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  • Selling a Business with a Trusted Guide

    Jul 11, 2019

    As a boy, my family & I would regularly go hiking in Forest Park in Portland, Oregon, a 5200 acre urban forest, often getting lost on its trails before finding our way back through a combination of maps & sense of direction.  Exploration is one of the joys of hiking, in the Pacific Northwest the possibilities in terms of sights and destinations (Mountains, Oceans, Waterfalls, Wildlife, etc.) are limitless.  The possibility also exists to get seriously lost.  The technology to address the problem of how to get back to civilization from an unknown destination was the brainchild of a visionary entrepreneur, Gary Burrell, who combined a knowledge of global-positioning satellites with a love of jogging, hiking, and aviation.  Gary Burrell along with his partner Min Kao, a fellow engineer, founded the GPS product company, Garmin, in 1989, creating the name from the first three letters of their two names.  The company would go on to become an iconic name in navigation from dashboard mounted GPS devices in cars to navigation devices that could be worn by joggers, bikers, and backpackers.  It can be honestly said that Gary & Min, through their company, likely were trusted guides for more people in the last 30 years than anyone else on the planet.  Unfortunately, Gary Burrell left the world in June after a multiple year battle with Parkinson’s disease.  He is now navigating a place from which there is no return.

    Navigation of travel is easier with a Garmin device.  A trusted guide is also beneficial for navigating the business sale process. IBA, as the oldest business brokerage firm in the Pacific Northwest, has successfully guided over 4000 business owners in the sale of their privately held companies and family businesses.  Our experienced, knowledgeable, highly skilled team of professional business sale intermediaries has the ability to guide entrepreneurs through the sophisticated, nuanced sale process mitigating risks, liabilities, and employing best practices.   The path to business sale has a variety of risks and obstacles.  The most significant being improperly valuing the company, having the sale become public knowledge through failure to maintain confidentiality in the sale process, excessive taxation through incorrect tax structure, and trailing legal liability post sale.

    The following are the basic mile markers on the marathon business sale journey that can take months or years.  A professional intermediary should be able to serve as a trusted guide for their client and provide knowledge & strategy for addressing each of the mile markers prior to and at their highest point of relevance.

    1. Business Valuation – Proper valuation of a business incorporates financial & accounting principles, market conditions, industry, and geographic location.
    2. Market Creation – The difficulty in selling a business is that on one level it is in the best interest of the client to create the most robust market conditions possible with the maximum number of potential buyers while on another level keeping the sale confidential from employees, customers, vendors, etc. is critical for future business success.
    3. Buyer Qualification – An established strategy and documentation should be in place to protect the confidential nature of information about the sale and insure that only parties that have the ability to financially complete the transaction receive information.
    4. Professional Presentation of the Company – The opportunity only exists to make a first impression once in a sale.  It is critical that the first time a potential business buyer is exposed to a business acquisition opportunity that the business is presented in the best possible light highlighting its strengths and potential.
    5. Information Facilitation – It is best practice for the buyer & seller to enter negotiations from a foundation of knowledge. When & how to distribute information to parties is as much an art as a science.
    6. Deal Term Negotiations – The sale of a business is a sophisticated, nuanced negotiation involving obvious elements such as price, but also secondary & tertiary items like transition training/consulting and non-competition agreements. It is prudent to have a skilled, experienced professional negotiator on your team.
    7. Tax Allocation – The important value in a business sale is not the sale price, but the after tax proceeds paid to ownership. Tax strategies & structures can impact the net amount paid to the seller by 10 – 20%.
    8. Legal Documentation – Representation, warranties, indemnification, and trailing liability for the seller in an asset or stock sale agreement can vary greatly from transaction to transaction and attorney to attorney. One advantage of having an experienced, knowledgeable mergers & acquisitions intermediary facilitate a sale is that they have likely reviewed numerous documents and can provide information about what they have seen done to work through legal issues or mitigate liability in other transactions.
    9. Financing – Most buyers utilize bank financing to complete acquisitions of privately held companies and family businesses. Credit approval & under writing policies vary from bank to bank.  They can also change in a specific lending institution from year to year based on bank mergers, executive management, or prior lending practices.   An experienced, knowledgeable business broker will know where the money to complete an acquisition can be found at a given place and time.
    10. Real Estate – A business can occupy real estate that is owned by the business, owned separately by executive management, or leased. It is prudent to engage a business brokerage firm where the intermediaries also hold real estate licenses, so comprehensive representation can be provided by one individual.
    11. Escrow – Selling and buying a business is a little like jumping off and onto a moving train. Administratively there are a lot of details to address during a transition of ownership. It is beneficial to have a trusted guide to insure the i’s are dotted and t’s are crossed while the transfer of ownership is occurring to insure the minimum amount of turbulence for the buyer, seller, employees, customers, and vendors.

    In 2019, I would not hike the Pacific Crest Trail without a personal navigation device on my wrist.   I would also not recommend selling a business that has been your life work to retire without engaging a trusted guide to lead you through the process.   IBA has sold over 4000 businesses since 1975 in the Pacific Northwest.  We would welcome the opportunity to provide a detailed roadmap of the terrain ahead to any business owner considering a sale in 2019. 100% of our fees are payable upon completion of the transaction.

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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