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 R. A. Cohen Consulting
 
 How do you know if a seller is serious about selling?
April 29, 2010
Greetings!

After 20 years as advisors in over 120 staffing industry mergers and acquisitions, we've gathered many insights for sellers and buyers that we would like to share with you. We hope you will find them informative and enlightening. 
 

As experienced Staffing Industry M & A Intermediaries we hear from staffing firm owners all the time. Part of our role is to try to determine who is serious and who merely wants market information. Ironically, some callers believe we will only respond to their information requests if we believe they are serious potential sellers, likely to move quickly.

This is never the case, we are happy to create a relationship, if we can, with any staffing owner as one never knows when circumstances will require them to consider a sale and we hope that if we have been helpful to them in the past, they will think of us when they are ready to sell.

 

Not every company needs to sell their business at this or any particular time, however some truly should explore their options. Not all potential seller targets are serious about selling. Here are some recent examples:

 

Recently, we spoke with an IT Staff Augmentation firm doing about $12M in annual sales, who felt a 4-5 multiple that might be available today paled when compared to the 8 multiple that person received in 1998 when they last sold an IT staffing firm. Of course, that 8X was mostly in stock that never amounted to any worthwhile value. We suggested it may be a long time before firms of that size may again be valued at such a high multiple.

 

Some in our business would describe this individual as a tire-kicker, not in touch at all with market realities. We believe, he really had no compelling reason to sell but would entertain a "way above" market valuation. If one doesn't need or want to sell, why not price your business behind reasonable market value, maybe someone will meet your price and terms.

 

Another firm we spoke with owns a Commercial staffing business in the Northeast that they tried to operate as best they could from their winter home in the south where they lived 7-8 months of the year. Not surprisingly, this arrangement took its toll on the business volume over the past 18 months or so. These owners would like to retire full-time and they recognize that their business will not improve under these conditions. For these owners, selling their business was necessary before its value completely disappeared.

 

Certainly, they could have done better if they had sold their business 2-3 years ago, however, hindsight is a very cheap commodity and it never pays today's bills. We know you will be wiser when considering where your business is and what it needs to do to survive and flourish.

 

Another potential seller called from the Pacific Northwest (PNW) and said her clients were pushing her to expand nationally to service more of their needs in more locations beyond the PNW. This owner contacted us to see if we could find a suitable National firm to acquire her business so she could maintain and strengthen her customer relationships without having to invest in a national expansion program. Again, this potential seller has a compelling reason to look for an acquisition partner.

 

For those of you in the search or placement business, we are sure you can relate when a potential job seeker speaks to you about their desire to make a career change. Before you spend a great deal of time working with that candidate you need to feel they have compelling reasons to make a career change and are not just having a frustrating day.

 

We want to be able to make the same determination for the sake of all potential parties, as selling one's business may be the biggest business decision an owner has to deal with. There are many compelling reasons to sell a business; we want each seller to feel as comfortable as they can that they are doing the right thing for the right reasons. We know it is rarely an easy choice.

 

Reply to this email to let us know your thoughts on this subject. 

 

Contact Sam or Bob, who have successfully completed over 120 staffing industry transactions, if you'd like to discuss M & A matters related to your staffing firm.

http://www.racohenconsulting.com/contact.html

 


 

Bob Cohen                                            Sam Sacco

Partner                                                   Partner

R. A. Cohen Consulting                        R. A. Cohen Consulting

(416) 229-6462                                     (910) 509-0691

[email protected]              [email protected]