If an owner tries to sell his own business, he runs the risk of making public that his business is for sale. Employees, customers, suppliers and competitors may get wind that the business is for sale - raising a host of concerns among these groups - and, possibly opening the door for competitors to become predatory. The business Intermediary protects the identity of the company he/she represents for sale with a process designed to contact only owner-approved buyers with a blind profile - a document describing the company without revealing its identity.
Further, in order for the buyer to gain access to any sensitive business information, he must sign a confidentiality agreement (CA) - which is designed to protect the proprietary nature of the firm's operational and financial information - as well protect the firm's clients and employees with a non-solicitation clause.
3) Pre-Qualifying
Owners are well served to deal with only qualified buyers. Based on an Advisor's knowledge of an industry's prospective buyers, they can match credible and appropriate buyers with appropriate sellers. This is another area where experience in the Staffing space can be very helpful, however, not all Advisors have the same knowledge level, so do your homework and ask the tough questions on a phone interview and when appropriate get a list of references and drill them to learn what you need to know.
4) Experience with Selling
Through experience with multiple business sales within a particular industry, Intermediary's know how to bring buyer and seller closer together. Inexperienced owners and Advisors may unwittingly drive the parties further apart.
5) Documentation
Intermediaries obtain relevant information from the seller that buyers need to know prior to assessing and then purchasing the business. This information is compiled in a succinct Confidential Offering Memorandum that is distributed to buyers approved by the seller who sign a Confidentiality Agreement.
6) Maintain Buyer-Seller Relationship
The sale of a business is both a business and an emotional process and may become contentious between parties. The Business Advisor can act as a buffer between the buyer and seller. This not only improves the likelihood of the transaction closing, but helps preserve a healthy buyer - seller relationship post-closing. Often buyers want sellers to have a portion of their transaction value contingent on the successful performance of the company post-closing. In short, buyer and seller need to be on the same team after closing.
7) Reaching qualified potential buyers
Business Intermediaries have the tools and resources to reach the largest possible base of buyers. Usually, many of these buyer prospects have regular contact with active Advisors so both parties have prior knowledge of the other.
Then Advisors can update there records by screening / qualifying these potential buyers for appropriate size and synergistic fit with the seller. Since, a greater number of interested buyers can really slow down the selling process; quickly qualifying each prospect's specific interest and financial wherewithal for this opportunity is vital for a time-sensitive transaction. We generally advise sellers to start with 10-15 prospective buyers that the seller and their Advisor believe may potentially have the greatest interest, the best synergy, good prices and terms and a track record from earlier deals that shows their buyers usually max out their earn outs or come very close with good reasons.
8) Marketing
A business Intermediary will present a company in an honest fashion with the best possible light to maximize the sales price. He or she has an understanding of the key values / business profile and qualities that buyers are looking for and will emphasize these factors. Intermediaries can also assist in identifying specific factors and/or improvements that a seller can make and then implement prior to sale - leading to a better price. Advisors also know how and when to deal with any potential "warts" the selling firm has or had. It is always better to deal with these types of issues earlier than later in the process. Buyers hate eleventh hour surprises, if it is a deal breaker better for everyone to know sooner rather than later.
9) Business Valuation
The value of a business is far more art than science - as well as very dynamic in nature - as value changes with variations and changes within a particular industry, economic cycles and technological innovations. Further, every business is unique and has dozens of variables that affect value. For example, how does one place value on talented management, key customer relationships, high gross margins or proprietary methodologies?
Owner's acting on their own behalf may have access to business transactions within particular industries - used as guidelines or reference points - or assumed comparables. And while in the Staffing Industry owner's may have access to historical (public) transaction information -which have little or no correlation to a sale of a private company, due to differences in size, scale, liquidity, management depth etc. - these historical values are based on certain valuation multiples - which have a basis in the public segment, however very little comparability to private Staffing firm business sales. Advisors almost always get better pricing and terms than an Owner could get on their own. Knowing the game and how to play it can be invaluable to the seller in maximizing their value on the transaction.
10) Balance of Experience
Many corporate buyers have acquired multiple businesses - while an Owner typically has never sold a business. We have found that there is often one or two shots to get the job done properly and successfully and there is no dress rehearsal. An experienced Intermediary can level the playing field for an owner by matching his or her expertise in M&A with the Buyer's experience.
11) Maximize the Value of Seller's Outside Professionals
Business Advisors can save the seller significantly on professional hourly fees by managing several important functions leading up to a transaction agreement. The Advisor will negotiate the terms of the transaction (sale price, down payment, earnout structure, seller financing, etc.) prior to turning the purchase agreement over to outside counsel for legal and accouting (tax)review.
In the absence of an Advisor, this comprehensive negotiation process would default to the outside attorney - which is sometimes outside of the attorney's area of expertise. The end result would be significantly higher hourly legal fees and possibly a different or no deal. We strongly hope you will select our firm to represent you, however, make sure the group you choose will have your support by controlling all of us as Professionals to serve you best.
We promise that we may ask questions about some of the legal or accounting advise we receive, which we believe is healthy; we will not insist that you use our legal or accounting advice; that is not our job, nor is it the job of the other Advisors to decide they have other ideas on what the business terms, prices etc. should be and worse when they contact the Buyer's Attorney or Corporate Officer and share these thoughts.
This can be a deal breaker in a New York minute as the confuses and often angers the other side since thought they were negotiating with our firm on your behalf and know they are not sure who they should respond to on these matters.
With all due respect, over the past 20 years we have completed over 130 successful staffing industry transactions. Staffing transactions is all we do; we have backed off of certain clients if they were unable to control their Professionals, until order was restored.
How would it work if we called the Attorney for the other side and suggested new and different legal clauses that we wanted to run by them for their consideration? Clearly, this would be a chaotic environment where success on any level is less likely and the owner suffers the most as it hard to get a good deal under these circumstances. We are incredibly flexible however, I would be wary of any Intermediary who was ok with abdicating their most important responsibility.
12) Closing the Deal
Since a key component of the business Advisor's function is to sell the business, there's a much better chance that a deal will be closed in less time - as the Advisor will expeditiously and diligently facilitate getting the deal done. The faster the sale, the lower the risk of operational or financial challenges, employee awareness, customer defection and predatory competition and hence, the lower the risk of adversely affecting the business value and the ultimate sale transaction. Delay has been the death of many a deal as: market conditions, sales, buyer needs and motivations are all subject to change over time. However, we will never rush a deal that's not right or ready to close.
