IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog has been provided by Allan VanderHamm of Berntson Porter & Company, PLLC.
Selling a Business to a Qualified Buyer (What to Expect on the Other Side of the Negotiating Table)
Assuming that all business owners (except for those forced to liquidate) will eventually sell or transfer their companies, we often focus on what it takes to be a well-prepared seller. Setting exit objectives, planning to minimize the income taxes on the ownership transfer, building business value and selecting a skilled Team of Advisors are some of the most important items on any “Savvy Seller Checklist.”
But what about well-prepared buyers? What does one look like and why, as a seller, should you care?
First, once you put your company on the market, you must be able to recognize a “serious” buyer. No one likes to conduct an extensive courtship only to be stood up at the altar. Business owners are no different. They want a serious buyer—one who will be able to close the deal.
Characteristics of Well-Prepared Buyers
They Know What They Want.
First, owners should look for a buyer who has clearly defined objectives. Will your company be a standalone acquisition or part of an industry consolidation? Will the buyer build-and-hold or flip your company? Serious buyers know what they want and aren’t just “looking for a new opportunity.”
They Travel In A Pack.
Second, well-prepared buyers have teams of advisors knowledgeable and experienced in the acquisition process. They are too smart to attempt to fly solo through the sale process. They know that if they try to handle the transaction themselves, the probability of closing greatly diminishes. Ultimately, do-it-yourself buyers can be a waste of your time.
They Know What’s In Their Wallets.
Third, serious buyers know what kind of financing they can secure. They’ve already communicated with their lenders and are poised to move forward.
They Understand Win-Win.
Fourth, well-prepared buyers are not myopic. They know that the only “good deal” is one in which everyone wins.
They Are Grown-Ups.
Serious buyers have been around the block a few times. They know that the road from the initial meeting to the closing table can be full of twists, turns, peaks and valleys. They have stomachs strong enough to endure the ride.
They Run In the Fast Lane.
Once the deal process is underway, an owner can look for several other characteristics. Well-prepared buyers can move quickly to closing. Their preparation, Team of Advisors and understanding of the process eliminate many of the obstacles novice buyers encounter.
They Know Their Place.
Serious buyers understand their role in the deal process. They let their advisors negotiate the nitty-gritty deal points so that they can maintain a relationship with the seller as well as their credibility and professionalism at all times. They are well aware that today’s seller may be tomorrow’s key employee.
Now that you can spot a prepared buyer, don’t be surprised if you have to become one. As you prepare your company for eventual sale, you may need to acquire other businesses as means to achieve “critical mass.” In other words, you may have to buy smaller (or similar-sized) businesses so that your company is large enough to attract qualified cash buyers. Before you become a seller you may have to walk a few miles in a buyer’s shoes.
We are happy, as always, to assist you with all of your planning needs, including those involving the preparation of your business for a sale or a purchase.
Allan VanderHamm, CPA, ABV, CVA, CM&AA, CExP, is a Principal and the Director of Business Transition and Valuation Services at Berntson Porter & Company, PLLC. Allan’s practice focuses on designing and implementing comprehensive owner exit plans, completing successful merger and acquisition transactions, and preparing effective business valuations. If you have questions about the content of this article or any area relevant to Mr. VanderHamm’s expertise please contact him at (425) 454-7990 or firstname.lastname@example.org.