January 30, 2025 • 19 mins
Unlock the secrets of successfully selling your business with insights straight from the trenches of mergers and acquisitions. Ever wondered how to find a buyer who truly respects your company’s culture and values? This episode promises to equip you with the essential knowledge to safeguard your business's legacy and protect your employees. We navigate the landscape of potential buyers, from private equity groups to strategic buyers and publicly traded companies, sharing compelling real-life examples of what happens when the match is just right—and the consequences when it isn’t.
As your hosts, we go into the operational challenges that can derail a sale, emphasizing the importance of being prepared. Learn from cautionary tales of buyers who failed due to lack of involvement and discover why having the right accounting practices and advisory team is pivotal. We spotlight the critical role of timely, specialized legal support, sharing how delays can jeopardize deals. Our approach to marketing and vetting potential buyers ensures that only serious inquiries come through, making your transition as smooth as possible. Get ready to arm yourself with expert strategies that turn the complexities of selling a business into a seamless process.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to the South Florida M&A Advisors Podcast,
your trusted M&A team.
Here's your host, Russell Cohen.
Speaker 2 (00:11):
Hello everyone.
We are back.
Russell, I am going to paint anice pretty picture for you this
morning.
Are you ready?
I'm ready, let's go.
All right, let's party.
So I'm a business owner.
Been spent the last fourdecades toiling blood.
Let's party, so I'm a businessowner.
I've been spent the last fourdecades toiling blood, sweat and
tears.
I built a successful businessand now I'm approaching my
(00:31):
twilight years.
It's getting close to thatretirement time and I'm thinking
got to sell the business.
Many questions are arising inmy head, one of which, which is
the topic of today's discussion,is how to find the right buyer
for my business.
Right, this is my baby as muchas my children.
Right, I've been with this,spent thousands and thousands of
(00:51):
hours.
I want to make sure that I'mturning it over to the right
buyer, and obviously I getcompensated accordingly for it.
So what's the first thing thata business owner should consider
when looking for the rightbuyer?
Speaker 3 (01:10):
You know, in the world of mergers and
acquisitions there's going to bea few types of buyers that will
be available to the businessowner.
If the business has an EBITDAof their earnings of, let's say,
a million five minimum goinghigher.
Let's call it 10 to 15 millionmiddle market, lower middle
market You're going to have someoptions.
Majority of those buyers willbe private equity groups, which
(01:33):
are investors in the business.
They're not coming in to runthe business.
They're going to expect thebusiness owner to stay on,
probably about two years and, ifyou're lucky, maybe a little
shorter.
But there's need to be someonethat steps in.
So private equity groups isprobably your number one buyer.
Your second buyer could be astrategic buyer.
(01:56):
For example, I'm representing aplumbing contractor and
naturally another plumbingcontractor would be a strategic
buyer.
Or, let's say, an airconditioning contractor.
That is a dual role, havingmultiple divisions.
So a strategic buyer could besomeone in the trades that would
also buy that company, and thebuyer might actually be someone
(02:20):
in your company too.
Be someone in your company too.
I've seen many times where theperson just under the owner
might be that person to buy thecompany.
They may not have thewherewithal to buy, but there
might be some funding or gettingadditional partners and then,
(02:41):
on a rare occasion, it could bea publicly traded company.
And that's rare, but you mustbuild something special for a
publicly traded company to comeyour way.
So when you're dealing withmergers and acquisitions, your
buyer pool will not be anindividual buyer, someone
relocating from one area orsomeone that is just
individually local.
More than likely, the privateequity group strategic buyer may
(03:04):
be the top person in yourcompany, right in front of you
and a rare occasion publiclytraded company.
Speaker 2 (03:11):
Lots of different factors to consider, and it's
not all about the money.
This probably is an obviousquestion, but I want to ask it
anyway.
Why is choosing the right buyerso critical for a business?
Because again, somebody couldcome along and have all the
resources available.
So critical for a business?
Because again, somebody couldcome along and have all the
resources available.
But as a business owner thatbuilt an empire over the last 40
(03:32):
years, I have thoughts about mylegacy.
Right, I want to ensure thatthe buyer is going to uphold the
business's culture and thevalues, right, no doubt.
Speaker 3 (03:42):
What you typically find is high quality, owner, top
notch business.
They want to protect theiremployees.
The owner can't do it withoutan incredible team and it's a
team that's been with them for along time.
A business supports manyfamilies, so when I hear that a
business owner wants to protecttheir employees and they do care
(04:03):
about their legacy, they docare about their staff.
They do want to see thebusiness carry on to the next
generation of owners and it's atough decision because they've
worked all these years and it'simportant to sell with a certain
timeframe because eventually abusiness owner will take their
eye off the prize as they getolder and that's where the
business value can go down.
(04:24):
So it's important to pick theright buyer for the right
situation.
A lot of things have to alignto make everything work, but
it's a tough decision but it'swell.
The business owner getsrewarded multiple ways.
Speaker 2 (04:43):
You've been doing this quite some time.
I wanted you to look backthrough the history of clients
and look for some real lifeexamples.
Can you share a story, maybe,where you represented a seller
and you found the perfect buyerand how that transaction went,
in contrast with a situationwhere you found a buyer that
maybe wasn't quite perfect andthe deal maybe fell apart?
Speaker 3 (05:04):
Yeah, I was representing a real estate
school that did continuingeducation online.
It was an internet businessapproved by the state of Florida
.
The gentleman was a one-manband.
He worked out of his home, madelike a million five working out
of his home.
We found a publicly tradedcompany, which is one of those
rare circumstances that weredoing a roll-up in the internet
(05:25):
space.
So they they bought his companyand they were buying up other
internet type companies.
It worked out well because hewas able to stay on for a couple
years.
He did not leave.
He got a tremendous amount ofstock, got a very substantial
down payment and one year laterhe was able to sell a stock at a
profit.
Uh, and it worked out wellbecause he was able to.
(05:47):
He was still young enough wherewhole lifestyle wasn't really
upset and he wasn't inretirement age, so it was
important to him to get to acompany that that could grow and
build infrastructure, becausehe was just a one person doing
everything but making a boatloadof money.
And that was really whencontinued education went online.
(06:09):
Some unfortunate circumstancessometimes your deals don't work
out where I was selling a siteexcavation company, new
construction, and we had a buyercome from overseas and he had a
green card and he butchered upthe business and they had
contracts with WCI, who's nolonger in existence right now,
(06:32):
but he just killed the business.
So here a perfect examplesomeone who'd been in business
30 years and, within two years,the buyer.
It was the right decision atthe time to sell the business to
the buyer, but we thought thebuyer was going to be
operational in the business andhe was trying to be hands-off.
Yeah, so you just don't know.
You just don't know.
But in the M&A world, theseinvestors are not coming to run
(06:55):
the business.
Everything stays status quo.
If you built the right business, things should not get
destroyed.
If it ain't broke, don't fix itright.
Yeah, just keep running it andkeep the staff happy and pay
them well, and they'll take careof you.
Speaker 2 (07:12):
So are there any red flags that you typically look
for that a business owner shouldlook for during negotiations
with potential buyers to try todetermine if this is the right
party to take over theirbusiness?
Speaker 3 (07:22):
Everyone has to win.
It can't be a one sided.
If it's a one sided win, no onewins and the deal is not going
to come together.
The attorneys can.
Really, time is the killer ofdeals basically in the M&A world
and any type of businessacquisition If your advisors are
not on it.
I'm on it, I'm working all thetime, but sometimes attorneys
(07:47):
are very slow to the punch.
In my last M&A deal, wereceived an offer let's call it
April 15th and the attorneydidn't respond until June 1st 45
days, which is unheard of.
So yeah, that's a red flag forme when the attorneys are not
moving quick enough.
I got to give the warning isyour attorney an M&A attorney?
(08:07):
Does this attorney have time todo the deal?
I'm experiencing it right nowwhere it took a few weeks for an
attorney to respond to and Idon't understand why it's so
slow.
Sometimes you got to light afire.
But yeah, I've noticed a lot ofjust really, that's a red flag
to me when we have either thebuyer's attorneys are just
(08:29):
running up the tab or theseller's attorney is just not
engaged enough.
Speaker 2 (08:34):
Yeah.
So I want to dig in a littlefurther into the role that you
play as the advisor, as thebusiness broker in the deal.
Obviously, this should be acollaborative effort between the
owner and yourself as theadvisor.
When you come into, what waysare you going about marketing to
determine a pool of buyers?
(08:56):
I know it varies for business,but what are you typically
looking at?
What resources are you usingand how are you vetting the
business owner once you find it?
Walk us through your process ofhow you start this.
Speaker 3 (09:07):
Yeah, Once we meet with the owner, we like to sit
down with our first meeting.
Learn about the business, findout if they're really serious
about selling, discuss aboutnon-compete, maybe discuss about
taxes, get them to prepare forthis colonoscopy that they're
going to be going through.
Everything will be unturned.
Unfortunately, you get into aquality of earnings and you're
(09:31):
talking about pages and pages ofrequests from legal, accounting
, insurance, medical,environmental.
It's just, it's never endingdue diligence.
So they mentally have to beready to really dig for
information that they neverthought they would have to dig
for.
But once we determine that theclient is a real seller, we're
(09:51):
going to dig into their numbers.
We're going to get their P&Ls.
We ask for the tax returns.
But the private equity groupswill just look at them, the
QuickBooks and the P&Ls.
They're looking really at thetrailing 12 months of the
business.
Where is the business goingthis year?
Downward trend, upward trend,stable.
And we're preparing the businessfor sale, getting the executive
(10:14):
summary organized, and we'retrying to come out the market
within four to six weeks afterthey engage.
And while that's happening,we're preparing a buyer list
from private equity groups andwe are strategic buyers If
you're going to have asuccessful M&A office, you got
to probably invest 30 to 50grand into the data sources to
(10:36):
have the right ability to findthe buyers.
There's PitchBook, there'sTagnify, there's Private Equity
Info, there's SourceGrove,Apolloio.
These are all differentsubscriptions, that where I can
really form a buyer list and goafter.
So we're not publicly listingthe business for sale on a
website.
We are hitting predeterminedbuyers that we feel might be
(11:00):
interested.
So technically you're neverreally hitting the market and
it's extremely confidential andevery buyer has to sign a
confidentiality.
But all these private equitygroups, they're not even local,
so it's held confidential prettyeasily compared to smaller
business.
Speaker 2 (11:24):
Now, if you could give one piece of advice to a
business owner out there that isat that place where the thought
has entered their mind they'regetting ready to sell, what
would that be?
What would be the first thingyou'd want them to start
thinking about before they enterinto that process?
Speaker 3 (11:35):
Your books are not ready for what's going to happen
.
Okay.
So, private equity works on gapaccounting and small businesses
don't.
Revenue recognition on gapaccounting is different than
traditional accounting.
Knowing that these privateequities private equity are
(11:58):
hiring a high prior toaccounting firm to really unwind
everything and I really meanunwind everything it would be
two to three years, three yearsprior start forming your team.
Make sure you got the rightaccounting CPA in place or CFO.
Because if I get to a sellerwhich I have right now where I'm
(12:20):
helping someone sell and I'mlooking at the balance sheet and
there's negative numbers on thebalance sheet, okay, now we
know the QuickBooks are notready.
So then we got to get a CFO andunwind your QuickBooks and get
it cleaned up to make a privateequity ready.
That could get expensive.
So if you're doing this acouple of years in advance, you
get a top-notch, quality CFO.
(12:41):
Make sure your staff is reallycapable.
If your QuickBooks is not clean, you're going to have problems.
So, yeah, advanced preparation.
If you don't own the realestate and you have a lease, get
your lease in order.
If you have personal guaranteeswith vendors, try to get your
name off the personal guarantees.
If you have contracts, if it'sassignable, see if the contracts
(13:04):
are assignable.
A lot of times the privateequity groups buy the stock, so
they'll actually buy yourcorporation.
Get contracts renewed, makesure they're long-term.
Anything that presents a highrisk can affect the valuation.
So if you spend time in advance, years in advance, prepare the
business for sale, you're goingto win at the end of the day,
(13:28):
you hear that everyone Get yourhouse in order.
Speaker 2 (13:32):
No doubt so key.
What is maybe the mostoverlooked factor that you've
seen when it comes to choosingthe right buyer?
It's an emotional ride.
Speaker 3 (13:44):
So these buyers will come in and they'll talk a
really good game.
And if you fall in love with abuyer which is great make sure
you take care of yourself first.
Make sure there's enough downpayment so when you're sitting
at the closing table you'rehappy about the sale.
That's most important becausethere's a tax situation, there's
(14:06):
a commission, there's anattorney bill, there's lots of
different types of holdbacks inan M&A deal.
So you might fall in love witha buyer, but when you start
looking at that closingstatement, then you got hard
palpitations.
Okay, okay, because what youthink you're getting.
And then, after you unwind,after all the fees, okay, make
(14:27):
sure you take care of yourselffirst, because you're selling
for your income.
You now don't have any income,so now you get this lump sum of
money you got invested correctlyand this is the income you're
going to live off for the restof your life, assuming,
obviously, of other investments.
Hopefully that would help.
(14:47):
So this is an importantdecision.
Take care of yourself, takecare of your employees.
Hopefully that would help.
So this is an importantdecision.
Take care of yourself, takecare of your employees Legacy
will live on and just make sureit's the right deal so you don't
freak out or try to back out atthe tail end of the deal.
Speaker 2 (15:03):
As we're diving deeper into 2025, are there any
trends that you've been seeingin the market that are impacting
how sellers should evaluatebuyers, the trends, the
multiples are not on an upwardtrend.
Speaker 3 (15:19):
Listen, you hold the deck of cards, no-transcript.
We're going to be able tocreate enough stir, an auction
process, a structuredtransaction where we're going to
have multiple offers competingagainst each other and some
private equity groups and someprivate companies will sprinkle
an earn out, will sprinkle arollover equity into the deal.
(15:42):
So there's lots of ways tostructure the deal on top of
that cash at closing.
Trends of the multiples aregoing down because of the
economy and the higher interestrates, but we can still get a
lot of offers at the same time.
So you could pick the rightbuyer and negotiate the right
deal that works for you.
But obviously, better economy,more free flowing money, better
(16:08):
multiples Probably if interestrates go down, that helps.
If it goes up, it does not help.
How the global economy willdefinitely affect how private
equity works, but there'sdefinitely a lot of money out
there still ready to deploy andbuyers that want to buy.
We're in a very good seller'smarket.
It is a seller's market if youhave a high profit making
(16:33):
business, no doubt.
Speaker 2 (16:35):
Indeed, and you just need the right team behind you.
Speaker 3 (16:39):
Very important to get the professionals behind you
that will help you decide what'sthe right deal.
Low pressure just be yourconsultant.
Let's find the right situationfor your time in your life.
Speaker 2 (16:53):
Absolutely.
Was there anything else that wemissed that you'd like to touch
upon before we wrap this up?
Speaker 3 (16:59):
I think we covered it really good.
I mean, the number one thing isbusiness owners don't prepare
their business for sale.
If more business owners didthat, they will get a bigger
cash out position and they'll beable to negotiate better.
So get your house in order, getyour consultants in line, look
at your leases, look at yourcontracts, look at your vendors.
(17:19):
Don't don't have concentrationin vendors.
Just put yourself in the shoesof the buyer looking at your
company.
Would you buy your company ifyou had a lot of money at risk?
That is a very important pointto know.
Speaker 2 (17:34):
Yeah, good question to ask for sure.
All right, everyone.
Thank you so much for tuning in.
If you are listening to thisand you've gone through this
process and you've sold thebusiness, please leave a comment
below.
Let us know about yourexperience.
And if you're looking to sellyour business, leave a comment.
Let us know what type ofbusiness that is.
And feel free to reach out toRussell anytime.
(17:56):
He is obviously a wealth ofknowledge.
He is here to help in any waypossible, help guide you through
this process.
So don't go at it alone.
Stay educated.
Losing my train of thought hereat the end, russell, oh my
goodness, what are we doing?
Speaker 3 (18:08):
Educated.
You got to be educated becauseyou are work.
The buyers are professionalbuyers.
They do this for a living andyou're stepping into the world
for the first time and you'regoing against professional
buyers.
So get help.
You need help.
You'll understand when you getin the process.
It's a process that you wouldonly want to go through once.
Speaker 2 (18:31):
All right, sounds good.
Again, everyone thanks fortuning in and we will catch
everyone next time on the nextepisode of the South Florida M&A
Advisors Podcast.
Everyone, take care, have agreat day and stay blessed.
Bye-bye, take care.
Speaker 1 (18:43):
Thanks for listening to the South Florida M&A
Advisors Podcast.
For more information, visitsouthfloridamacom or contact
954-646-7651.
Welcome to the South Florida M&A Advisors Podcast,
your trusted M&A team.
Here's your host, Russell Cohen.
Speaker 2 (00:11):
Hello everyone.
We are back.
Russell, I am going to paint anice pretty picture for you this
morning.
Are you ready?
I'm ready, let's go.
All right, let's party.
So I'm a business owner.
Been spent the last fourdecades toiling blood.
Let's party, so I'm a businessowner.
I've been spent the last fourdecades toiling blood, sweat and
tears.
I built a successful businessand now I'm approaching my
(00:31):
twilight years.
It's getting close to thatretirement time and I'm thinking
got to sell the business.
Many questions are arising inmy head, one of which, which is
the topic of today's discussion,is how to find the right buyer
for my business.
Right, this is my baby as muchas my children.
Right, I've been with this,spent thousands and thousands of
(00:51):
hours.
I want to make sure that I'mturning it over to the right
buyer, and obviously I getcompensated accordingly for it.
So what's the first thing thata business owner should consider
when looking for the rightbuyer?
Speaker 3 (01:10):
You know, in the world of mergers and
acquisitions there's going to bea few types of buyers that will
be available to the businessowner.
If the business has an EBITDAof their earnings of, let's say,
a million five minimum goinghigher.
Let's call it 10 to 15 millionmiddle market, lower middle
market You're going to have someoptions.
Majority of those buyers willbe private equity groups, which
(01:33):
are investors in the business.
They're not coming in to runthe business.
They're going to expect thebusiness owner to stay on,
probably about two years and, ifyou're lucky, maybe a little
shorter.
But there's need to be someonethat steps in.
So private equity groups isprobably your number one buyer.
Your second buyer could be astrategic buyer.
(01:56):
For example, I'm representing aplumbing contractor and
naturally another plumbingcontractor would be a strategic
buyer.
Or, let's say, an airconditioning contractor.
That is a dual role, havingmultiple divisions.
So a strategic buyer could besomeone in the trades that would
also buy that company, and thebuyer might actually be someone
(02:20):
in your company too.
Be someone in your company too.
I've seen many times where theperson just under the owner
might be that person to buy thecompany.
They may not have thewherewithal to buy, but there
might be some funding or gettingadditional partners and then,
(02:41):
on a rare occasion, it could bea publicly traded company.
And that's rare, but you mustbuild something special for a
publicly traded company to comeyour way.
So when you're dealing withmergers and acquisitions, your
buyer pool will not be anindividual buyer, someone
relocating from one area orsomeone that is just
individually local.
More than likely, the privateequity group strategic buyer may
(03:04):
be the top person in yourcompany, right in front of you
and a rare occasion publiclytraded company.
Speaker 2 (03:11):
Lots of different factors to consider, and it's
not all about the money.
This probably is an obviousquestion, but I want to ask it
anyway.
Why is choosing the right buyerso critical for a business?
Because again, somebody couldcome along and have all the
resources available.
So critical for a business?
Because again, somebody couldcome along and have all the
resources available.
But as a business owner thatbuilt an empire over the last 40
(03:32):
years, I have thoughts about mylegacy.
Right, I want to ensure thatthe buyer is going to uphold the
business's culture and thevalues, right, no doubt.
Speaker 3 (03:42):
What you typically find is high quality, owner, top
notch business.
They want to protect theiremployees.
The owner can't do it withoutan incredible team and it's a
team that's been with them for along time.
A business supports manyfamilies, so when I hear that a
business owner wants to protecttheir employees and they do care
(04:03):
about their legacy, they docare about their staff.
They do want to see thebusiness carry on to the next
generation of owners and it's atough decision because they've
worked all these years and it'simportant to sell with a certain
timeframe because eventually abusiness owner will take their
eye off the prize as they getolder and that's where the
business value can go down.
(04:24):
So it's important to pick theright buyer for the right
situation.
A lot of things have to alignto make everything work, but
it's a tough decision but it'swell.
The business owner getsrewarded multiple ways.
Speaker 2 (04:43):
You've been doing this quite some time.
I wanted you to look backthrough the history of clients
and look for some real lifeexamples.
Can you share a story, maybe,where you represented a seller
and you found the perfect buyerand how that transaction went,
in contrast with a situationwhere you found a buyer that
maybe wasn't quite perfect andthe deal maybe fell apart?
Speaker 3 (05:04):
Yeah, I was representing a real estate
school that did continuingeducation online.
It was an internet businessapproved by the state of Florida
.
The gentleman was a one-manband.
He worked out of his home, madelike a million five working out
of his home.
We found a publicly tradedcompany, which is one of those
rare circumstances that weredoing a roll-up in the internet
(05:25):
space.
So they they bought his companyand they were buying up other
internet type companies.
It worked out well because hewas able to stay on for a couple
years.
He did not leave.
He got a tremendous amount ofstock, got a very substantial
down payment and one year laterhe was able to sell a stock at a
profit.
Uh, and it worked out wellbecause he was able to.
(05:47):
He was still young enough wherewhole lifestyle wasn't really
upset and he wasn't inretirement age, so it was
important to him to get to acompany that that could grow and
build infrastructure, becausehe was just a one person doing
everything but making a boatloadof money.
And that was really whencontinued education went online.
(06:09):
Some unfortunate circumstancessometimes your deals don't work
out where I was selling a siteexcavation company, new
construction, and we had a buyercome from overseas and he had a
green card and he butchered upthe business and they had
contracts with WCI, who's nolonger in existence right now,
(06:32):
but he just killed the business.
So here a perfect examplesomeone who'd been in business
30 years and, within two years,the buyer.
It was the right decision atthe time to sell the business to
the buyer, but we thought thebuyer was going to be
operational in the business andhe was trying to be hands-off.
Yeah, so you just don't know.
You just don't know.
But in the M&A world, theseinvestors are not coming to run
(06:55):
the business.
Everything stays status quo.
If you built the right business, things should not get
destroyed.
If it ain't broke, don't fix itright.
Yeah, just keep running it andkeep the staff happy and pay
them well, and they'll take careof you.
Speaker 2 (07:12):
So are there any red flags that you typically look
for that a business owner shouldlook for during negotiations
with potential buyers to try todetermine if this is the right
party to take over theirbusiness?
Speaker 3 (07:22):
Everyone has to win.
It can't be a one sided.
If it's a one sided win, no onewins and the deal is not going
to come together.
The attorneys can.
Really, time is the killer ofdeals basically in the M&A world
and any type of businessacquisition If your advisors are
not on it.
I'm on it, I'm working all thetime, but sometimes attorneys
(07:47):
are very slow to the punch.
In my last M&A deal, wereceived an offer let's call it
April 15th and the attorneydidn't respond until June 1st 45
days, which is unheard of.
So yeah, that's a red flag forme when the attorneys are not
moving quick enough.
I got to give the warning isyour attorney an M&A attorney?
(08:07):
Does this attorney have time todo the deal?
I'm experiencing it right nowwhere it took a few weeks for an
attorney to respond to and Idon't understand why it's so
slow.
Sometimes you got to light afire.
But yeah, I've noticed a lot ofjust really, that's a red flag
to me when we have either thebuyer's attorneys are just
(08:29):
running up the tab or theseller's attorney is just not
engaged enough.
Speaker 2 (08:34):
Yeah.
So I want to dig in a littlefurther into the role that you
play as the advisor, as thebusiness broker in the deal.
Obviously, this should be acollaborative effort between the
owner and yourself as theadvisor.
When you come into, what waysare you going about marketing to
determine a pool of buyers?
(08:56):
I know it varies for business,but what are you typically
looking at?
What resources are you usingand how are you vetting the
business owner once you find it?
Walk us through your process ofhow you start this.
Speaker 3 (09:07):
Yeah, Once we meet with the owner, we like to sit
down with our first meeting.
Learn about the business, findout if they're really serious
about selling, discuss aboutnon-compete, maybe discuss about
taxes, get them to prepare forthis colonoscopy that they're
going to be going through.
Everything will be unturned.
Unfortunately, you get into aquality of earnings and you're
(09:31):
talking about pages and pages ofrequests from legal, accounting
, insurance, medical,environmental.
It's just, it's never endingdue diligence.
So they mentally have to beready to really dig for
information that they neverthought they would have to dig
for.
But once we determine that theclient is a real seller, we're
(09:51):
going to dig into their numbers.
We're going to get their P&Ls.
We ask for the tax returns.
But the private equity groupswill just look at them, the
QuickBooks and the P&Ls.
They're looking really at thetrailing 12 months of the
business.
Where is the business goingthis year?
Downward trend, upward trend,stable.
And we're preparing the businessfor sale, getting the executive
(10:14):
summary organized, and we'retrying to come out the market
within four to six weeks afterthey engage.
And while that's happening,we're preparing a buyer list
from private equity groups andwe are strategic buyers If
you're going to have asuccessful M&A office, you got
to probably invest 30 to 50grand into the data sources to
(10:36):
have the right ability to findthe buyers.
There's PitchBook, there'sTagnify, there's Private Equity
Info, there's SourceGrove,Apolloio.
These are all differentsubscriptions, that where I can
really form a buyer list and goafter.
So we're not publicly listingthe business for sale on a
website.
We are hitting predeterminedbuyers that we feel might be
(11:00):
interested.
So technically you're neverreally hitting the market and
it's extremely confidential andevery buyer has to sign a
confidentiality.
But all these private equitygroups, they're not even local,
so it's held confidential prettyeasily compared to smaller
business.
Speaker 2 (11:24):
Now, if you could give one piece of advice to a
business owner out there that isat that place where the thought
has entered their mind they'regetting ready to sell, what
would that be?
What would be the first thingyou'd want them to start
thinking about before they enterinto that process?
Speaker 3 (11:35):
Your books are not ready for what's going to happen
.
Okay.
So, private equity works on gapaccounting and small businesses
don't.
Revenue recognition on gapaccounting is different than
traditional accounting.
Knowing that these privateequities private equity are
(11:58):
hiring a high prior toaccounting firm to really unwind
everything and I really meanunwind everything it would be
two to three years, three yearsprior start forming your team.
Make sure you got the rightaccounting CPA in place or CFO.
Because if I get to a sellerwhich I have right now where I'm
(12:20):
helping someone sell and I'mlooking at the balance sheet and
there's negative numbers on thebalance sheet, okay, now we
know the QuickBooks are notready.
So then we got to get a CFO andunwind your QuickBooks and get
it cleaned up to make a privateequity ready.
That could get expensive.
So if you're doing this acouple of years in advance, you
get a top-notch, quality CFO.
(12:41):
Make sure your staff is reallycapable.
If your QuickBooks is not clean, you're going to have problems.
So, yeah, advanced preparation.
If you don't own the realestate and you have a lease, get
your lease in order.
If you have personal guaranteeswith vendors, try to get your
name off the personal guarantees.
If you have contracts, if it'sassignable, see if the contracts
(13:04):
are assignable.
A lot of times the privateequity groups buy the stock, so
they'll actually buy yourcorporation.
Get contracts renewed, makesure they're long-term.
Anything that presents a highrisk can affect the valuation.
So if you spend time in advance, years in advance, prepare the
business for sale, you're goingto win at the end of the day,
(13:28):
you hear that everyone Get yourhouse in order.
Speaker 2 (13:32):
No doubt so key.
What is maybe the mostoverlooked factor that you've
seen when it comes to choosingthe right buyer?
It's an emotional ride.
Speaker 3 (13:44):
So these buyers will come in and they'll talk a
really good game.
And if you fall in love with abuyer which is great make sure
you take care of yourself first.
Make sure there's enough downpayment so when you're sitting
at the closing table you'rehappy about the sale.
That's most important becausethere's a tax situation, there's
(14:06):
a commission, there's anattorney bill, there's lots of
different types of holdbacks inan M&A deal.
So you might fall in love witha buyer, but when you start
looking at that closingstatement, then you got hard
palpitations.
Okay, okay, because what youthink you're getting.
And then, after you unwind,after all the fees, okay, make
(14:27):
sure you take care of yourselffirst, because you're selling
for your income.
You now don't have any income,so now you get this lump sum of
money you got invested correctlyand this is the income you're
going to live off for the restof your life, assuming,
obviously, of other investments.
Hopefully that would help.
(14:47):
So this is an importantdecision.
Take care of yourself, takecare of your employees.
Hopefully that would help.
So this is an importantdecision.
Take care of yourself, takecare of your employees Legacy
will live on and just make sureit's the right deal so you don't
freak out or try to back out atthe tail end of the deal.
Speaker 2 (15:03):
As we're diving deeper into 2025, are there any
trends that you've been seeingin the market that are impacting
how sellers should evaluatebuyers, the trends, the
multiples are not on an upwardtrend.
Speaker 3 (15:19):
Listen, you hold the deck of cards, no-transcript.
We're going to be able tocreate enough stir, an auction
process, a structuredtransaction where we're going to
have multiple offers competingagainst each other and some
private equity groups and someprivate companies will sprinkle
an earn out, will sprinkle arollover equity into the deal.
(15:42):
So there's lots of ways tostructure the deal on top of
that cash at closing.
Trends of the multiples aregoing down because of the
economy and the higher interestrates, but we can still get a
lot of offers at the same time.
So you could pick the rightbuyer and negotiate the right
deal that works for you.
But obviously, better economy,more free flowing money, better
(16:08):
multiples Probably if interestrates go down, that helps.
If it goes up, it does not help.
How the global economy willdefinitely affect how private
equity works, but there'sdefinitely a lot of money out
there still ready to deploy andbuyers that want to buy.
We're in a very good seller'smarket.
It is a seller's market if youhave a high profit making
(16:33):
business, no doubt.
Speaker 2 (16:35):
Indeed, and you just need the right team behind you.
Speaker 3 (16:39):
Very important to get the professionals behind you
that will help you decide what'sthe right deal.
Low pressure just be yourconsultant.
Let's find the right situationfor your time in your life.
Speaker 2 (16:53):
Absolutely.
Was there anything else that wemissed that you'd like to touch
upon before we wrap this up?
Speaker 3 (16:59):
I think we covered it really good.
I mean, the number one thing isbusiness owners don't prepare
their business for sale.
If more business owners didthat, they will get a bigger
cash out position and they'll beable to negotiate better.
So get your house in order, getyour consultants in line, look
at your leases, look at yourcontracts, look at your vendors.
(17:19):
Don't don't have concentrationin vendors.
Just put yourself in the shoesof the buyer looking at your
company.
Would you buy your company ifyou had a lot of money at risk?
That is a very important pointto know.
Speaker 2 (17:34):
Yeah, good question to ask for sure.
All right, everyone.
Thank you so much for tuning in.
If you are listening to thisand you've gone through this
process and you've sold thebusiness, please leave a comment
below.
Let us know about yourexperience.
And if you're looking to sellyour business, leave a comment.
Let us know what type ofbusiness that is.
And feel free to reach out toRussell anytime.
(17:56):
He is obviously a wealth ofknowledge.
He is here to help in any waypossible, help guide you through
this process.
So don't go at it alone.
Stay educated.
Losing my train of thought hereat the end, russell, oh my
goodness, what are we doing?
Speaker 3 (18:08):
Educated.
You got to be educated becauseyou are work.
The buyers are professionalbuyers.
They do this for a living andyou're stepping into the world
for the first time and you'regoing against professional
buyers.
So get help.
You need help.
You'll understand when you getin the process.
It's a process that you wouldonly want to go through once.
Speaker 2 (18:31):
All right, sounds good.
Again, everyone thanks fortuning in and we will catch
everyone next time on the nextepisode of the South Florida M&A
Advisors Podcast.
Everyone, take care, have agreat day and stay blessed.
Bye-bye, take care.
Speaker 1 (18:43):
Thanks for listening to the South Florida M&A
Advisors Podcast.
For more information, visitsouthfloridamacom or contact
954-646-7651.
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