Transition Planning 2nd Edition

RISKS
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 management of receivables
• Good banking credit and payables history
• Low employee turnover
• More than adequate working capital
• Financial ratios compare favourably with other industry averages
WHAT CIRCUMSTANCES LEAD TO A
SHORT-SELL?
Fact - 90% of deals fall through.
If your Valuation is not calibrated to the marketplace, your initial asking
price may be too high or too low. In that case, one of two things can occur:
1. Short Sale - You will sell your company for a lot less than it is worth
– leaving significant money on the table for the buyer.
2. Your company will not sell and therefore could be branded as
“damaged goods”.
Buyers are usually more sophisticated than Sellers in the market; they
surround themselves with a team of experienced advisors throughout the
process.
To offset that advantage, the sell side needs an accurate valuation with
advisors who know the market and are able to increase the odds of a
favorable completion.
However, if you choose to use an accounting related firm, it is common
knowledge that they do not have access to what the marketplace is willing
to pay. Instead, they rely on multiples of EBITA which are widely known to
be incorrect and in most instances undervalues the fair market value.
Some Advisors don’t like to talk about risk. They’d much rather talk
about how much money you’ll make when their advice produces positive
returns. This advice clearly overlooks the distinct advantages and benefits
of working with a dedicated advisor whose CORE business is Merger &
Acquisitions. As noted in the following chapters, it takes a team to provide
maximum enterprise sale value.
“
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 thirdparty
advisors that fail to deliver a sale
structure and offers that are in the best
interest of the business owner.
“
10
INTEGRITY • AGILITY •RESULTS