A Well Represented Company Part 1

Apr 19, 2015

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 John Martinka of Martinka Consulting:

Represent Well and Be Rewarded (Part One)

A well-represented company (for sale) can make or break the deal. So, what is a well-represented company? Is it the one whose intermediary who gets the highest price, the most cash at closing, the fastest to close, or the best buyer (for the good of the company, customers, and employees)? I’ll go with the last one, finding the best buyer, and having them pay a fair price (a lousy buyer paying a higher price is a disaster).

As a Business Buyer Advocate® I work with individuals and companies on the acquisition side. Some deals have seller representation and some don’t. So I’m in a great position to judge the traits that encourage versus discourage win-win deals.

Five traits of a good sell-side intermediary:

Collaboration not confrontation – Buyers buy from sellers they like. Sellers sell to buyers they like. And buyers buy a listed business from intermediaries they like. Yes, we’re on different sides of the table, but it has to a friendly, team-like approach if a deal is to be done.

Introduces and lets the deal happen – A good intermediary knows when to sit back and shut up. I was in a meeting where the buyer and seller were carrying on like long-lost buddies. The seller’s rep handed me a note saying, “Never get in the way of a deal about to happen.” Contrast that with the intermediary who had to get comments in on every part of the discussion, especially on how to improve operations. After the meeting the buyer, who had extensive operational experience, said the broker didn’t know what he was talking about, he was just selling and doing a poor job of it.

Encourages questions, provides all information (buyers are nosy) – Especially after the Great Recession buyers and banks are nosier than ever. Banks are asking questions buyers didn’t ask just 10 years ago. Buyers are checking, rechecking and asking again. An open book vs., “How many more questions is the buyer going to ask?” gets a deal done quicker.

Works with all the other advisors (most want a deal for their clients) – Seller reps should welcome with open arms buyer advocates, attorneys, accountants and others on the buyer’s team. This also means the intermediary should not work on things the seller’s lawyer or CPA should be handling.

Conducts open negotiations and doesn’t let minutia get in the way of a deal – Structuring a buy-sell deal for a small business (up to $10-15 million transaction value) is not like labor union negotiations. Post-deal the parties have to work together, so it has to be friendly. The intermediary also can’t let their client get hung up on little things while ignoring the big picture (a large payment).
Part two of this series will cover my recommendations for things seller representatives should do to be more effective for their clients.

John Martinka is known as The Escape Artist® for his work helping executives escape the corporate world and helping owners prepare so they can sell with style, grace and more money. You can reach him at 425-576-1814 or www.martinkaconsulting.com. His books, Buying A Business That Makes You Rich and If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)? are available in paperback and for the Kindle at www.amazon.com.