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ARTICLES
Selling Texas Businesses
Since 1974
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Selling Texas Companies Since 1974
Our monthly newsletters provide information about buying or selling a business, current economic conditions, and highlight some of our newest business-for-sale opportunities.
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"The best library of articles about how to sell
your business "..... says The New York Times
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Taking The Curtain Call: Timing Your Exit
They say that luck is the residue of design. That is typically true for business owners that sell their companies for the greatest values. They are not only lucky but they also reap the rewards of a well-designed exit strategy. There are countless published tips for improving the value of a company and preparing for an exit, but business owners able to recognize windows of opportunity can typically sell the business for a much higher premium.
Setting the Stage for a Sale
The following five scenarios often suggest a good opportunity for selling a company:
1. The industry is hot. This window is the time when other companies are looking to break the barriers of entry into the industry, and there is usually no better way to do that than by acquiring an existing company. If a business is in a popular industry, then its owner could receive multiple offers from eager buyers.
2. Interest rates are low. Most buyers use debt capital to finance the purchase of a business. When the cost of debt is low, valuations are higher. Therefore, business owners could earn more money by selling their companies.
3. A buyer has a compelling reason to acquire the company. If a buyer is set on purchasing a particular business, he or she may go to great lengths to buy it. In turn, the business owner could be more likely to sell for the desired price.
4. There is noise in the industry. There may be more news about consolidations in the industry, meaning large firms are buying out smaller firms to build market share. This moment may be a good time for owners to sell and earn more than they would through a consolidation.
5. The business has had a good run. After three years of consistent growth, a business owner has a good opportunity to sell at a premium. Specifically, buyers may be more likely to purchase when they see that they could yield a high return on investment (ROI) from a growing business.
Preparing for the Final Act
Exit opportunities appear in many forms. Businesses owners can sell to larger companies that are seeking to expand through acquisitions. Some business owners may sell to financial buyers (e.g. private equity groups) who look to grow and, ultimately, sell a company to earn a significant ROI.
Being the Playwright of Your Exit Strategy
Many business owners have spent a lifetime building companies, but they sometimes fail to maximize their return and sell to their preferred buyer simply because they were not opportunistic. Business owners are well-served by keeping their eyes and ears open for opportunity.
By: Carr Riggs & Ingram
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This software company, established in 1977, provides and maintains middleware to client banks to run their ATM operations. Specifically, the software acts as a bridge or interface between the clients' internal systems and external ATM networks. The company customizes its core programming code to work with their clients' systems. In addition to executing client projects to expand the functionality of their software, the company provides routine maintenance under annual contracts. About 70% of their total sales are recurring. The company has very few competitors due to high switching costs. The company maintains very clean and current books and records. Having done no business development since 2005, the company has excellent opportunities for growth. The owners were ready to retire.
The buyers, Fortitude Partners, a New York City based investment firm specializes in lower middle market companies in the software, technology, healthcare, media and telecom sectors.
This business was sold within 4 months of going to market
Peggy Tate listed and sold the business.
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This Houston wholesale company sells a variety of products to its retail business customers, currently 250 clients. The company has a warehouse with an office that's fully stocked with over 1500 products, and has a website for online sales. The Seller, Siraj Madraswala, who is moving out of state, will train the new owners and introduce them to the company's international suppliers. The buyers, Mai Tuyet Do and T. Manh Tran, current owners of Exotic Ponds and Patios, a small importer and manufacturer of exotic garden and patio items, were looking for an acquisition that would complement their existing company. Direct Import fit the bill. This was the first and only business this buyer looked at with our firm. Some seller financing was included in the deal.
Tom Pence listed the business and sold it.
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Luigi's Italian Restaurant
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| | Pictured left to right: Mehdi & Leena Mir (Buyers), Carlito & Monica Figueiredo (Sellers) |
The Sellers are Canadian citizens and own businesses here in the U.S., Canada, and in Asia. They, along with their extended family (who were all business owners and clients of ours here at CBB for whom we sold Fish City Grille, Malibu Steakhouse, and Tuscany Italian Grill) all decided that they'd be moving back to Canada and needed to sell this business.
The buyers had been looking for quite some time with another brokerage firm to find a restaurant that fit their criteria, but grew wary of the firm's sales tactics. Once they came to us we were able to find them a restaurant relatively close to their home that was being run as semi-absentee and fit their investment objectives. The buyer made an exit from his oilfield-related position and wanted to run his own business on a part time basis. Luigi's, a cozy Italian restaurant, was an excellent fit.
This business was sold within five months of going to market.
Ryan DeGennaro listed the business and sold it.
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This upscale spa and massage venue, a great investment near the heart of Aggie Land, is located very close to campus and attracts so many students, locals and visitors that the business had to turn away business. The Sellers, having developed a management structure that requires very little supervision, were operating as semi-absentee owners. Membership packages offered to customers, provide healthy recurring monthly revenues. The sellers purchased this business in 2006 and nearly doubled the revenue before its sale in December. Due to a family health situation they wanted to be closer to family so they placed the business on the market.
The buyer came from an unrelated background and wanted to find a profitable business somewhere in NW Houston. But, when this opportunity was presented to him, he was motivated by the proximity to his home in Tomball, and felt like the drive in rush hour would still be shorter than driving to a business in Sugarland considering traffic. He plans to continue running it semi-absentee, but is also looking to acquire other similar businesses in the area.
This business was sold within 64 days of going to market.
Ryan DeGennaro listed and sold the business.
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Ask The Experts
Question:
It's been a while since you and I were in contact, but I wanted to let you know that we're considering selling. Over the last 18 months, we've been running pretty lean in anticipation of a sale and are at a point where I think we can put together a good set of financials for a prospective buyer. I wanted to ask if you could give me your thoughts on current market conditions for a company like this.
Answer:
The market hit a new global record in 2015. Deal volume reached $4 trillion, beating the previous record set in 2007. The 2016 deal market is anticipated to be another good year for Texas, despite the gloomy oil prices. Potential buyers and sources of capital is plentiful while the supply of businesses on the market is not. Interest rates are low, but rising. The rise is expected to be slow enough to have no immediate impact on the market.
There are more buyers in the market than businesses for sale. Buyers include strategic corporate buyers, individuals, executives who are leaving the energy sector, and Private Equity Groups that have money to spend. This makes a profitable, established company a hot commodity and in demand. Texas enjoys one of the top economies in the nation.....and location, location, location is always a value driver, and a business location is no exception. So when a new business hits the market it will usually sell quickly if the owner's expectations are realistic, if their financial history and data are upward trending and in good order, and is marketed properly. We have buyers waiting for businesses such as these and are ready to act quickly when one comes along. They know that if they don't pull the trigger, they will miss out to someone else who will.
Markets change and fortunes change from year to year. Upcoming political uncertainties and unexpected world events can shake market confidence. The current status of the Texas marketplace is one of the best in the nation. For now, buyer confidence is high and debt is still cheap. Barring any catastrophes, market conditions should be strong as long as those factors are in play.
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Texas Economic News
