You’ve worked hard over the years to build a business that would take care of you and your family. Now, you think it might be time to sell your business. This is a decision that most business owners do not take lightly. They are proud of what they’ve built and would like to see their employees and customers treated well by the next owner. Most often, the Seller would also like to receive full value and good terms for what they’ve built. It’s hard building a business. Unfortunately, it’s easy to mess up the mergers and acquisitions process.
It seems that in these late stages of a nine-year bull market, everyone and anyone thinks that they have the knowledge and know-how to sell businesses. It’s easy to “hang a sign”, as they say. The problem is, most practitioners do not have the education, backgrounds, or experience to do so. They are glorified, Sunday real-estate agents. We hear about it from frustrated buyers all the time: “I think the business broker I talked to was 20 years old.” “I’m not sure they had any financial experience, whatsoever.” “In order to sign up the deal, the broker gave the seller the most unrealistic expectations, making any kind of deal impossible.” “I’m not sure their M&A advisor did any due diligence, at all, before bringing this to the market.” “The broker knew nothing about the actual business.” “The Information Memorandum, if you want to call it that, was full of wrong and useless information.” “After spending thousands of dollars on due diligence, the cash flow was no where near what was advertised.” “There was zero chance the bank would underwrite this deal.” Or even worse, “The business broker completely mis-priced the business on the low end. I got a steal of a deal.” On and on they go… So, before you turn your life’s work over to a broker who will get these kinds of reactions from buyers, it’s best to choose wisely.
Why does this happen? Quite simply, his happens because most people in the business brokerage industry do not have the proper backgrounds to be in mergers and acquisitions. On Wall St., M&A investment bankers are often the best students, who go to the best schools, who go through rigorous financial training to help make vital decisions for their Fortune 500 clients. These deals are often multi-billion dollar decisions that can make or break companies, CEO’s, and shareholders. The stakes are high. While your company may not be a Fortune 500 company, it is nonetheless just as important to you. To you, the stakes are just as high, if not higher.
This is why it is vital to understand the backgrounds of those you might hire to sell your business. Reading through the websites or LinkedIn profiles of most M&A advisors or business brokers will likely sound impressive. They want you to trust them. They are putting their best foot forward. They might have good, corporate backgrounds at Fortune 500 companies. They might be a CPA. They might have built a business and sold it. They’ve been in “your shoes”, they will say, and are now selling businesses. They might have even done M&A at a corporation as a buyer. Unfortunately, these are the kinds of backgrounds that lead to the aforementioned reactions from a couple of paragraphs ago.
So who should you hire? Before you make that decision, think about who the potential buyers for your company might be. From our perspective, buyers tend to be in three general categories. Ultra-sophisticated, private equity or venture capital buyers, who have spent an entire career learning how to buy, run, and sell businesses. These are your Ivy League or equivalent MBA’s and Goldman Sachs alums. Think “Shark Tank”, but better. Another type of buyer is a high-net-worth, individual buyer, who has built a great deal of capital by being really good at what they do. Even if they, themselves, do not have M&A experience, they tend to hire those that do, as advisors. Finally, there are strategic or corporate buyers. These types of buyers are who most sellers at this level believe will buy their business. Often, though, the smaller, corporate buyers do not see the value in M&A. These smaller corporate buyers are generally founders, who have built their businesses from scratch, and can’t understand paying millions of dollars for what they believe they can accomplish with a few more advertising dollars. “I’ll just go advertise in that location”, they tell us. These buyers are often your best fit, if they truly “get it”, but they usually don’t buy businesses, because they are unwilling to pay market prices. Finally, there are your larger, corporate buyers. We often hear about Public Company “A” or “B” that is going to be interested in buying my small business. That’s exactly the problem. If your business can’t move the needle, in terms of revenue or earnings, or provide some real, unique niche to a public company, then chances are, Public Company “A” or “B” are not going to be interested. In the event that these behemoths are interested, we will likely be dealing with someone sophisticated at the firm, who is out for a good deal.
This is why we feel very strongly that we must be one of your calls, if you are truly interested in getting the best deal possible. We get good deals, in both price and terms, for your our business Sellers. Remember, every buyer wants a good deal. A high, headline sales price is worthless to you as a Seller, if you never receive the money or get jilted by other terms or deal structures. There are some very sophisticated buyers in the marketplace. Some will have great M&A or private equity backgrounds, which are much better than their M&A advisor or business broker counterparts. These sophisticated buyers will run circles around the unsophisticated M&A advisor or business broker during the deal process. Unfortunately, some sophisticated buyers will try to rob the Sellers blind. It’s a tough business. Most business brokers and smaller M&A advisors won’t even realize their mistakes. The Seller, the advisor, and their attorneys believe they’ve gotten a good deal but they haven’t. Your M&A advisor or business broker might have just squandered millions of dollars, in an instant, due to their lack of sophistication and M&A know-how. But wait, you say, the M&A advisor or business broker I just talked to has been in business for 20 years and sold hundreds of businesses? Have you ever heard the saying, “They don’t know, what they don’t know”? We consistently sell businesses that other M&A advisors or business brokers could not.
We run a different kind of process here at CGK Business Sales. We get the best prices and terms because of our differentiated, proprietary process. We reach buyers that other M&A advisors or business brokers simply don’t have access to or were too lazy to contact. We have the types of education, backgrounds, and financial training to go to-to-toe with the most sophisticated buyers. Put us to work for you. Get the deal you deserve. It’s your life’s work. Protect it. Call us at 512-900-3770 or call your local office.
