Transition Planning - (Sellers/Second Edition)

pavilion

GUIDE

2ND EDITION


LIFE VALUES

“Wisdom cannot be imparted. Wisdom that a wise man

attempts to impart always sounds like foolishness to someone else...

Knowledge can be communicated, but not wisdom. One can find it,

live it, do wonders through it, but one cannot communicate and teach it”

- Hermann Hesse, Siddhartha

DIVESTITURE » SUCCESSION » EXIT PLANNING » SELL

1.888.859.5388 | www.pavilionservices.com


WHAT’S INSIDE

The Journey of Life for a Business Owner

2

Begin with the End in Mind

4

What is an Exit Plan?

6

How to Build Recurring Revenue: A Key to a Valuable Business

8

Working Together as a Team

10

Valuation - Risks & Rewards

14

The Pavilion Sale Process

16

The Silent Auction Process

18

Risk & Rewards

20

How Does Pavilion Obtain Extra Value for Each Client?

22

It Takes a Team

23

Pavilion Factsheet

24

Our Values

25

IT TAKES A TEAM

The process of preparing and selling a business is complex and requires a dedicated team

of professionals. Deal success is dependent on having the right team working together to

facilitate the sale process. The team players are different on each transaction:

• Accountant

• Valuation specialist

• Merger & Acquisition lawyer

• Merger & Acquisition specialist

• Marketing team

•Wealth management

Designed and created by Firstbase Business Services (www.firstbase.ca)

Copyright Firstbase 2016

TRANSITION PLANNING GUIDE 1


THE JOURNEY OF LIFE

Have a

family

Start a

business

Invest

in the

business

Grow the

business &

wealth

Design

transition &

estate plans

GENERATION 1

MAKE SUCCESSION A SUCCESS

If you have invested a serious portion of your energy, time and life into

building and nurturing your business, the choices you make relating

to who to work with on the last phase of your succession journey can

make a significant difference.

This guide details the specific key issues and challenges that can

increase your final sale price and terms by several million dollars.

As you begin the journey towards retirement, it is essential to plan a

head for the best options for all owners and shareholders.


Selling a business is a marathon not

a sprint. A journey that takes careful

preparation and planning.


“Nowadays people know the price of everything and the value of nothing.”

- Oscar Wilde

2

TRANSITION PLANNING GUIDE


FOR A BUSINESS OWNER

Assign team

to transition

business

Transition

business

Decrease

business

involvement

Retirement

& freedom

NEW SHAREHOLDERS

Establish

a living and lasting legacy

BEGIN WITH THE END IN MIND

Planning is essential to enable a successful outcome. As a business

owner, it’s important to ensure that all the elements are in place to

achieve the best result.

Many businesses fail to sell for a variety of reasons:

• Financial performance

• High levels of risk and volatility

• Marketplace conditions

• Inadequate management team

This document outlines some of the key aspects needed to consider

and prepare for the best outcome.



Coming together is a beginning.

Keeping together is progress. Working

together is success.

- Henry Ford

However good our futures research may

be, we shall never be able to escape

from the ultimate dilemma that all our

knowledge is about the past, and all our

decisions are about the future.

- Ian Wilson



“Place a priority on discovering what a win looks like for the other person.”

- Harvey Robbins

TRANSITION PLANNING GUIDE 3


BEGIN WITH THE END IN MIND

Planning includes not only when and to whom you intend

to sell or transition your business, but also ways to maintain

your company’s value through tax planning and being

prepared for unforeseen events. Through this process, you’ll

gain peace of mind that both you and your company are

ready for transition.

There are several factors to consider when planning to exit or

retire from your business:

• Business partners or key executives

• Your business plan

• Your family situation

• The structure of your company

• Your retirement plans

• Tax laws

• Your health

• Business debt

• Market conditions

Most business owners will only ever sell one business and as

a result of that will not have the experience of the numerous

challenges and pitfalls involving finance, legal and taxation

issues that impact the business sale process and outcome.

Understanding the value of the business in the open market

and ensuring the right mix of elements will lead to the key

objective of maximizing the value on the sale.

THERE IS ONLY ONE SALE THAT MATTERS

Despite plans to exit their firms within the next decade, few

business owners have developed a formal succession plan;

that could greatly diminish their returns on a business sale. It

is vital to plan ahead with the exit planning process several

years in advance to ensure all the key elements are in place.

In this document there are several sections and chapters to

be a guide and resource for business owners to facilitate and

manage the outcome.

WHY DOES IT TAKE A TEAM?

Selling a business is one of the most complex transactions

imaginable and requires a diverse team to enable a

satisfactory result. Deal success requires having the right

team on board including:

• Accountant

• Valuation specialist

• Mergers & Acquisition lawyer

• Mergers & Acquisitions specialist

• Marketing team

• Wealth Management

Each of these specialists will play a pivotal role to steer your

transaction from concept to completion. It is vital that the

selection process of the team be assessed for their prior

experience in transactions involving Mergers & Acquisitions.

An important element to remember is that the buyer

will have a similar team representing them during the

negotiation process; therefore selecting the best quality of

team members will be a determining factor in achieving the

best value and terms.

“Insanity is doing the same thing over and over again and expecting a different result.”

- Albert Einstein

4

TRANSITION PLANNING GUIDE


5


WHAT IS AN EXIT PLAN?

An exit plan asks and answers all the business, personal, financial, legal, and tax questions

involved in selling a privately owned business. It includes contingencies for illness,

burnout, divorce, and even the owner’s death. Its purpose is to maximize the value of

the business at the time of exit, minimize the amount of taxes paid, and ensure that the

business owner is able to accomplish all of his or her personal and financial goals in the

process.

An exit plan can be complex and usually requires advice from a number of different

specialties. A well-designed and implemented exit plan enables business owners to:

• Control how and when they exit

• Maximize company value in good times and bad

• Minimize, defer, or eliminate capital gains taxes

• Retain control by generating a number of strategic exit options

• Ensure they achieve all of their business and personal goals

• Reduce their stress and that of their employees and families

• Ensure continuity of the business

On the other hand, the failure to create a well-defined exit plan virtually guarantees that

business owners will:

• Exit their companies as a result of pressure from outside circumstances, not as a

result of their own desires

• Exit their companies on a timetable that’s forced on them instead of one that meets

their needs

• Undervalue their companies and leave hard-earned wealth on the table

• Pay too much in taxes

• Lose control over the process by being reactive and limiting their exit options

• Fail to realize all of their business and personal goals

• Suffer unnecessary psychological stress

• Watch a lifetime of work disintegrate as a result of poor business continuity planning

• Lose confidentiality during the sale or exit process

A recent survey showed the number one reason private business sales fail or only partially

succeed is a lack of planning on the seller’s part.

6

TRANSITION PLANNING GUIDE


TRANSITION PLANNING GUIDE 7


HOW TO BUILD RECURRING REVENUE:

A KEY TO A VALUABLE BUSINESS

Recurring revenue is the Holy Grail for business owners looking to have

a valuable and desirable company.

A customer base with a subset of recurring revenue that is contractual

and repeating in nature increases the probability that the business will

have stable, predictable revenues and cash flow into the future.

From a buyer’s perspective, this reduces future risk and therefore

enhances perceived value. The value associated with acquiring the

available cash flow is directly related to risk.

Although all recurring revenue will have a positive impact on business

value, some forms are more desirable than others. Here is a list of the

types of recurring revenue in an order from good to best:

CONSUMABLES

If you sell a consumable product, whether it is diapers, commercial

cleaning supplies, or office supplies, start tracking your repurchase rate

from existing customers. This will be a number that buyers will use to

calculate your projected sales into the future — and to calculate how

much they’re willing to pay to buy your company today.


Recurring revenue is the Holy Grail

for business owners looking to have a

valuable and desirable company.

- Rose Stabler


8

TRANSITION PLANNING GUIDE


SUBSCRIPTIONS

Even better than having loyal customers who repurchase is having revenue that is guaranteed into the future.

For example, loyal subscribers to magazines, newspapers, and other publications get a renewal letter each year

and pay upfront for the next 12 issues. They make the conscious decision to renew into the future for a certain

period of time.

Automatically renewed subscriptions are even more attractive than periodic renewals because they require

a conscious decision to cancel rather than renew. For example, Mozy.com automatically backs ups office

computers online on a daily basis and charges a fee each month. This subscription service has no end date

unless the client tells them to stop providing the service. By tracking historic cancellation rates, revenues can be

predicted well into the future, which is why these types of revenue streams enjoy higher valuations.

CONTRACTS

The only thing more valuable than an automatic renewal subscription is a hard contract for a defined term.

Wireless cell phone companies come to mind as one of those industries that push hard to get you on a multiyear

contract. When a company is acquired, the owner and some employees may leave after the acquisition,

however customers with plenty of time remaining on their contracts are security for the acquirer. As you ascend

the recurring-revenue hierarchy, the value of the business will go up accordingly.

RECURRING REVENUE MODELS FOR YOUR BUSINESS

Do you think that recurring revenue is tough to achieve in your business? Here are some examples of recurring

revenue models:

• Maintenance contracts

• Annual license agreements

• Warranties

• Subscriptions

• Landscape maintenance companies

• Pool service companies

• Janitorial companies

• HVAC companies that perform routine maintenance of

equipment

• Accounting firms that provide annual tax return preparation and

audits

• Security firms that monitor home and commercial businesses on

a monthly basis

• Software companies that provide annual user support and

software upgrades for a maintenance fee

BENEFITS OF RECURRING REVENUE

The recurring revenue customer base you build for your company will:

• Increase the probability that you will have stable revenues and cash flow

• Decrease future risk in the mind of a potential buyer

• Provide you with an opportunity to sell additional products or services to your existing customer base

• Keep you more attuned to your customer needs while helping you ward off competition

• Provide a corporate buyer with the opportunity to cross-sell its products to your customers

• Provide a justification for a higher sales price of your business

“Ensuring your company has a predictable and stable revenue base will mitigate

risk in your business and leads to a much higher valuation.”

TRANSITION PLANNING GUIDE 9


WORKING TOGETHER AS A TEAM

ACCOUNTANTS

In order to maximize the benefits of the sale value, forward planning is

essential. It’s important that sellers seek advice from their accountant,

regarding tax planning or structuring the business for sale.

When you are planning to exit and sell your business, it usually takes

between two to three years of advance planning. Advance planning

is essential to ensure the most effective business corporate structure

meets with CRA accepted standards that will enable full access to the

Capital Gains Exemption (CGE).

Currently the CGE is set at $800,000 tax free benefit for each

shareholder based on a share sale transaction. However, in order to

gain access to these tax free funds, the sellers business must meet a

wide range of criteria in order to achieve a successful outcome. Her e

are some of the examples of the challenges involved:

1. The business structure must be “on side” from a CRA perspective in

order to qualify.

2. Each shareholder must have held the shares in the business for

two (2) years prior to selling the business to a third party.

3. The business model must pass the buyer scrutiny of “due

diligence” and only when the buyer is satisfied that the risks

involved in the purchase of the business will they consider a share

sale. If the risk is unacceptable to the buyer, then they will proceed

with an Asset sale that doesn’t have the same tax free benefits.

4. If the business has a track record of any substantive legal action,

then this illustrates risk to the new buyer and will probably result in

an Asset sale.

There are a wide range of issues involved when selling your business

that are impacted by the sellers accounting records, for example:

Every business has to pay taxes, but a solid tax strategy will help your

client pay what’s fair. There are two possible scenarios, Share Sale or

Asset Sale.

While a Share sale is the obvious preference, often business

circumstances dictate that buyers will only consider an Asset sale.



Where there is no guidance, a

people falls, but in an abundance of

counselors there is safety.

- Proverbs 11:14

Opportunity is missed by most people

because it is dressed in overalls

and looks like work.

- Thomas Edison



“The difference between failure and success is doing a thing

nearly right and doing it exactly right.”

- Edward Simmons

10

TRANSITION PLANNING GUIDE


DOES YOUR BUSINESS MEET THE LOW RISK CRITERIA

THAT BUYERS SEEK?

• A consistent trend of increasing sales and profits over many years

• Dominant market share in its trade area

• A diversified customer base

• Excellent receivables management

• Good banking credit and payables history

• Low employee turnover

• More than adequate working capital

• Financial ratios compare favourably with other industry averages

There is a wide range of issues involved when selling your business that

are impacted by your accounting records, for example:

Every business has to pay taxes and developing a solid tax strategy

will help your client pay what’s fair. It’s important to plan ahead for a

tax efficient strategy with your client. There are two possible scenarios,

Share Sale or Asset Sale. In many circumstances, providing your

client with a Review Engagement process carries more strength and

substance than Notice to Reader.

While a Share sale is the obvious preference, often as a result of the due

diligence phase, the clients business circumstances dictate that buyers

will only consider an Asset sale because of high perceived risks.


Without advice plans go wrong, but with

many advisors they succeed.

- Proverbs 15:22


SERVING OUR CLIENT’S BEST INTEREST

Pavilion has acted for many respected businesses to structure

and execute significant corporate financial merger & acquisition

transactions in the small / mid-cap marketplace.

The advantages of working with Pavilion include:

• Access to objective advice, professional insight and judgment

• Strategic partner that keeps the clients best interests in mind

throughout the transaction

• Essential market intelligence both locally, nationally and globally

• Maximize the transaction value

• Access to pre-qualified investors and strategic buyers

It’s a fact, Pavilion has the skills, talent and know-how to negotiate and

achieve a significantly higher selling price than any other organization.

Working together to serve the

common purpose of the clients goals.

“The great accomplishments of man have resulted from the

transmission of ideas and enthusiam.”

- Thomas J. Watson

TRANSITION PLANNING GUIDE 11


LAWYERS

Legal issues are always at the forefront of M&A deals. The lawyer is a

very important advisor to both Seller or Buyer. The lawyer should be

someone who is well versed in M&A; only use an attorney who has

actually engaged in M&A transactions.

Buying and selling a business is one of the most complex transactions

that exist in the marketplace today. It’s a complicated process with

multiple concurrent moving pieces in the transaction that effect:

• Taxation matters relating to the CRA

• Human Resources and Employment Contracts

• Real Estate – Sale or Lease

• Trusts

• Deal / Transaction Structure: Share Sale or Asset Sale

• Terms of Payment: Vendor Financing, Earn Outs and other

conditions

• Purchase / Sale Agreement




There is gold and abundance of costly

stones, but the lips of knowledge

are a precious jewel.

- Proverbs 20:15

Earnings can be pliable as putty when

a charlatan heads the company

reporting them.

- Warren Buffet

Rule No.1: Never lose money. Rule No.2:

Never forget rule No.1

- Warren Buffet




“Proficient is defined with one word: skilled. In order to become skilled you must

have more than knowledge, you need to apply that information.”

- Jac Fitz-Enz

12

TRANSITION PLANNING GUIDE


WEALTH PRESERVATION

While every business has to pay taxes, a solid tax strategy should help

to pay what’s fair. There are many aspects to consider to prepare a

clients business for transition planning, including:

• Wills

• Trusts & Corporate Structure

• Estate Planning

• Tax Strategies

In many instances, either accountants or lawyers are key proponents of

best practice in this regard and help structure the clients’ tax strategy

–and enabling more revenue toward their bottom line.


And if anyone forces you to go one mile,

go with him two miles.

- Matthew 5:41


MERGERS & ACQUISITION - IT TAKES A TEAM

The lawyers for both sides (buyer and seller) work together and craft

the details of the purchase agreement.

These agreements are very complex and often utilize complex terms

and phrase and it’s a key responsibility to craft a document that think

makes sense, protects the clients interest and not cause the transaction

to collapse.

The lawyer selected must specialize in Mergers & Acquisitions

transactions and will help resolve the following issues:

• Assisting with a transaction strategy;

• Conducting due diligence on legal matters;

• Drawing from previous mid-market M&A transactions, in order to

provide the owner with some comfort and reassurances as to:

o The process that the owner will undergo; and

o What types of problems and concessions are customary in

similar circumstances?

CORE COMPETENCY

The primary role of the lawyer is focused on negotiating the legal terms

of the purchase agreement. Lawyers are worth their weight in gold

providing they are proactive and assist in protecting their clients best

interest and enable a successful outcome.

Lawyers – during the sale process of every transaction, an experienced

M&A lawyer will play a key role in determining and facilitating the key

components of the final Purchase Agreement.

In most cases, it is the buyers’ lawyer who drafts the Purchase

Agreement and it will be weighted in their favour. Selecting a lawyer

who is specializes in Merger and Acquisition services and is aware of

the unique language and aspects of these complicated transactions is

essential.

The lawyer is there to protect the clients best interests and often will

save their client unnecessary taxes and post closing costs.


A negotiator should observe everything.

You must be part Sherlock Holmes and

part Sigmund Freud.

- Victor Kiam


If you are considering selling your

business with the plan of being out

in 3 to 5 years, the best time to strart

the process is today



TRANSITION PLANNING GUIDE 13


VALUATION - RISK & REWARDS

IT’S ALL ABOUT VALUE

Pavilion has a team of highly qualified professionals who utilize various

methods for conducting valuations.

We recognize that a sound valuation will be based on all the relevant

facts including the elements of common sense, informed judgment

which must enter into the process of weighing those facts and

determining their combined or cumulative significance.


The value of a thing is the amount of

laboring or work that its possession

will save the possessor.

- Henry George


In addition, Pavilion has further resources that help smaller and midcap

clients optimize their current “fair marketplace” value.

INTERNAL VALUE DRIVERS

Our team works closely with sellers to assess the business internal

“value drivers” that ultimately determine the Enterprise Value in the

marketplace. In addition, we utilize real time access to the following

resources:

4 Precedent database of completed transactions across North

America that provide evidence to support the valuation.

4 Real time access to the financial performance in each SIC or

Industry sector to enable an independent “yard stick” for key

performance indicators (KPI’s).

4 RMA Ratio’s – The Risk Management Association provides a wide

range of metrics that we use to assess the business and provide a

“score card”.

The true indicator of a company’s success is measurable by a wide

range of factors. One of the main components is the financial metrics

of the business including the Profit and Loss statements and Balance

Sheet performance. While this is a key financial metric, there are

numerous other factors that enhance enterprise value.


4.

Normalization of financial statements and

assesment as to future maintainable earnings

2.

Risk Profile

(internal/external)

7.

Valuation

Conclusion

6.

Transaction reviews

including the number of

buyers and sellers

market sector

5.

Application of valuation

approaches and methods

3.

Future Opportunities/

Growth Potential

1.

Collection and analysis of all relevant information

necessary to support the valuation conclusion

Everything that can be counted does not

necessarily count; everything that counts

cannot necessarily be counted.

- Albert Einstein


14

TRANSITION PLANNING GUIDE


MORE THAN EBITA

EBITA plays a significant contribution to the business valuation

however there are multiple other factors that can make a considerable

difference to the outcome.

Today, up to 80% of a firm’s value can be associated with intangible

assets, such as brand, reputation, culture, customer satisfaction, human

capital, risk management, R&D pipelines and a company’s trading

license to operate.


There is gold and abundance of costly

stones, but the lips of knowledge

are a precious jewel.

- Proverbs 20:15


EXTERNAL VALUE DRIVERS

When taking your business to market, it is important to consider the

external value drivers:

• Economic factors

• Strategic buyer synergies

• Recurring revenue

• Competition from buyer groups

• Innovation & IP: proprietary technology, trademarks, patents, etc

Transition timeline for existing management

Each of these factors can substantially increase the final selling price for

the benefit of the seller.

IT’S COMPLICATED

Selling a private company is not just about finance, accounting or legal

matters. It is a team effort that is dependent on sales and marketing to

ensure the best value.

A marketing strategy is critical to the sale process primarily because it

will enable multiple bidders for the sellers business which will ensure

they obtain maximum value for your clients’ years of hard work.

AVOIDING THE PITFALLS

Traditional approaches for selling a business involves little sales or

marketing activity. There is an over reliance on “word of mouth” and

networking connections from third party advisors. As a result, the client

often does not achieve optimum price, value, or terms - referred to as a

“short sale”.



We are in danger of valuing most

highly those things we can measure

most accurately, which means that we

are often precisely wrong rather than

approximately right.

- Sir John Banham

Money, which presents the prose of life,

and which is hardly spoken of in parlors

without an apology, is, in its effects and

laws, as beautiful as roses.

- Ralph Waldo Emerson



“If you are considering selling your business with the plan of

being out in 3 to 5 years, the best time to start the process is today”

TRANSITION PLANNING GUIDE

15



THE PAVILION SALE PROCESS

The successful sale of a business involves many moving parts, making

it the largest and possibly most complicated transaction of your life.

The Pavilion process ensures practical advice that will help you select

the best professionals to sell your company while ensuring that you

get the best price and terms.

It’s often possible to sell your business for 50% more value if you

do everything right. Unlike selling a home in the residential or

commercial real estate market, the process of selling your business is

deemed “inefficient” for a myriad of reasons.

The purchase price for your company will vary greatly depending on

who you are selling to and what type of buyer you are looking for.

For example, Pavilion utilizes a dedicated marketing team who

specializes in researching niche and vertical markets to identify

strategic buyers from around the Globe. Strategic buyers will often

pay a premium for your business.


It’s complicated

EFFECTIVELY STRUCTURING YOUR COMPANY

FOR TRANSITION

When you sell your business you may face a significant tax bill, if

you’re not careful, you could find yourself with less than half of

the purchase price in your pocket. Fortunately, there are multiple

opportunities to reduce or even eliminate tax, with the right

preparation and enough time to implement.

The moral of the story? Structure your company well in advance of a

potential sale and reap the benefits; or fail to plan ahead of time and

pay the price – literally to the CRA.

Our team has substantial experience in establishing proactive tax

planning practices to mitigate your taxes, so that shareholders take

full advantage of your enterprise value benefits.

Whereas in the M&A market,

the selling and marketing

process itself can have a

major impact on the price

of your company. Plan and

execute the process correctly

and you could increase the

price of your company by

upwards of 50%.

16

TRANSITION PLANNING GUIDE


HOW DOES PAVILION ATTRACT MORE

BUYERS?

The Pavilion team works closely with our marketing

agency Firstbase Business Services (www.firstbase.ca). This

relationship provides the basis for our strategic advantage.

Firstbase is an international strategic marketing agency

with an exceptionally talented team to provide “best value”

solutions for clients.

Our marketing strategies are unique and comprehensive,

when we implement the marketing program, we invariably

have a significant level of high quality enquiries for each

unique business enterprise we represent. The result is obvious

very quickly – a higher level of qualified buyer enquiries based

on our geo-demographic targeting initiatives.

ABOUT FIRSTBASE

Established in 1985, Firstbase was founded by Greg Spafford

in 1985 in the UK and the business was a founding member

of the Direct Marketing Association. The basis for success is

that geo-demographic targeting enables precisely targeted

messaging to niche and vertical markets. This expertise

enables the selection of the most appropriate audience for

specific messages to target business audiences around the

globe.

Unlike other indiscriminate media including newspapers,

magazines, radio and television; targeted messaging ensures

the message being delivered that the audience is relative.

The result is higher levels of engagement and response

based on accurate targeting.

TARGETED RESULTS

TARGETED RESULTS

1. The Project Brief

230

25

5-10

5-7

3

2

1

1. The 2. Exhaustive Project Brief Research

2. Exhaustive 230 prospective Research purchasers

230 prospective purchasers

3. Prospect Generation

3. Prospect Generation

25 interested parties “Dry-run”

25 interested parties “Dry-run”

negotiation negotiation training training

4. Qualification

4. Qualification

& Bidding

& Bidding

5-10 exploratory meetings

5-10 exploratory meetings

5-7 Competitve

5-7 Competitve

bids

bids

3 Bids 3 worth Bids worth considering considering

2 Alternatives maintain competition

2 Alternatives maintain competition

5. Concluding

5. Concluding

the

the

Deal

Deal

1 purchaser 1 purchaser

“The great accomplishments of man have resulted from the

transmission of ideas and enthusiam.”

- Thomas J. Watson

TRANSITION PLANNING GUIDE 17


THE SILENT AUCTION PROCESS

Due to our proactive marketing programs, we generate more

buyer enquiries than anyone in our industry. The result, increased

competition between buyers enables us to negotiate higher sales value

and improved terms for the client.

INFORMATION AT OUR FINGERTIPS

We have access to a database of buyers from around the world

including:

• Venture Capital firms

• Private Equity Groups

• Strategic Buyers with selection by industry category, sales revenue,

etc.

• Comprehensive database of most companies in USA and Canada

• International buyers including: China, Europe, Middle East, and

Australasia

The Benefits of the Silent Auction:

• Pavilion generates a wide range of buyers for each listing and

operates the silent auction process.

• Bidders are coached through the bidding to negotiate the best

price and terms.

• The result is a higher sales value and improved terms for our client.

Pavilion comprises of a dedicated M&A specialists who have the skill

set, know-how and experience to enhance and improve the final selling

price by as much as 50% over any other firm in the USA or Canada.

WHY DOES COMPETITION FROM BUYERS

INCREASE YOUR SALE PRICE?

The purchase price for your company can vary greatly depending on

who you are selling to and what type of buyer you are looking for. The

team at Pavilion market your business under the radar and in stealth

mode while managing the complexity of a confidential sale process.


You only have to do a very few things

right in your life so long as you don’t do

too many things wrong.

- Warren Buffett


An expert is a man who knows some

of the worst errors that can be made

in the subject in question and knows

how to avoid them.

- Thomas Stewart



“If you know what you are talking about you have something

more valuable than gold or jewels.“

- Proverbs 20:15

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TRANSITION PLANNING GUIDE


MAXIMIZE THE VALUE OF YOUR BUSINESS

Selling your business is a complex process that requires thorough

preparation, skillful presentation of your company, identifying the right

buyers, and sophisticated negotiation skills.

At Pavilion, you’ll work with a senior member of our team. We will

work closely with you to prepare your business for sale, present your

company to a highly targeted group of national and international

buyers and work with you to negotiate a transaction that meets all of

your objectives.

Your Pavilion advisor will guide you through each step of the sales

process, help you solve every challenge, be your advocate throughout

the deal, and leverage our firm’s years of experience to successfully sell

your company for maximum value and on the best terms.

By preparing your business for a voluntary sale, you can build a

sustainable operation that will attract both strategic and investment

buyers who will pay a premium for your business enterprise.


There really is only one sale that matters

to your business: your final sale. The one

where you exit. Your brand, your culture,

your reputation, your revenue - they all

culminate in that one big transaction.

So while you’ve got to be thinking

about your revenue numbers every

quarter, you’ve also got to be building a

business that creates value. Ultimately,

you’re going to capture that value

if you do it well.

- Razor Suleman

Director of software company

Achievers, which sold for $110 Million


INTERNAL VALUE DRIVERS

4 Stable and predictable cash flow

4 Reliable financial information

4 Customer diversity

4 Human capital / quality of workforce

4 Growth potential

4 Facility and equipment condition

4 Product / service diversity

4 Goodwill

4 Barriers to competitive entry

4 Operating systems and procedures

EXTERNAL VALUE DRIVERS

4 Economic factors

4 Strategic buyers synergies

4 Reccuring revenue

4 Competition from buyer groups

4 Innovation & IP: proprietary technology, trademarks, patents, etc.

4 Transition timeline for existing management


The only source of knowledge

is experience.

- Albert Einstein


“Those who fail to acknowledge and adapt themselves to the digital

revolution will become the “Kodak“ of this industry.“

- Aakash Educational Services

TRANSITION PLANNING GUIDE 19


RISKS & REWARDS

RISKY BUSINESS – AVOIDING THE PITFALLS

Some advisors don’t like to talk about risk. They’d much rather talk about

howmuch money you’ll make when their advice produces positive

returns, overlooking the potential that a collaboration with an M & A

specialist can provide.

WHAT CIRCUMSTANCES LEAD TO A SHORT-

SELL?

Many advisors are seeking to diversify their revenue streams and enter

the Mergers & Acquisitions arena. In many instances, because business

owners have worked closely with advisors for years or decades, they are

of the opinion that the advisor is able to sell the business in the most

effective manner.

The final sale result is underwhelming, the advisors’ firm sells the clients

business to the best of their ability however, the outcome results in a

lesser sum than the business enterprise is worth.

Without collaboration from other advisors with more knowledge of M &

A, millions of dollars can be left on the table resulting in a short-sell.

IT’S ALL ABOUT VALUE

The Pavilion approach to valuation is comprehensive and distinctly

different than any other advisor. Primarily because, we review the

strategic combined value and multiplies it, offering maximum return for

the client.

A sound valuation will be based on all the relevant facts including the

elements of common sense, informed judgment and rationally which

must enter into the process of weighing those facts and determining

their combined or cumulative significance.


CAUTION & RISK

Traditional approaches for selling

a company involves little sales or

marketing activity, resulting in a

short sale for the client.

There is an over-reliance on word of

mouth and networking connections

from third-party advisors that

fail to deliver a sale structure and

offers that are in the best interest of

the business owner.


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TRANSITION PLANNING GUIDE


REWARDS

Pavilion has acted for many respected businesses to structure and

execute significant corporate financial transactions in the mid-cap

marketplace. The advantages of working with Pavilion include:

4 Access to objective advice, professional insight and judgment

4 A strategic partner that keeps our best interests in mind

throughout the transaction

4 Essential market intelligence both locally, nationally and globally

4 Maximize the transaction value

4 Access to pre-qualified investors and strategic buyers

It’s a proven fact, Pavilion has the skills, talent and know-how to

achieve a significantly higher selling price than any other organization

in Western Canada.

AVOIDING THE PITFALLS

What is the difference between a company that is sold versus bought?

It’s a fact that most business owners will only sell one significant business in their lifetime. The process of selling

a business is complicated with many concurrent moving parts. Selecting the right partner in the selling process

will make a significant difference in the outcome, as outlined below.

CASE STUDY

In a recent example, a mid cap business owner worked closely with their highly reputable top tier advisors for

over 15 years. When the owner was ready to sell, the advisors conducted a valuation and stated that they could

sell the company for an estimated value of $12 million. After a year on the market with no success, the business

owner approached Pavilion.

Pavilion conducted a new valuation, which determined the business was actually valued at nearly $20 million.

With Pavilion’s innovative marketing initiatives, the business gained interest from prospective buyers and within

8 months, the right buyer was found.

Target enterprise value

Other Advisors

$12 Million

The Pavilion Team

$19 Million

Number of bidder enquiries 29

132

Shortlisted bidders in negotiation 5

19

Highest bidder $ 9.5 Million $16.5 Million

$7Million

Difference in sale value

The bought company had significantly more buyer enquiries and resulted in more

competition and enabled an improved outcome for our client. The Pavilion fee

was paid for many times over and the client got the increased value they deserved

for their years of hard work.

TRANSITION PLANNING GUIDE 21


HOW DOES PAVILION OBTAIN EXTRA

VALUE FOR EACH CLIENT?

Due to our proactive marketing programs, we generate more buyer enquiries than anyone in our industry.

The result, more competition means we are able to negotiate better value and improved terms for our clients.

MOTIVATED BUYERS

IMPROVED NEGOTIATION OUTCOME

THROUGH MOTIVATED BUYERS

FAIR MARKET VALUE RANGE

MOTIVATED SELLERS

BUYER WITH STRONG

NEGOTIATION SKILLS

A MYRIAD OF BUYER CATEGORIES

We have access to database of buyers from around the world

including:

• Venture Capital firms

• Private Equity Groups

• Strategic Buyers with selection by industry category, sales

revenue, etc.

• Comprehensive database of most companies in USA and

Canada

• International buyers including: China, Europe, Middle East,

and Australasia

“Invest in truth and wisdom, discipline and good sense, and don’t part with them.”

- Proverbs 23:23

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TRANSITION PLANNING GUIDE



IT TAKES A TEAM

The process of preparing and selling a business for sale is complex and

requires a dedicated team of professionals. Deal success is dependent

on having the right team working together to facilitate the sale

process.

KEY TEAM MEMBERS

The team players are different on each transaction:


Without advice plans go wrong, but with

many advisors they succeed.

- Proverbs 15:22


• Accountant

• Valuation specialist

• Merger & Acquisition specialist

• Marketing team

• M&A lawyer

TEAM WORK

Each of these team players will play a pivotal role and need to work

collaboratively with each other at different stages in the sale process.

The Pavilion team works with clients to facilitate the sale process in the

following manner:

• Maximize their client’s value

• Minimize their risk

• Support an effective and efficient transition

At Pavilion, we believe in teamwork and don’t displace the client’s

existing professionals.

SERVING CLIENTS BEST INTEREST

Pavilion has acted for many respected businesses to structure

and execute significant corporate financial merger & acquisition

transactions in the small / mid-cap marketplace.

The advantages of working with Pavilion include:

Working together to serve the

common purpose of the clients goals.

• Access to objective advice, professional insight and judgment

• Strategic partner that keeps the clients best interests in mind

throughout the transaction

• Essential market intelligence both locally, nationally and globally

• Maximize the transaction value

• Access to pre-qualified investors and strategic buyers

It’s a fact, Pavilion has the skills, talent and know-how to negotiate and

achieve a significantly higher selling price than any other organization.

If you are interested in collaborating together, we would be pleased to

hear from you.


Unity is strength. . . when there

is teamwork and collaboration,

wonderful things can be achieved.

- Mattie Stepanek

TRANSITION PLANNING GUIDE 23


PAVILION FACTSHEET

OVERVIEW

Pavilion Business Services is an independent Mergers & Acquisitions (M&A)

advisory firm operating and serving Canada’s small to mid-cap market.

Pavilion provides specialized advice to management teams of publicly and

privately-owned businesses. Pavilion’s team of experts is comprised of M&A

Specialists, Business Consultants, Succession Planners, Valuation Experts and

Marketing Specialists. Our team provides advisory services in the areas of:

• Succession / exit planning

• Mergers & Acquisitions

• Raising capital

• Business valuations

• Corporate restructuring

• Business growth strategies

Pavilion specializes in working with companies and organizations with

typically $2 million – $500 million in annual revenue.

CORPORATE INFORMATION

• Serving clients across Canada

• Attracting strategic and investment buyers across the

globe

• Financial analysis specialists

• Access to domestic, national and international markets

• Skilled and experienced negotiators

INTERNATIONAL BUYERS

Pavilion’s extensive networking partners allow us to provide

business advice on an international scale with direct access

to buyers and investors in over 120 countries. We work with

professional equity, strategic buyers and investment firms

from USA, Europe, Middle East, China and Australia.

North America is increasingly being regarded as the

preferred location for business investments. Established

businesses with a solid cash flow are in huge demand from

buyers around the world.

ADVANTAGES OF WORKING WITH A

MERGERS & ACQUISITIONS ADVISOR

Pavilion has acted for many respected businesses to

structure, negotiate and execute significant corporate

financial transactions and has successfully completed

numerous transactions in the mid-cap market space.

The advantages of working with Pavilion include:

• Access to objective advice, professional insight and

judgment

• A strategic partner that keeps your best interests in mind

throughout the transaction

• Essential market intelligence both locally, nationally and

globally

• The ability to maximize transaction value based on our

experience and track record

• Access to pre-qualified investors/buyers

PHILOSOPHY

The Pavilion management team instinctively know that great companies are built on the principle of doing the right thing each

and every day, and treating business partners, customers, and employees honestly, fairly and with respect.

KNOWLEDGE » INTEGRITY » RESULTS

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TRANSITION PLANNING GUIDE


OUR VALUES

dedication

innovation quality

entrepreneurship

excellence

sustainability

teamwork accessibity

integrity

collaboration

honesty

openness

persistence simplicity

transparency aware

empathy

OUR MISSION

In partnership, we build trusting relationships with individuals, business owners

and organizations to provide strategic exit planning and transition services.

“Do not use harmful words, but only helpful words, the kind that

build up and provide what is needed, so that what you

say will do good to those who hear you.”

- Ephesians 4:29

TRANSITION PLANNING GUIDE 25


With vision and imagination,

we sell your business for maximum value.

(Image of Pavilion Business Services’ reception area)

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TRANSITION PLANNING GUIDE


TRANSITION PLANNING GUIDE


DIVESTITURE » SUCCESSION » EXIT PLANNING » SELL

1.888.859.5388 | www.pavilionservices.com

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