“Selling a business is telling a story that is substantiated by the facts.”
Andy Peters, Talley Capital Group
At Talley Capital Group, we endeavor to take a holistic approach that focuses on why a sale is the right choice for the owner. If it isn’t, we offer them viable alternatives. If it is, our goal is to meet or exceed your expectations in the sales process.
We work with many Private Equity Groups (PEGs) and see them as good buyers for many of the businesses that we believe have strategic value especially when the PEG has an existing platform company. A recurring theme in our conversations with PEGs is that most of the deals that they see are not properly vetted prior to marketing. Rather, many of the “teasers,” “business profiles,” “offering memorandums” or “confidential business memorandums” that are produced by intermediaries are characterized by unsubstantiated assertions, or worse, inaccurate representations. When due diligence starts and the skeletons march from the closet a reduction in price, changed terms or a busted deal are the predictable results.
An Example of Unsubstantiated Assumptions At Work
We looked at buying a company that complemented a business we own. The business broker represented the business as a “leading competitor” and “dominant” in its industry. When we sat down with the owners they stated that they did not know the size of the market, the revenue of their competitors and even conjectured that they might be the smallest of the five “credible” competitors in their region. Moreover, there were no forward looking-budgets, sales forecasts or even targeted customers.
With this in mind, is it surprising that fewer than 25% of the businesses that are listed actually sell?
If you choose to work with us as your business broker or investment banker representative, we will need to take the time necessary to thoroughly explore the details of the business. In addition to specific data points about the market, the competition, the customers and the company including people, product, process and technology, we explore how much money the business makes, why it makes money, the risks that could adversely impact the business, the future prospects of the business and the unique value drivers that need to be drawn out, documented and presented with supporting financial and operational statistics.
It is uncommon, but it is even better if the financial metrics are consistent with historical budgets and the operating metrics are part of the key performance indicators targeted by company management. A sophisticated buyer wants to know they are buying a predictable, defensible business that is being driven by a capable management team that has the skills and knowledge to perpetuate the performance of the company after the owner exits. This is what we help business owners work toward when we are engaged as operational consultants.
The above is just the beginning of the process, which includes:
- Preparing for initial buyer inquiries
- Coordinating the process to bring multiple parties to the table simultaneously (when possible)
- Negotiating terms
- Selecting the best buyer by balancing value, terms and probability of close
- Navigating due diligence and post-due diligence negotiations
- Agreeing upon assets that are included and excluded from the purchase consideration as well as which liabilities will and will not be assumed
- Drafting APA language including representations, warranties indemnifications, preparing schedules that support the language of the APA as well as any associated supporting documents . . . notes payable, non-compete agreements, leases, escrow agreements, etc., etc., etc.
At the beginning and every step along the way we need to be thinking about what comes next AND the “endgame.” If we fail to start correctly by digging into the business, challenging assertions, and preparing you to answer the questions we expect a buyer to ask, we will fail not only you but also ourselves.
We both need to be prepared to succeed. As John Wooden said:
“Failing to prepare, is preparing to fail”
Situations where a potential sale might be right for you:
- Retirement
- Transitioning a business to a family member or key employee(s)
- Uncontrolled circumstances(e.g. death, disability)
- When your business value corresponds to financial needs
- A window of opportunity opens.
