FAQs and Real Life Stories
Q#1: How do I negotiate the best deal?
A#1: You negotiate
the best deal when you are in a position of strength. Attracting multiple
qualified Buyers and then negotiating all the deal points with the interested
Buyers is an excellent position for you as a Seller. Selby Associates
has many methods to attract multiple Buyers. One tool we utilize is
our detailed Seller Memorandum that positions your company in a way
that it is more attractive than other business opportunities on the
market and therefore attracts more Buyers. Multiple Buyers can bring
you multiple offers and this places you in a better position for negotiating.
These interested Buyers make offers through a Letter of Intent (LOI).
Another tool we utilize in negotiating the best deal for you is the
way we handle the LOI. The industry standard LOI is a short document
that basically states the price and that the business is removed from
the market while the Buyer performs their due diligence and a month
later the attorneys negotiate the details or deal points. The problem
with this approach is that you are in a weaker position because you
are negotiating the deal points after the business has been off the
market and all the other interested Buyers have since gone. Selby Associates
rejects this type of LOI and insists that a fully detailed LOI be in
place before the business is removed from the market. The major advantage
to negotiating with multiple Buyers while the business is still on the
market is that you know all the deal points before the business is removed
from the market. This is better positioning for you during the negotiations.
Selby Associates will guide you through the entire process, make recommendations
and handle the negotiations for you.
Real Life Story#1:
We worked with our client, a manufacturing company,
to fully understand their business and their strengths and weaknesses.
We then documented and detailed the business in the Seller Memorandum
and other supporting documentation to position the company appropriately
and attracted numerous, qualified Buyers. The Seller Memorandum and
supporting documentation addressed company weaknesses and included solutions
for future potential and growth opportunities. As a result, the company
received five offers from qualified Buyers. Selby Associates prepared
a 1,200 page due diligence package for distribution to the five Buyers
in order to work with each fully informed prospective Buyer and obtain
the optimum transaction for the client. Selby Associates closed this
transaction at a higher sale price than the asking price because of
the following: the Seller Memorandum clearly illustrated the value of
the business and its strengths, supporting documentation was disclosed
that documented growth potential and Selby Associates worked with five
Buyers through due diligence to ensure the best offer (Buyer) was selected.
Q#2: How long do I have to stay for a transition?
A#2: Every deal
is different, however, we will discuss your desires and the business'
needs during Our Approach and disclose this in the Seller Memorandum
to potential Buyers to target those Buyers who meet your desired transition
criteria. A standard transition period usually consists of 30 –
90 days in order to educate the Buyer about the company systems and
make formal introductions. For more complex transitions or for Sellers
who desire to continue working, there can be longer transition periods.
We recently had a Seller execute a 5-year employment contract because
both the Buyer and Seller desired to have the Seller continue working
with the company after the sale. We recently closed another transaction
where both the Buyer and Seller desired only a 30-day transition.
Q#3: How
can I obtain the maximum price for my business?
A#3: Selby Associates knows what Buyers look
for in a business: cash flow. That's why our Seller Memorandums are
prepared with all the relevant information that a Buyer needs and wants
including a Recast of the financials. We also prepare supported projections
and growth plans, if necessary, to show future cash flow and growth
opportunities. In specific instances, we also provide other Advisory
Services where we examine your company and your situation to determine
the best exit.
Real Life Story #3:
We were presented with a manufacturing/services company
who had lost in excess of $550,000 in its preceding year and had millions
in debt, but possessed considerable assets including equipment and real
estate. On the surface, it appeared this company was a prime candidate
for liquidation. Liquidation would have brought in just enough to cover
the debt, approximately $5 million, and leave little for the owner.
We met several times with the owner and determined that it was worth
reviewing the company in much further detail. Selby Associates provided
Advisory Services over many months and concluded that it was most appropriate
to sell the company not as a whole entity, but sell divisions of the
company separately. We then created multiple Seller Memorandums (for
the different divisions) that included recast financials and projections,
and we made further recommendations to increase their profit. As a result,
the sum of the parts was worth more than the whole. The divisions sold
in multiple transactions totaling in excess of $10.5 million. By utilizing
Selby Associates and our recommendations, the owner received in excess
of $5.5 million above the original value.
Q#4: I want to
sell my business, but I am not ready today. What can you possibly do
for me now?
A#4: During
an initial no cost consultation, Selby Associates can evaluate your
company and where it is in its business life cycle and make recommendations
in preparing your business for a future sale. Eliminating issues or
areas of concerns and making changes to your business may make your
business worth more in the future. Owners operate their companies to
meet their own specific goals, however a Buyer (and their banker) looks
at your company differently than you do. Often times, small changes
can be made to make your company more attractive and it is beneficial
to explore these options now if you are considering selling your company
in the future.
Real Life Story#4:
The owner of a manufacturing company who was ready
to retire contacted us. After reviewing the company’s books and
records and touring the facility, we noticed two conditions that lowered
the value. From our previous experience with manufacturing companies,
we knew that that the amount of equipment we had seen at the company
versus the company’s revenue was out of proportion. We recommended
selling all equipment that the company did not fully utilize and shift
the work accordingly. The sale of this specific equipment does not lower
the value of the company because the company’s value is determined
by it’s earnings on a recast cash flow basis with consideration
for future potential. The company has this defined value regardless
of the excess equipment because this defined company value includes
only the assets necessary to generate the current or potential revenue.
The assets in excess of what is required to generate the current or
potential revenue do not increase the company’s value. Therefore,
in this case, it is in the owner’s best interest to sell this
excess equipment prior to selling the company. By selling this excess
equipment the owner received cash immediately and the value of the company
stayed the same. The second condition Selby Associates noticed was that
once the excess equipment was sold, the company would have excess square
footage in the current building and higher than necessary overhead expenses.
As their current lease was to expire in 6 months, we recommended relocating
to a smaller facility and thus saving on rent and utility expenses.
The current sales revenue was not affected by the sale of excess equipment
or the relocation. With the lowered expenses, however, cash flow increased
and with this the company’s value increased. When Selby Associates
initially met with the owner, we declined listing the business for sale,
but reviewed the company’s current situation and made the above
recommendations to improve cash flow and increase the company value.
Because the owner took the time to meet with Selby Associates and took
the initiative to make the recommended changes to the company, as well
as, the fact that Selby Associates declined to list the business at
the initial meeting, the owner will receive an additional $700,000 over
what he would have received had he not made these changes or listed
the company for sale 9 months earlier. This is an excellent return for
the owner after making two changes and 9 months work.
Q#5: Why is Selby Associates so
successful?
A#5: Selby
Associates has a 100% success rate; every business we have listed has
sold with many of the businesses we list receiving multiple offers.
Our success is attributed to many factors including:
-
Our Seller Memorandum – exclusive to Selby
Associates, rarely done in this industry for businesses under $25m.
-
Database of Buyers – we have a proprietary
database with every Buyer’s search criteria and financial
capabilities so that we can target the most appropriate Buyer.
-
Our LOI – every person with whom we have
worked, including Buyers, Sellers, Accountants and Attorneys, have
commented that our LOI is superior to others that they have seen.
-
We focus on industries in which Robert Selby
has owned and operated businesses and therefore has extensive experience
and knowledge.
-
We accept a limited number
of clients so that every client receives personal attention.
