Selling Your Business After The Pandemic

For the past 4 years, business owners have faced unprecedented times and challenges. Every business has felt the impact of Covid-19, in some cases in a positive way but in most cases in a negative way.

Mergers & Acquisition activity has rebounded and starting in 2023 transactions have surpassed activity levels from before the pandemic. The reasons why are pent up demand from buyers, dropping interest rates and that the baby boomers, who own most businesses, have aged another four years and want to sell and retire.

Buyers are looking for the following indicators:

• The business was able to adapt during the height of the pandemic;
• The pandemic has not caused any negative fundamental changes to the business;
• There is no “Covid bubble” where revenues have increased and will return to normal after the pandemic is past; and
• That after the pandemic the business will continue to grow or have the ability to grow.

There is now a vibrant market again with plenty of buyers chasing deals but experts are now warning of a Tsunami of business sales from aging business owners that could significantly reduce valuations over the next few years as more and more businesses are put up for sale.

In an article in ProfitGuide.com, Doug Robbins, founder and president of Robbinex Inc., a nationwide business brokerage based in Hamilton, Ont., says that;

“now that the North American economy has regained predictable, stable growth, pent-up supply could flood the marketplace. As thousands of owners confront too few buyers, the winning companies will be those that start planning now to create the conditions for success.”

The message is clear; the time to start planning a viable succession for your business is now.

Contact the Summit Group for a free, no obligation consultation and we will provide you with the advice and the tools to ensure that you make the best decisions possible.

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Earnings are probably the single greatest factor but there are many other factors that go in to determining the appropriate value of your business. Is the profitability sustainable? Is there potential for growth? Is there a risk that your profitability is tied to one particular consumer? You may be confident that your business has significant value and a bright future but can you demonstrate that to a buyer?

These other factors are more subjective but are all related to buyer risk and the lower the perceived risk to the buyer, the higher the earnings multiple that a buyer will associate with your business. A recent article is divestopedia outlines  ten value drivers that a business owner needs to master in order to sell their business at the highest price.

“Each driver is a characteristic of a business that either reduces risk associated with owning the business or enhances the prospect that the business will grow significantly in the future. Simply put, the better the performance in these areas, the greater the selling price of your business.”

The post Before Offering your Business for Sale Ensure that you have Mastered these Value Drivers appeared first on The Summit Group.

Before you select a business Broker, you should consider the following;

• Ask your Accountant and Lawyer for their input and advice.

• Ask business acquaintances and friends for referrals.

• Visit their offices: does the Business Broker have a professional corporate culture?

• Is the Business Broker willing to come to your business and learn about it?
•  Ask to meet with the “team” that will be selling your business.

• Insist upon a written quote that not only covers the fees but details the process and exactly what the Business Broker is going to do for you.
•  Make sure you understand exactly how the Brokers Fees are calculated and how much you will pay.

• Ask for references and check them.

• Find out how experienced the Broker is and how long has the Firm been in business.

• Ask them how they find buyers.

• Ask them how they qualify the buyers.

• Determine if the Business Broker requires an exclusive contract to sell your business and for how long.

Make sure that you are comfortable with the Business Broker and the team. Yours is going to be a close, confidential and personal relationship so you must have confidence and trust in the Broker. After all, they are selling the business that you have devoted a significant portion of your life to it and chances are you are only going to do this once..

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The sale of your business may be the singularly most important business activity that you undertake.  Your retirement may depend on what you sell it for (or more importantly what you get to keep after tax).  Your employees job security may well depend on the choice that you make.  Typically, most owner mangers only sell their business once…and you want to make sure that you get it right the first time.

The short answer is that a Business Broker will help you ensure that you sell your business for the best price, on the best terms, in a timely manner and with the least amount of disruption to your business

The Business Broker will be your trusted advisor who will “Quarterback” the sale process and ensure that your business gets exposure to the market and hopefully competitive bidding for your business A Business Broker will also allow the business owner to focus on running the business and insuring that it performs well during the sale process.

The Business Brokers scope of work:

 The scope of work performed by a Business Broker is varied, detailed and complicated.  It includes:

• Assist the owner to prepare the business for sale.
• In conjunction with their Lawyer, assist the Shareholders in dealing with the Shareholder Agreement as it relates to selling the business.
• In conjunction with their Lawyer, assist the Shareholders in dealing with the Shareholder Agreement as it relates to selling the business.

• Plan the sale process and assist the owner in seeking professional advice for tax planning, financial planning and legal planning.

• Review the business, the Industry, the Marketplace and trends.

• Assist in preparing financial projections.

• Review the business and the Industry for growth opportunities.

• Assist the seller with determining the value of the business.

• Prepare a marketing package highlighting the strengths of the business and growth potential.

• In conjunction with the sellers’ lawyer, prepare a confidentiality agreement for prospective buyers to sign.

• Find qualified buyers and review them with the seller.

• Review potential Management Buy Out options with the seller.

• Present the marketing package to the qualified buyers.

• Assist the seller with reviewing the offers for price and as importantly, the terms.

• Negotiate the deal on behalf of the seller.

• Liaise between seller and buyer…keeping the communication lines open.

• Collect and organize the due diligence information required by the buyer and lenders

• Assist the Lawyers in completing the Letter of Intent and the Purchase Agreement.

• Liaise between other professionals including Business Valuators, Accountants, Tax Advisors, Lawyers, Real Estate Agents, Environmental Engineers, Banks and Lenders.

• Assist with other closing matters.

• Assist the seller with post closing matters.

The sale of a business is a complicated process involving many stages of the deal and many parties representing both the seller and the buyer.   When you choose a Business Broker, make sure that the Business Broker supplies all the services noted above in order to assist you in the most professional way possible

The post The Role of the Business Broker appeared first on The Summit Group.

Not considering a Management Buy Out (MBO) effectively eliminates a potential group of buyers that have advantages over other buyers. The advantages over other potential buyers are:

• Smooth transition of the business
• Greater acceptance by the employees
• Less disclosure of confidential information
• Management already knows the business.
• Banks love MBO’s because of the experience and continuity
• Can be a staged management buyout
• More confidence in a VTB
• Management can feel empowered and see this as an opportunity to increase their personal wealth. Very motivated.
• The seller has more comfort that vendor financing, if required, will be repaid.

Often employees have inheritances or friends with financial resources and business skills.

A seller might consider a staged sale to employees, where they can buy into a portion of the business and earn the balance while being mentored by the seller.

Why not consider a staged MBO as part of a succession plan?  As the Manager matures as the owner and driving force of the business, the seller can gradually transition out.

Often, the current banker would be prepared to finance the management team because the Lender is familiar with the business, is most likely familiar with the Manager and sees such a sale as a less risky transition of the business.

Whether selling to a Manager or to a third party, the seller should start delegating and transferring the Goodwill to his employees in any event. 

The Summit Group would be happy to meet with prospective sellers to review the advantages, disadvantages, process, timing and planning for an MBO.

The post Consider a Management Buy Out appeared first on The Summit Group.

The Summer is a good time to reflect on such things; business is often slower, clients and business associates are away on vacation and the weather is better.  Hopefully you as the business owner will be taking a well deserved vacation away from all of the day to day distractions of the workplace.  Perhaps you may find some time to reflect on your future and whether or not that will involve the sale of your business.

To get you started have a look at our “Top Ten Steps When Preparing Your Business For Sale“ One of the key factors to consider is how important you are to the business.  If you are too important to even take a vacation to allow you to reflect on your companies future it is likely that it will be very difficult to sell your business.  A potential buyer will be evaluating your business not the business owner.  You will need to consider a plan that allows you to start stepping away from the day to day activities of the business and develop or hire people that can take on these responsibilities under your supervision.  Another key factor is getting proper tax and financial planning advice.  What your business sells for is one thing but what you get to keep post sale is really the most important factor.  How much do you need to retire?

One of the the critical factors in a successful business sale is often the selection of the appropriate business broker or advisor.  An experienced business broker will be your trusted advisor and will assist you in the planning process, provide a valuation of your business, introduce you to the right legal and accounting advisors, find potential buyers and assist you in the purchase and closing negotiations.

The Summit Group are experts at selling businesses.  Check out “The Top Ten Reasons to Hire the Summit Group” and have a great summer.  When the time is right give Harvey Lee  (604) 307-3870 or David Gray (604)250-1120 a call for a free no obligation consultation

The post Considering Offering your Business for Sale – Summer is a good time to Reflect appeared first on The Summit Group.