“Executing an acquisition strategy that is beneficial to an individual owner or an acquiring company is perhaps one of the most difficult engagements for an intermediary. Talley Capital Group has the extensive industry knowledge and transaction experience necessary to execute successful transactions.”
Andy Peters, Talley Capital Group
To be successful, a buyer needs to start with clearly defined acquisition criteria that addresses many questions: What industry? What product, equipment or markets will complement our existing business? Are there cross-selling or roll-up opportunities? Which people and skills complement the entrepreneur’s skills and expertise? Are there robust business processes independent of the knowledge of the departing owner? Is there a team of individuals that can be tasked with successful integration?
In addition, the buyer should be able to answer one very important question for the seller. Why are you a good buyer for my business? Fundamentally, buying a business from a long-time owner is about building trust that unfolds and builds through each stage of the process. Most importantly, the buyer needs to understand and appreciate that if the business is worth having, the seller is a smart, capable business person. The objective needs to be a win-win scenario that allows the owner to meet their financial and personal needs while giving the buyer an opportunity to realize an appropriate return on investment.
We are regularly approached by individuals who want to buy a business. Typically, these individuals describe an interest in ANY business. The criteria usually includes very attractive financial performance, high recurring revenue, minimal business risk, and a baby-boomer owner that will accept a transaction price of 3X-4X earnings with payments over time.
The original author of this fairy tale was named Robert Southey. He called it Goldilocks and the Three Bears. Instead of “just right,” in the real world you might expect to find the business equivalent of a hard bed, a chair with three legs, cold porridge and maybe even a wolf at the door. And the question you need to ask . . . where is the hidden value? That’s where we can help.
Note to SellersNote to Sellers: If you are prospective seller that we have approached on behalf of a buyer, you may well be reading this. You might be asking yourself, how do I know I am getting a fair deal? The only way you can know is by hiring an intermediary (business broker or investment banker) that will investigate your business, prepare an offering memorandum, thoroughly market your business to the best and most likely buyer, negotiate a letter of intent, etc. (See the Selling A Business section of the website for more details). We respect your right to follow this path to its logical conclusion over the next 6, 9 or 12 months at which time the opportunity before you may have slipped away. Depending on the size of your business hiring an intermediary may cost you hundreds of thousands of dollars in fees in addition to your legal and transaction costs. One of the checks and balances that keep us in line is our expectation that any transaction you complete with a client of ours will be vetted by your financial advisors and a competent transactional law attorney. With this in mind, we advise our clients at the outset that they should expect to pay a fair price for the businesses we present to them.
At each stage of the buy-side process we make valuable contributions to ensure that the process stays on track including:
- Helping define an executable acquisition criteria
- Identifying and soliciting businesses that meet that criteria
- Obtaining objective, quantitative information about the financial and operation performance of the business
- Facilitating buyer and seller engagement
- Preparing and negotiating a letter of intent
- Creating a supportive due diligence environment
- Finalizing post-due diligence transaction terms
- Introducing legal counsel and accounting advisors to the process appropriately
- Navigating the preparation of transaction documents including representations, warranties and indemnification provisions.
