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Why Successful Business Owners Sell Out

October 10 2009| Filed Under M&A,Private Equity,Small Business,Venture Capital

In the world ofmergersandacquisitions, there are typically several hundred transactions per

week. While many of the multibillion dollar, cross-border transactions attract most of the press

coverage, a vast majority of deals involve micro- and middle-market companies. These

transactions involve mergers, acquisitions,leveraged buyouts,management buyouts, or

recapitalizations, and involve companies with enterprise values between two to several hundred

million dollars.

There are a variety of reasons why owners sell their companies or explore strategic and capital

raising alternatives. A vast amount of deal structure possibilities exist to accommodate varying

objectives. The owner (normally with the advice of an experienced M & A advisor) will seek out a

structure that best meets one or more of his or her objectives.

Read on as we explore the motives behind M&As from the seller's perspective. Understanding this

process can be an important step for investors in researching a company they own or are

considering buying into. What happens to a company once it's acquired is often determined in the

details hashed out in the merger/acquisition process.(To learn about the other side of these

transactions, seeThe Buy Side Of The M&A Process.)

Why Owners Sell

Owners who agree to sell their companies may be tired of running the business and seek either a

full or partial exit. If an owner wants to liquidate 100% of his or her equity, acquiring investors will

usually offer a lower acquisition price. This is partly a result of the greater difficulties that are

anticipated in running the business after the transaction if the owner is not available to help with

the integration process.

Arecapitalization, where the exiting owner retains a minority equity stake in the business

(typically 10-40%), is a more common structure. In this case, the exiting owner has incentive to

help increase the value of the business (normally through part-time effort). The exiting owner will

still benefit from a gradually diminishing role in the operation and the freedom to enjoy more

leisurely pursuits. Once the owner is out of the picture, the combined entity will have a go-forward

plan in place to continue to grow the business, both internally and through acquisitions. In

addition, the exiting majority owner will see the value of his or her equity increase if performance

benchmarks are reached. It is important to remember that large companies receive higher

valuation multiples from the market compared to smaller companies, partly due to lower

enterprise risk.
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An exiting owner may also wish to convert his or her equity into cash. This is because many

business owners have considerablenet worth, but a lot of this value is often value tied up in the

business, and thusilliquid. Unlocking this equity through a liquidity event may reduce the seller's

risk by diversifying his or her portfolio and allowing the seller to free up more cash.

Another common exit scenario involves an elderly owner who is experiencing material health

problems, or an owner who may be getting too old to effectively run the business. Such situations

often necessitate the need to quickly find an acquirer. While business development officers of

strategic companies can move the M&A process rapidly, large companies often do not respond

quickly enough because they are hindered by a number of bureaucratic processes that cause

delays (ex. managerial and board approvals). (For related reading, seeOwners Can Be Deal KillersIn M&AandHow The Big Boys Buy.)

Buyer Motivation

In the acquisition marketplace,private equityappears to be better suited to quickly engage the

owner, assess the business and complete the acquisition. A reasonably well run mid-market

company can be acquired within three to six months if both parties are genuinely invested in the

deal. This is especially true if the exiting shareholder's accountants readily provide yearly and

monthly financial statements, and if the acquiring equity group already has the accounting and

legaldue diligenceteam ready to move in.

Family disputes are also a common driver for an acquisition. A spouse or close relative may be

abusing company assets for personal gain, resulting in poor company performance and low

morale. Incoming investors can get rid of dysfunctional individuals and restore good management

practices in the business, as well as provide peace of mind to the seller.

A seller may seek to sell his or her company for operational or strategic purposes.

For example, the owner may wish to:

Gain market share. A larger acquiring company has complementary distribution and

marketing channels or arecognizable brandandgoodwillthat the target entity can

leverage.

Finance an expansion. The acquiring entity has the cash to fund new equipment,

advertising, or additional geographic reach, increasing the operational footprint of the

target.
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Raise capital for an acquisition. The acquiring entity has the capital or debt capacity to

execute an accumulation play. In other words, it can acquire a series of smaller

competitors and help to consolidate an industry. The target operates with fewer

competitors in an industry, and has access to its former competitors' resources

(management talent, product expertise, etc.).

Place better management. The parent company has superior management that can

unlock value in the target business. The acquired business can then be professionalized

(have better IT systems, accounting controls, equipment maintenance, etc.). (For more

insight, seeEvaluating A Company's Management.)

Diversify a relatively focused customer base. Small companies often have a large

percentage of their revenue base coming from a single or a relatively small number of

customers. Customer concentration significantly increases enterprise risk because the

business can go bankrupt if it loses one or more of its key customers. A diversified

customer base - presumably with a diversified revenue stream - lowers the volatility of its

cash inflow, increasing the company's value.

Diversify product and service offerings. The addition of complementary product and

service offerings into the target business allow it to capture more customers and increase

revenue.

Secure leadership succession. A business owner may not have invested time and effort

into identifying and grooming a successor, necessitating the sale of the business in order

to ensure that it continues to operate effectively. (For more, seeHow To Create A Business

Succession Plan.)

Other Factors

Themacroeconomicenvironment can also be an impetus to sell. The vast pool of capital available

in the U.S. economy has pushed up acquisition prices. As such, owners often look to take

advantage of a "seller's market" and hire advisors to market their businesses for higher multiples.

With vast amounts of cash competing for acquisitions, acquirers (particularly private equity) have

become flexible in structuring deals in order to accommodate existing shareholders' preferences

and objectives. However, while a seller's market provides such perks and benefits, if owners get

too carried away from reasonable and fair prices for their companies, they risk blowing up the deal

and losing millions of dollars.

When is the Right Time to Sell a Business?From time-to-time many owners find themselves thinking about selling their business and cashing out.

Thoughts of selling can be stimulated by a variety of factors. Regardless of the reason, an owner needs to

pause and ask if now is the right time to sell the business.
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How does an owner determine if the time is right to sell? Is there a systematic approach? How important

are instincts and gut-feelings? Should an owner wait until approached by a prospective buyer? What needs

to be considered when determining if its the right time to sell?

In general terms, there are three conditions which indicate that the time is right to sell. The time is right to

sell if the owner: (i) has a compelling or motivating reason to sell, (ii) is reasonably confident about thechances of meeting his or her objectives through the sale, and (iii) is psychologically prepared to relinquish

ownership control.

A Compelling or Motivating Reason

Occasionally an owner has no choice, and must sell whether or not the timing is right. For example,

divorce, the dissolution of a partnership, or the untimely death of a major shareholder can necessitate a

forced or involuntary sale. In such cases the question is not whether to sell, but rather how to make the

best of an unfortunate situation.

Assuming that an owner is not forced to sell, there are a variety of motivations to sell. Such motivations fall

into three general categories: (i) personal reasons, (ii) investment reasons, and (iii) strategic businessreasons.

(i) Personal motivationsare essentially non-economic and non-business reasons for selling and caninclude major disagreements with co-owners, the lack of heirs, retirement of the owner or a key manager,

the possibility of relocation, a desire to try something new, health problems, divorce, family problems, or

the death of an owner. In some cases, the owner simply feels emotionally burdened by the business, a

condition frequently referred to as burn-out.

When a privately held company borrows money, the lending institution will frequently require that the

owners sign a personal guaranty. The personal guaranty places the owners non-business assets at risk. In

order to eliminate the stress and uncertainty associated with a personal guaranty, some owners decide to

sell.

(ii) Investment Factorsinclude the owners need for liquidity, desire to minimize risk, and required yield

or return on investment. These three factors apply whether the business is closely held or operated as a

subsidiary or division of another company.

Liquidity: Unlike the stock of a publicly traded company, an ownership interest in a privately held

company is not immediately convertible into cash. It is difficult for an owner to raise cash by borrowing

money using stock as collateral. In addition, a leveraged recapitalization may raise tax concerns, negatively

impact the companys balance sheet and credit position, and, if a personal guaranty is required, increase

the owners degree of risk. The sale of the business, whether effectuated through the sale of assets or

stock, can provide the owner with needed liquidity.Risk: The biggest risks that an owner of a privately held company faces are bankruptcy, exposures under

personal loan guaranty, and the inability to quickly convert the asset into cash. For many owners, their

business represents their largest and most significant asset. At first an owner may be very tolerant toward

risk; however, in time the owner may grow uncomfortable with the risks of ownership.

To reduce their level of risk, an owner might elect to sell the business and then invest the proceeds into a

more diversified portfolio or another investment perceived to have less risk.

Yield: To the owner, yield represents the expected return on the investment. Yield or return can take

many forms including dividends, interest payments to owners, above-market salaries, and appreciation of

the companys value. The rate of return is usually expressed as a percentage of the owners actual

investment in the company.


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In some cases the yield on the investment may fall below the owners minimum requirement. As a result,

the owner may choose to sell their company in order to achieve a higher yield in another investment

opportunity.

(iii) Strategic business factorsinclude raising expansion capital, gaining access to technologies or

distribution channels, and securing needed management expertise. As traditional banks becomeincreasingly stringent in their lending practices, owners may contemplate selling all or a significant part of

their companies in order to raise additional expansion capital.

Each company has a life-cycle through which it passes. Under one model, there are five discreet stages

through which a company may pass: (a) initial development, (b) introduction/early growth, (c)

growth/accelerated development, (d) maturity, and (e) decline. As a given company matures and passes

through the initial development and early growth stages, various problems and challenges can arise which

can sometimes be addressed through the sale or merger of the company.

(a) Initial Development Stage:The force behind a start-up company is usually an entrepreneur with

a vision. The companys focus is on getting the product or service designed, tested, and ready for market.

The venture is very dependent upon the entrepreneur. Companies at this stage are regarded as unknown

quantities, can be very difficult to value, and are seldom sold as going concerns.

(b) Introduction/Early Growth Stage:Once a company has progressed beyond the initial development

stage, it can be characterized as: (i) experiencing an increase in sales, (ii) operating at break-even or

slightly better, (iii) working capital consists of trade credit and the founders initial investments, (iv) having

a home grown management team, and (v) still concentrating on entering the market and securing

distribution.

As with companies in the initial development stage, early growth companies are not prime candidates for

acquisition, although it is possible for strategic alliances to form in the early stages of development.

(c) Growth/Accelerated Development Stage:A rapidly growing company is primarily concerned withdeveloping its market and may experience any one or more of the following conditions: (i) dramatic

increases in sales, (ii) high operating margins, (iii) working capital and credit lines that are being exhausted

by the cash required to fuel the growth, (iv) the company is expanding beyond the capabilities of existing

management, (v) the possibility of increased competition, and/or (vi) having difficulty entering certain

segments of the market.

The right buyer can provide a company in the accelerated growth stage with the resources needed to

sustain growth. The buyer can provide much needed working capital, management expertise, competitive

strength, and expansion into new markets.

Companies in the accelerated development stage make attractive acquisition candidates. At this point in

the companys development, sales and earnings are still on the upward side of their curve, a situation

which supports a higher valuation.

(d) Maturity Stage:A mature company is primarily concerned with maintaining its share of the market

and may experience: (i) a leveling off of sales, (ii) some erosion of operating margins, (iii) excessive

leverage, (iv) under-valued or nonperforming assets, (v) a sense of systemic managerial complacency,

and/or (vi) more extensive competition.

The right buyer can provide a mature company with the spark it needs in order to return to growth. The

buyer may be able to provide more effective channels of distribution, improved operating margins through

combined operations (economy of scale), expansion capital or credit enhancement, opportunities to

increase facility utilization, a fresh managerial perspective, and a strengthened competitive position.


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Companies in the maturity stage also make attractive acquisitions even though they may lack the appeal of

a growth company. The company has established itself in the market, has a record of earnings, and

provides a foundation on which to build with the assistance of the right buyer.

(e) Declining Stage:A declining company is primarily concerned with maintaining its customer base and

may experience: (i) a decline in sales, (ii) marginal or break-even operating profits, (iii) difficulty servicingdebt, (iv) a pressing need for capital to fuel a turnaround, (v) difficulty retaining talented personnel, and

(vi) intensive competition.

The right buyer can provide a declining company with the time and resources needed in order to effect a

turnaround. The declining company will likely need an infusion of capital and managerial talent. In

addition, the right buyer can help provide a sense of direction and stimulate renewed commitment on the

part of key personnel to help them face the immediate challenges, identify and address the cause(s) for

decline, and defend the companys share of the market.

Companies in the declining stage can be attractive to turnaround specialists with a special set of skills and

sufficient resources to effect the turnaround. This tends to narrow the field of buyers.

Regardless of whether an owner decides to sell for personal, investment, or strategic reasons, it is

important that the owner be motivated. The sale of a business is not something to be approached

halfheartedly. If an owner is not sure that he wants to sell or that his objectives are capable of being

fulfilled, then he should think twice about putting the company on the market.

Confidence in Meeting the Owners Objectives

Whatever the owners motivations, he or she should be reasonably confident that their objectives are

achievable. How likely is it that the sale can be consummated? How reasonable are the owners objectives?

The probability of successfully completing the sale of a given company increases when: (i) the company is

properly marketed, (ii) at a realistic price, (iii) under favorable external and internal conditions.

(i) Proper Marketing: A properly orchestrated marketing plan for a given business will protect sensitive

information and keep the identity of the company confidential. A sound marketing plan also: (a) identifies

and targets the ideal buyer, (b) effectively and credibly communicates the advantages of ownership to

prospective buyers, (c) identifies and manages potential risks, and (d) minimizes barriers and obstacles to

agreement.

(ii) Realistic Price:If the owners minimum acceptable price is considerably higher than what the market

is likely to pay, the owners chances of success are decreased accordingly. Conversely, if business is priced

below market, the chances of a sale are dramatically increased, but at the owners expense! The

companys market value should be estimated before deciding to sell. If the estimate of value meets the

owners objectives, its prudent to proceed. If the estimate is below the owners objectives, he may want to

defer the sale or reconsider his objectives.

(iii) Favorable Conditions: Conditions which affect the likelihood of the owners achieving their

objectives can be found (a) within the business and (b) within the environment in which the business

competes. Obviously, favorable internal and external conditions increase the probability of success.

(a) Internal Influences:Factors within the business which affect the probability of success include (1)

the overall sales and earnings performance of the company, (2) the quality and stability of management

and personnel, (3) technology and proprietary property, and (4) the quality and adequacy of the facility.

(b) External Influences: External factors which affect the probability of success include (1) the general

performance of the national and local economy, (2) the market outlook for the companys products or


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services, (3) the performance of the company in relationship to the performance of the market, (4) the

companys competitive position within that market, and (5) the legislative and regulatory environment.

Psychologically Prepared to Sell

After an owner has determined that there is a compelling reason to sell and is reasonably confident that

their objectives can be realized, the owner needs to take some time and make certain that he or she is

emotionally ready. For the most, part the issue of emotional readiness to sell is a concern for individual

owners. When the ownership group consists of a holding company, venture capital group, or a larger

operating company, the process of letting go is generally oriented toward business issues.

While the sellers motivations may act to carry the deal forward, at some point in the process, the owner is

going need to face the emotional reality of severing his or her ownership-bond with the business.

The emotional bonds of ownership can be strong. The ownership-bond encompasses issues of (i) identity,

(ii) lifestyle, (iii) family relationships, and (iv) financial security. The best time to come to terms with these

issues is before engaging in active discussions with buyers. Otherwise, an owner may find that instead of

focusing his full attention on the substantive aspects of the negotiations, his attention is diverted to

emotional issuesa situation could obscure the owners view of the process and lead to errors of

judgment.

(i) Identity Issues:In our culture, what we are is often defined by what we do. If we own a business, it

is natural to think of ourselves as owners and entrepreneurs. Being an owner can become part of how

we define ourselves, part of our self-image.

Ownership pays certain emotional dividends. It can provide a general sense of self-esteem, pride, and

feeling of control. It can bring recognition by the community. For some owners, their business and social

lives are interwoven, making letting go all the more difficult.

An owner needs to ask himself if he is prepared to let go of the business and open a new chapter of his

life. Take an inventory of the emotional benefits of ownership. What is more important, the emotional

benefits of ownership or the anticipated benefits of selling?

(ii) Lifestyle Issues:An owner enjoys a sense of independence and self-reliance. Hes his own boss.

Ownership can provide a sense of focus, direction, and productive purpose to ones life.

After the sale, the owner may find that they are suddenly retired or working part-time on a consultant

basis. If the seller remains with the company as an employee, he will have to adjust to being an employee

and the time demands placed upon him by the new owner.

The owner should consider the likely impact of selling on his or her lifestyle. If the owner plans on

remaining active in the company after the sale, is he prepared to account for his actions and report to the

new owner or his representative? If the owner exits from the business, how will he spend his time?

(iii) Family Issues:A successful business can provide many benefits to the family. The business can

provide opportunities for family members and help keep the family together.

If the owner sells the business, the family will be impacted. Opportunity or higher-paying jobs may be lost.

The bond of the family business will be broken. Some members may be disappointed that the business

will not remain in the family, especially if they had expectations of one day buying or inheriting the

business.

An owner should consider the impact of sell ing on the family. How will those family members who relied on

the business for a living be effected? What will replace the business in the family system?


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It is important that the family be given an opportunity to discuss the sale as a family and work through the

individual issues involved in order to minimize unnecessary and potentially damaging conflicts.

(iv) Financial Security Issues:A successful business can provide an owner with a generous income

frequently structured to minimize tax. In addition, the value of the business remained within the owners

estate.If the sales price is paid as a lump sum amount, the owner will need to adjust their financial plan. The

steady income previously derived from the business through salaries, dividends, and perks will no longer

be available. While a revision of the owners financial plan can address these matters, the selling owner

needs to recognize that future income may be derived from investments rather than the company. The

time to begin developing a new financial plan is prior to the sale.

An owner should consider the possible effect of selling on family finances. How does he plan to use the

proceeds from the sale? How will the money be invested? Will earnings on the invested proceeds be the

owners primary source of income? If so, will that require a change in spending patterns?

By and large, owners and entrepreneurs are resourceful and resilient people. Facing the emotional realitiesof selling should pose no great challenge. Selling is going to change the owners life. Before starting the

process, the owner should ask himself if hes ready for the change and what will his new life look like? If

he is comfortable with the anticipated change and has a clear vision of life after sale, then he is probably

emotionally ready to let go of the company and move on to the next chapter of his life.

Summary

When you are thinking about selling, you need to pause and take an inventory of the situation. Do you

have a compelling reason or motivation to sell? Do circumstances within the company and the general

business climate favor selling at this time? Are you emotionally prepared to sell? Although the above

outline is not all-inclusive, you can use it to help you arrive at a decision. If the answers are yes, then

perhaps its a good time to sell. If the answer is no, then turn your attention to building your business and

increasing its value so that when the day comes that it is right to sell, youll get the best price and most

favorable deal.

Recent News and Successes

Why Sell Your Company?The time to prepare to sell is the day you start or take over the business. Burnout This is a major

reason, according to industry experts, why owners consider selling their business. The long hours and 7-

day workweeks can take their toll. In other cases, the business may just become boring the challengegone. Losing interest in ones business usually indicates that it is time to sell.

Why Sell Your Company?

Selling ones business can be a traumatic and emotional event. In fact, sellers remorse is

one of the major reasons that deals dont close. The business may have been in the family for

generations. The owner may have built it from scratch or bought it and made it very
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successful. However, there are times when selling is the best course to take. Here are a few of

them.

BurnoutThis is a major reason, according to industry experts, why owners consider selling

their business. The long hours and 7-day workweeks can take their toll. In other cases, the

business may just become boring the challenge gone. Losing interest in ones business

usually indicates that it is time to sell.

No one to take overSons and daughters can be disenchanted with the family business by

the time its their turn to take over. Family members often wish to move on to their own lives

and careers.

Personal problems Events such as illness, divorce, and partnership issues do occur and

many times force the sale of a company. Unfortunately, one cannot predict such events, and

too many times, a forced sale does not bring maximum value. Proper planning and

documentation can preclude an emergency sale.

Cashing-outMany company owners have much of their personal net worth invested in their

business. This can present a lack of liquidity. Other than borrowing against the assets of the

business, an owners only option is to sell it.They have spent years building, and now its

time to cash-in.

Outside pressureSuccessful businesses create competition. It may be building to the pointwhere it is easier to join it, than to fight it. A business may be standing still, while larger

companies are moving in.

An offer from out of the blue The business may not even be on the market, but someone

or some other company may see an opportunity. An owner answers the telephone and the

voice on the other end says, We would like to buy your company.

There are obviously many other reasons why businesses are sold. The paramount issue is that

they should not be placed on the market if the owner or principals are not convinced its time.

And consider an old law that says, The time to prepare to sell is the day you start or take

over the business.

"Why Sell Your Business?"

The 5 main reasons for selling a business may be diverse but they are also the most common we encounter.

1. Lifestyle change


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Running a successful business requires considerable levels of commitment and responsibility. Rarely, if ever, is there the

opportunity to leave the office at 5pm without a further thought given to the next days workload, operational challenges orthe

future of the business. After living with the burden of such responsibility for many years, business owners often yearn for a

more relaxed lifestyle with time and thoughts dedicated to family and leisure pursuits.

2. Entrepreneur Versus Manager

Many owners of privately owned companies have a strong entrepreneurial spirit and building a business, although time

consuming and extremely hard work, is also an exciting and dynamic time. However all businesses inevitably require

adherence to policies, procedures and legislation during day-to-day operations. All this consumes an ever increasing proportion

of the day for each business owner, increasingly pulling them away from the exciting and dynamic environment in the early

years of the growing company. For many owners, the motivating elements of growing and running a business becomes far less

evident.

3. Time

Building and running a business often requires considerable commitment. It rarely allows business owners the luxury to take

extended breaks away or the care free option of simply working 9 to 5. Because of this, whilst business owners develop and

expand their businesses, there is little time left for family and social activities and holidays. For this reason many business

owners choose to reap the rewards of their labour and sell their business, using the proceeds to regain lost time.

4. Business Life Cycle and Exit Strategy

A typical business life cycle sees rapid growth in formative years as each business develops from start up status into a small

and then medium sized company. Once the business reaches this size it is often necessary for the business owner to inject a

considerable quantity of capital into the business to maintain the level of previous growth. At this stage many business owners

have a stable and profitable business and feel less inclined to make a major financial commitment in the business which may

take many years to be fully realised and start planning their business exit strategy. At this point a decision is made to sel l the

business and allow a new owner, with greater financial resources and commitment to ensure the continued expansion of the

business.

5. An Approach

An approach from a potential acquirer can be the catalyst required to change a business owners mindset from running and

developing a business to enjoying the often considerable proceeds of a potential company sale. Approaches are typically made

either from an external organisation or from the internal management team (commonly known as an M.B.O. or Management

Buy Out). Many business owners experiencing such an approach take advantage of BCMS Corporates Negotiation only

service.

Why Business Owners Sell-

The Number 1 question asked by Buyers is -

If the business is so good then WHY does the owner want to sell?

The truth is that businesses sell everyday for numerous reasons. The following are some of the more

common reasons for owners to sell.

Common Reasons Owners Sell -

Cash out while the business is successful, take equity out of business

Retirement, or semi-retirement


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Burned out, generally too tired to run the business any longer

Pursue other interests

Other reasons-

Emotional freedom from weight of responsibility

Health & age issues

Bored, no longer satisfied, losing interest

Entrepreneur versus managermanagement duties stifle entrepreneurial spirit

Change in lifestylethe same reason that Buyers quit their jobs

Relocate to another part of the country

Death in the ownership, or of key employee, or in the owner's family

No family or heirs to succeed present ownership

Lack of capital or vision to expand the business

Lack of capital to fund the continued operations of the business

The business is unprofitable

Partnership or Shareholder Issues, partnership disputes, split in partnership

Divorce

Family disputes

Raise capital to start/buy another business

Willing strategic buyer opportunitybuyer suddenly makes a good offer

Difficulty addressing current business challenges

Succession: implementing a succession plan

Legacyensure business continuation

Pass ownership to next generation.

How we help... What we do -

You decide to sell your business, or to acquire another businessthese decisions bring into play

many complex factors that must be considered and properly handled in order to ensure success. We

manage the process to accomplish this infrequent and complex task, from beginning to end.


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Arrow Acquisitions serves Louisiana businesses with sales of $1 million or more. In addition, we

serve privately-owned middle market businesses nationwide. We are able to attract the attention of

qualified buyers and sellers nationwide through our joint-venture relationships with other

brokerages and through extensive use of the internet. In addition, we perform deep industry

research to locate prospective strategic buyers and sellers in related industries. Finally, we work with

private equity firms to present them with businesses in their target industries. Our goal is to provide

multiple buyers/sellers for each client.

Basic steps in the business transfer process-

Maintaining Privacy and Confidentiality

General Collection of Business & Financial Information

Pricing and Evaluation

Preparing the Business for Sale

SBA Qualification or Other Financing Strategy

Marketing and Advertising

Qualifying Buyers

Presenting the Business

Negotiating the Business Sale Transaction

Due Diligence

Closing and Transition

Whatever the reason you chose to sell your business, or acquire another one, we are able to assist

you in achieving your goals.

WHO ARE THE BUYERS?

We seek out and pre-qualify the most favorable buyers; those to whom your business represents its

highest and best use, and therefore its maximum value.

Our search includes:

Individual buyers - who want to "buy a job"

Strategic buyers - current business owners who can gain a strategic advantage

by buying your business

Financial buyers - wealthy individuals who seek absentee ownership

Private equity - an investment firm that purchases businesses to grow through

a cash infusion and management expertise


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Competitors - if you allow, frequently overlooked source of buyers

Your privacy is kept intact throughout the process. You run your business as usual, while

implementing initiatives that we suggest in order to prepare for a sale. We work behind the scenes,

discretely. We represent you professionally in the marketplace. Confidentiality is maintained,

protecting your relationships with customers, employees, and vendors.

Providing high-quality service in a spirit of excellence.

Why Would I Want to Sell My Business?

At one time or another, most business owners consider selling their businesses for such reasons as these

Under Capitalized

You've taken the business as far as you can, and it will require a significant capital infusion to take the

business to the next level.

Dispute with Partners, or Divorce

One or more partners wants to be cashed out, or a partner has lost his or her interest because of divorce or a

dispute.

Death or Illness

An owner or partner has suffered death or a serious illness, and his or her interest needs to be cashed out to

cover expenses or to settle the estate.

Relocation

Some other event necessitates a major move that will prevent you from continuing with the business.

Burnout

Even the best of businesses can drain our energy. Often, owners are tired of handling the day-to-day

responsibilities, managing employees, or keeping the books.

Upgrading to a Bigger Business

Successful owners often sell their current business to step up to a bigger opportunity.

Poor Management

Small business owners must wear many hats, and rarely are they master of all aspects of their business.

Sometimes owners need to get out of the business because they have taken on a business that does not fitwell with their skills and abilities.

Top

What Is My Business Worth?

The value of your business is determined by many factors. Mercury Business Brokerage will provide freeconsultation to give you a brokers opinion of value based on such factors as these

Tangible Assets

Such tangible assets as inventory, furniture, fixtures, equipment, and receivables all factor into the value ofyour business.
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Intangible Assets

Intangible assets like time in business, established customer base, training, non-compete agreements,

exclusive markets, established suppliers, and expected growth potential all add value to the business.

Lease Agreement

The terms and transferability of the existing lease agreements can be a critical factor in selling your business.

Favorable terms and easy transfer increase the price, whereas unfavorable terms or inability to transfer (or,

worse, requirement to move the business) may greatly reduce the value and price of the business.

Quantity and Quality of the Income Stream

The key factors of sales, gross profit margins, cash flow, quality of records, retention of key management, and

positive business trends all help support a greater value.

Risk Vs. Price

Risk factors are evaluated and considered. Higher risk for the buyer usually results in a lower selling price, and

lower risk for the buyer usually results in a higher selling price. The greater the chance of your business

continuing and growing without you, the greater the value to the buyer.

Market Comparables

Recent sales of other businesses in your market are considered. Local and national economic conditions are

evaluated along with many other factors.

At Mercury Business Brokerage, we will evaluate all these and many other factors at no cost to you and helpyou arrive at the right sales price. For many small- to mid-sized businesses, the value can be estimated at twoto three times the annual discretionary cash flow of the business. Our brokers have received specific trainingand use sophisticated tools and analysis to establish the value of your business.

Top

Why Use Mercury Business Brokerage?

Knowledge and Experience

Our experience can shorten the selling process and bring you a higher price. Private business owners operate

their businesses to minimize taxes. We know how to present the true benefits of your business.

Free Consultation

In a no-cost, no-obligation consultation with you, we take into account cash flow, assets, financial history,

current conditions, markets, competition, business location and the economy (among other factors) to

determine a brokers opinion of value.

Why not use a real estate broker?

A business sale is very different from a real estate sale. Most real estate agents do not have the training,

experience, or understanding to value or sell your business the right way. Consider some of the differences

The sale of a business is characterized by:

a confidential process

value based on cash flow

few comparables available

a complex transaction

On the other hand, a real estate sale is characterized by:

a public process

value based on real propertymany comparables available
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a simple process

Would-be business sellers are often reminded that if they wanted a FOR SALEsign posted out front and their

financial statements posted in the window and published on the Multiple Listing Service, then a real estate

agent would work just fine! If you want to keep the sale of your business confidential while still maximizing

your exposure to potential buyers, then see a business broker. Mercury Business Brokerage specializes inbusiness sales and in real estate sales that are associated with business sales.

Why not sell it yourself?

Because youre at a disadvantage. It takes owners several years to successfully sell their businesses on their

own and often at a drastically lower price than could have been achieved. In addition, the distraction of selling

their business on their own actually causes the value of the business to drop as the owner is distracted from

the day-to-day operations. You as the owner should focus on what you do bestrunning your business. Let us

focus on selling your business. We do the analysis to show you what your business is worth; we prepare the

business presentations to show prospective buyers; we advertise and market your business to buyers and

qualify them before interrupting your work. Our professional efforts allow you to continue to grow your

business and maximize its value.

Confidentiality

One of the big benefits of using a business broker is confidentiality. Most business owners do not want their

employees, competitors, suppliers, or customers to know they are considering selling, as such knowledge could

damage their ongoing business. Mercury Business Brokerage maintains confidentiality so your business can

move forward without interruptions.

Time

Most owners who sell their own businesses take several years to find a buyer. Selling a business is a grueling,

competitive ordeal that can be a big distraction. We take away that burden and shorten the process.

Documentation, Marketing, and Exposure

We prepare all the marketing materials to be released only under a confidentiality agreement to qualifiedbuyers. We advertise locally and nationally, both in print and on the World-Wide Web in a confidential, generic

manner. Your listing will be posted not only on Mercury Business Brokerage web site but also on several other

national sites, such as USBX, BizBuySell, StartupJournal, IBBA, and others.

Qualifying

Mercury Business Brokerage will match qualified buyers to your business. Your business will typically be shown

to about fifty potential buyers. Then five to ten of those buyers look closely at the business, and one or two of

them make offers. We can help ensure that these buyers are capable of completing the transaction before

interrupting you in the operation of your business.

Negotiation and Follow-up

Mercury Business Brokerage can help structure the deal and get the right offer for you. As an intermediary, weaggressively pursue the buyer without compromising your negotiating position. Selling your business is our

only business.

Success!

We bring our expertise and experience to work on your behalf. We have walked in your shoes and owned and

bought and sold our own businesses. We know what it takes and how to get the job done the right way.

Reasons why people sell their businesses.


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There are numerous reasons why people want to sell their business. Sometimes the true reason is

not clear, but we will discuss some underlying factors that influence a business owner to sell.

The owner is tired.

An overworked owner who has worked for years in his business without a break can reach a stagewhere fatigue can influence his/her decision to sell.

The owner has too many business responsibilities or can not cope with more than one business.

Business owners can find that the business he concentrates on performs beter than the business he

spends less time with and visa versa.

Financial reasons.

Cash flow is the major player in business success. If the cash flow of a business is negatively

influenced the owner might be forced to sell a perfectly profitable business.

A business that expands too rapidly can consume all the available cash and force the owner to sell.

The economic climate is right to sell the business.

The owner has reached retirement age and wish to call it a day.

Ill health of the seller.

Death of the owner or spouse.

Divorce.

The seller is emigrating.

The seller can not handle the responsibility of operating his/her own business.

The seller can not operate on his/her own outside a formal corporate structure.

The business is running at a loss. This can be due to poor management practices. A new competent

owner can revitalize the business.

Alcohol abuse has been reported in a liquor related business. The owner`s drinking habits will

influence his management style and business decisions.

Some business owners bought the business for the wrong reasons and find that the business does

not meet their expectations.

The partnership is failing. One or more partners of the business wish to withdraw from the

partnership.

Personal financial reasons of the owner.


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From experience we have learned that the business owner plays a major roll in establishing the

success of a business. A business that has failed can be taken over by the new owner and made very

successful. The opposite is also true. Therefore is some cases the true reason for selling may never

be established.

6 Reasons Why Business Owners Sell

When you launch a new business, the prospect that you might one

day sellthat business is probably the furthest thing from your mind. According to wealth analyst Randy Siller, however, it is

something that even brand new entrepreneurs ought think seriously about. The reality is that, one day, you will probably wish to

put the enterprise up for saleand if you start planning now, you can ensure that the sale process is as seamless as possible.

Start your exit planning process by acknowledging that, yes, a day will probably come when selling the business crosses your

mind. In fact, there are several common reasons why business owners sell. Six of the most common ones are listed here.

Burnout

The single biggest reason is simple burnout. Running a business can lead to stress, to fatigue, and to feelings of exhaustion.

Also, as satisfying and rewarding as business ownership often is, there might come a time when your industry or vertical simply

stops interesting you. These are the times in which your mind might drift to the thought of selling.

Retirement

One day, you may decide that you want to retireto take it easy, to travel, to spend more time with family, or to take up golfing!

Whatever the reason, retirement might mean that you need to sell the business, either because you need to do so to support

yourself financially, or because you have not adequately prepared for succession. Of course, by starting the exit planning

process early, you can ensure that you have as many options available as possible, when the time to sell comes.

Family Dynamics

The reason for selling may have something to do with changing family dynamics. Should a spouse fall ill, or an elderly parent

need looking after, it may prove prudent for you to sell the company. Again, advance planning is important, so that you can sell

as efficiently as possible and attend to these family needs without hindrance.

Adverse Market Conditions


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Your industry is ever-changing, and market forces could conspire to make selling the company seem like your only option. This

is especially true if strong new competitors arise, and all but take over your industry. If you face a battle that appears

unwinnable, a quick sale may prove the answer.

Favorable Market Conditions

On the other hand, you may face opportunities to capitalize on favorable market trends. Perhaps such an opportunity will come

knocking on your doora chance to sell for a tidy profit. Should such an opportunity present itself, you might think seriously

about selling.

Sticking to Your Plan

Finally, you may decide to sell your company because that was the plan all along! In many ways, this is the bestcircumstance

under which to sell: You sell because you prudently planned, from the beginning, to sell at a certain point in the business life.

Putting such a plan into action is not always easy, of course, which is why working alongside a wealth analystis usually

recommended.
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Download - Why Successful Business Owners Sell Out

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