stay at that location plays a key role in the overall health of your business.  It is easy to get lost with “larger” issues when buying or selling a business.  But in terms of stability, few factors rank as high as that of a lease.  Let’s explore some of the key facts you’ll want to keep in mind where leases are concerned. The Different Kinds of Leases In general, there are three different kinds of leases: sub-lease, new lease and the assignment of the lease.  These leases clearly differ from one another, and each will impact a business in different ways. A sub-lease is a lease within a lease.  If you have a sub-lease then another party holds the original lease.  It is very important to remember that in this situation the seller is the landlord.  In general, sub-leasing will require that permission is granted by the original landlord.  With a … [Read more...]

Why should you consider seller financing?

In today’s marketplace, a seller should expect to finance some portion of the sale.   Financial institutions today are asking for sellers to take back some piece of the sale price, especially if the intangible portion of the sale is an unusually high percentage of the price.  When reasonable terms are set up, the chances of selling increase and the time period to sell decreases.  Many sellers don't realize how much interest they can receive by financing some or all of the sale of their business.  In some cases, the amount received greatly increases. One important point that is easy to overlook is that allowing for seller financing tells the buyer that you have confidence that the business can, indeed, pay for itself.  Of course, not all sellers are in a position to carry.  Each situation must be analyzed and reviewed.  At Provest, we can help you make the right call. … [Read more...]

So I have a buyer for my business- what happens now?

When you have a potential buyer, the first thing to expect would be to get an offer in writing.  When you look at this proposal, you may find contingencies, which deal with a detailed review of your financial records, financing and/or environmental issues.  Your buyer may even ask for details of your lease arrangement, and franchise agreement when applicable.  At this point, you can accept these terms or make a counter offer. Of course, if you do not accept the buyer's proposal, he or she can withdraw it at any time.  Even if you aren't pleased with the offer you've received, you should look at it carefully.  Even if it’s lacking in some areas, it might have other advantages, so don't disregard it too quickly The next step of the process takes place once you and the buyer are in agreement.  At this point, you will need to satisfy and remove any contingencies.  You and the buyer must cooperate during this process.  Otherwise, he or she may feel you're hiding something.  Don't be … [Read more...]

Is there something I can do to help sell my business?

It goes without saying that a buyer will want up-to-date financial information. Work with your professionals to make all current information available.  Make sure that your attorney is familiar with all laws and the business closing process.  If you have an attorney, you may also want to check to see if he or she could participate at a closing on short notice.  You wouldn't potentially want to have to wait for an attorney to make the time to prepare documents or attend the closing.  When it comes to any business sale transaction, time is of the essence.  When parties don't close on schedule, the buyer could reconsider or make changes in the original proposal. … [Read more...]