May 16, 2024 • 22 mins
In this episode of the Apex Business Advisors Podcast, Andy Cavanaugh and Doug Hubler explore business acquisitions, discussing strategic alignment, qualified buyers, and the importance of professional assistance. They highlight the value of rigorous vetting processes, caution against rushing meetings, and emphasize the significance of NDAs in maintaining confidentiality. The episode underscores the importance of organization and market understanding for potential buyers and concludes with Apex's commitment to educating participants for more efficient transactions.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Music.
(00:08):
That when you have a strategic, when you have a competitor, two companies that
are competitors, two companies that are in the same industry,
one's looking to acquire, one's looking to be acquired.
Music.
(00:30):
Welcome back to the Apex Business Advisors podcast.
I am your host, Andy Kavanaugh, Oh, joined, as always, by the president of Apex, Doug Hubler.
Doug, how was your bourbon trip? I mean, your conference trip.
It was really nice. I think I'll go back.
You'll attend next year's conference? I hope that it's at the same spot.
(00:55):
Maybe not Mother's Day weekend next year. I hope not.
Can we avoid the Mother's Day weekend? I think they'll get some advice on that,
probably some feedback on Mother's Day weekend.
Now, in my case, Mom came along with me, so that worked out all right.
Well, neither my mom or my wife came along with me.
(01:20):
I also missed a musical on Friday, so, you know, really hitting all the levels
that you need for that husband hall of fame.
Yeah, right. Just really kind of wondering where I go to pick up my certificate.
Next year there's always next year there's always next year well not here to talk about,
(01:43):
was a good conference but um and we'll get into detail on that maybe there's
always so much information that comes back from those things that you really
as a team we have to get around and digest it there's so many great presentations
i mean there was one that i heard stood out above Above and beyond everybody else's.
Can we talk about you next time? Oh, mine?
(02:05):
Oh, I heard that you presented. Did you hear? You heard mine was the best.
Oh, wow. That's so kind of you.
I wasn't going there. You were going on and on about that.
Hey, I got lots of free drinks out of that. So today, our topic today is an
extra level of screening. reading.
(02:26):
So sometimes it becomes important to screen an additional step.
So oftentimes the process will go that somebody will inquire on a business and
then they will complete their NDA.
And then at that point, they're disclosed the CBR, cashflow,
(02:46):
any other information that is pertinent.
Typically after that, after they read that, the buyer-seller meeting comes next.
Except there's certain cases where we have to do a little extra screening.
And I thought it'd be interesting to talk about that today because I'm actually
involved in a deal right now that was under exclusivity for, it had two buyers.
(03:11):
Mm And unable to obtain the licensing, which went hand in hand.
So it was a relatively specialized business that required the license holder
to have specific experience that
(03:31):
he didn't have and the people that he was going to bring in didn't have.
And so Bank got skittish on it and said, you know, we just don't like the plan here.
We're going to pull the financing, which caused him to come back.
And, you know, it wasn't his fault.
Of course it was, you know, I just don't think I'm gonna be able to get this licensing. Right.
(03:52):
So then we, we bring another buyer on that was an out of state buyer. And this is a.
Business that deals with the state agencies. And I don't know if you've ever
dealt with state agencies, but navigating those can be a little bit of a challenge.
And, you know, they kind of were very reliant on an attorney in town that,
(04:12):
you know, claimed to be experts on the transaction and the process.
However, it was completely different than our seller's understanding of how
the process goes and the reality of it.
And the seller's been successful for years and years under their certifications and licensing.
And so what you're saying is the second buyer that came in outsourced part of
(04:36):
it to supposed experts, and they're just seeing it differently.
Yeah. And you get different answers. If you're talking to this particular state,
you may talk to five people. You're going to get three different answers.
Yeah. My favorite part of that one, and I won't spend a lot of time on it,
But my favorite part of that was when the person that said that our client needed
(04:59):
this specialized license and that there was no way that they would ever be approved
literally signed a credential renewal two weeks earlier.
So they don't seem to have a problem. So they didn't have a problem,
you know, signing the credentials.
So, but then when they were asked by this attorney, they were like,
(05:22):
oh, well, they're going to have to go through this, this, this,
this, this, this, and this.
And when asked by our guy, he's like, she's like, oh no, you, you're good.
Yeah. And I think, well, one of the things is I recall on that deal,
they were also, it seemed like they were using that as leverage to renegotiate a deal.
Right. Well, actually, I thought that until they decided to back out.
(05:45):
Yeah, the entire time. I mean, basically, they did. They said they couldn't do it.
They renegotiated the deal. They tried to take essentially a third off of it,
and they were unwilling to negotiate back to a, well, look, tell you what,
if you get in here and you're able to do this, perform this service,
chip in an extra 50 grand on the business. Yeah.
(06:07):
And they'll, they'll come off the price 50 grand and do it as a hold back or,
you know, something like that. And then if you can't do it, then,
you know, you keep it there.
And, and they walked and I was like, I was actually kind of shocked.
Like you guys just spent, you guys spent 30 grand on attorneys to,
for you to walk. Well, I think this brings up then, so we've had a couple of
(06:29):
lessons learned on this particular deal.
This isn't all that unusual. I mean, on the specific industries,
this one, now you're going into business has done well, price changed.
Price changed because the business had actually had a remarkable year last year.
And then in that time, that approximate four to five months that it was under
(06:51):
the two periods of exclusivity, we probably got 75 inquiries on the business
that, you know, people were receiving an email. Hey, thanks for your inquiry.
This business is under exclusivity. Can't really, you know, we'll put you on
the list. Right. I'm not thinking you're going to ever have to use that list.
Well, so now we've got 75 interested parties that we've got to disclose,
(07:14):
get information out, and learn about them.
And that's where we dive into what we're talking about today.
There's an extra layer of screening because we've learned from these two deals
that fell apart what will cause the deal to fall apart again.
So now we've got 75 interested people. And this is kind of similar to what we've
(07:37):
talked about with our buyer searches that like probably half these people are
no longer interested. They've moved on.
They're not going to respond to the email. They, you know, whatever.
So then you're still left with about 40 people that are interested.
Of legitimate interest, right.
And of those 40 people, we're certainly not going to hold 40 buyer-seller meetings.
(08:00):
We're not going to do that to the seller. We're not going to send out 40 packages
and disclose everything about the business either.
Well, unselfishly, I'm not sitting in on 40 of these buyer-seller meetings.
After you're on the fifth one, it's like, and then in 1986- You could just do it yourself. Yeah.
So what we've done is we've created a very simple five question form that helps
(08:25):
us with an extra layer of screening.
And what that does is.
Gives us the idea of the people that are most qualified and have the most likely
ability to make it to closing.
So, you know, specific, I'll give specifics on this.
One of the questions are, you know, tell about your background and after reading
(08:48):
this licensing requirement, do you have the background to qualify for this? Right.
Now, I think anyone that kind of realizes that, and maybe if they check that
no box that they're probably, it's probably a disqualifier, Right.
But we want to know, you know, if you can't, then let's move on. Let's move on.
We also know that the seller is okay with seller financing, but we still want
(09:10):
to understand what is, what's the financing funding source?
Is it going to be private money? Is it going to be bank loan?
Is it going to be seller financing?
You know, tell us a little bit about how you plan on funding this,
because while they're open to seller financing.
They're not going to do it all. Oh, they're they're going to prioritize those
are like, hey, we'll pay you cash at close.
(09:31):
The other thing is, is we ask about specifically, do you specifically understand
the credentialing and licensing process of the state of Kansas?
Fantastic that you've got a
New York based business, but can you get it done in Kansas where this is?
And this actually brought up one of my favorite quotes as a guy was like,
well, we've done some business in Missouri.
(09:53):
We qualified in Missouri and it's like, yeah, buddy, you don't know how these
two states, Missouri and Kansas, they get along very well.
They've gone all the way back to civil war time. These guys have been lockstep
on everything, right? Like, so.
So I think, you know, qualifying buyers is something that we do normally.
(10:14):
Like you were talking about, there are certain cases where we're going to have to come back.
And in this case too, you know, we're working for a seller who we've had,
we've brought two buyers.
So we feel like, you know, we don't want to have egg on our face, right?
We want to, we want to do a proper job, get the right people in.
You've got 40 people to look at. We've got to make sure maybe after that you
(10:35):
have five people, right?
But that's a real five qualified folks financially, their background,
the certifications or licensing.
And so you've done your job doing that. And I, and I think we,
We have to do that on every deal.
But there's another case where qualifying might be an additional step with the
(10:58):
seller. And we may have talked about this before.
But the seller may also ask or have them sign additional non-disclosure documents.
You know, we're going to go to this stage, but before I supply anything.
That's I would, I would say is, you know, extremely confidential.
Then they may have to supply another specific confidentiality agreement for that seller.
(11:25):
Their attorneys have said, you know what, we know we want another layer of protection.
So we'll maybe talk about what the apex NDA entails and why that step may be
necessary in a case where you may see that extra NDA.
Yeah, because I think the NDA that we have the buyer sign is protecting the information,
(11:48):
protecting the seller from people
who are trying to gather information to potentially compete with them.
But it really is also around, you know, not going around Apex to talk directly to the seller.
We don't want them talking to their employees. We don't want them talking to
(12:09):
suppliers, vendors, et cetera.
But the one thing that the seller may want to do in addition is really get down
into the non-compete part of that and expand on it.
And I'm going to give you information. We've got some proprietary information that I don't want out.
(12:31):
And I may not give that until the day of closing, and I'm going to make it specific
to my business and to that buyer.
Yeah, and we often see that when you have a strategic, when you have a competitor.
Who's in the market. Two companies that are competitors, two companies that
are in the same industry. Right.
One's looking to acquire, one's looking to be acquired.
(12:53):
And you just don't want to give away the trade secrets until the deal is done.
And you've got to put some protections in place.
And so that extra layer of screening.
So there's really a couple of scenarios where extra layer of screening comes
in. Number one is, do we just have a ton of buyers and ton of interest in this?
And we just simply cannot accommodate all of the 40 or 50 people that would
(13:18):
like to meet with the seller.
And then the other scenario is when you have an extra level of security that
you need to do in order to make sure that proprietary information is being safeguarded
and not used as a, well, sure,
I'll sign this nondisclosure because I think a common misconception with many buyers is,
(13:39):
well, I'll sign your NDA and then I'm entitled to get whatever I want.
To get everything. Right. Send me the tax return.
Send me how they make the sausage. I want the employee information.
Yeah. Social security numbers.
Yeah. And that's simply not the case, is that information becomes available
as steps are taken. As we get through the process.
And the first thing would be, I want an offer on the business.
(14:01):
So I'm going to supply enough information and have the buyer and seller meet, most likely.
Might be a conference call, but they're going to have a discussion,
get an offer from the buyer, and that, if it's accepted, then can open up more information.
Then there may be another confidentiality agreement to sign.
(14:23):
If I'm going to give you this.
And the seller oftentimes will say, like you said, I'm not going to give you
this bit of information until the day of closing.
Yeah, the information gets released as we get closer to closing.
So to your point, I want to give you enough information that you're comfortable to make an offer.
(14:43):
So some people, they're going to be financial buyers.
They're going to see it as financial and operations. So, hey,
let's talk operations first or let's talk finances before I meet operations.
But they're going to marry those two together and go, yes, I want to make an offer.
Now, if you're a financial buyer and you want to see the tax returns of the
(15:03):
P&Ls first, and then you want to have your operations meeting, that's fine.
But what we're not going to do, and I actually had this on the deal that I was
telling you about. So we send out an announcement.
Hey, this business is coming back to market. Here is the timeline that we're abiding by.
You're under NDA. So I'm just going to disclose to you the CBR and cashflow
(15:26):
because with you being under NDA, you're head of the line as opposed to these
people that didn't fill out their NDA.
You know, they're getting a different message. It's like, Hey,
this thing's coming back to market. You better get your NDA out because you're
behind these other people.
Well, one of my NDA buyers immediately comes back.
I kid you not. I sent a message at like say 322 at 329.
(15:48):
I got an email back from him. Hey, can you get me these five things from January?
Buddy, you haven't even read the information that I sent you.
In the message, I said, I've got 75 people that are getting this message.
Do you, what do you think my appetite is for taking off?
You think I got a big appetite for taking off process questions right now?
(16:10):
Like, like we're at the point where the people that have gotten the meetings,
we will take data requests after their meeting.
Hey, thanks for meeting with us. Let us know. Is there other data we can pull
for you? You know, and we pull that stuff and then we provide that information
to get them the information they need to make an offer.
But to your point, it's all to what can we get to you to make an offer?
(16:31):
And we know that at that point because they've had a meeting,
they have continued interest, and also the seller has an interest in them.
Because there are plenty of times where they're like, yeah, that buyer's not
right for me. I'm not going to work with that guy.
So after they've had the meeting, they
get back with you and ask for more information, and they may not get it.
(16:54):
So, again, there's more qualification that comes in.
Yeah, and I'll coach buyers as well and just say something to the effect of,
like, look, while you're – I sometimes think that people think we're lying or
bluffing, and we're not.
If I tell you I've got five people on it, I've got five people on it. We really do.
(17:14):
If I tell you I've got 20 people that are interested in it, I've got 20 people
that are interested in it.
If I tell you that I'm going to take five to eight buyer-seller meetings,
I'm going to take five to eight buyer-seller meetings.
That's what the seller has said, look. That's all I've got time for.
I've got, you know, if I start getting into 12 and 16 buyers,
(17:35):
all it's going to do is just confuse the seller more as to who's the right person
for me to, because I've only got one.
So, yeah, when we start getting the data requests early, it really does kind
of push people down towards the bottom of the line, especially in,
and we've talked about this in the green room, how competitive the market is right now.
(17:57):
Like it is incredibly competitive for a buyer.
And so if you're not understanding the process and you don't have yourself organized
and you don't have yourself teed up, even to the point where you receive a CBR and cashflow,
can you read that information and make a decision on, do you want to,
do you want to make the next step?
You read that information. Do you think you could put in an offer on this business? Yeah.
(18:21):
That's how competitive and how quickly things are moving because you may be
four days behind somebody and they've already written their offer and they're
going back and forth negotiating. Well, I think one of the things you mentioned
a little bit ago was you know if somebody's read the CBR you've sent them.
If they're asking some of the basic questions that were covered in that,
we send that out to cover a lot of the basics.
(18:43):
And so they should be ready with more in-depth questions, things that aren't covered in that.
And so ultimately, we're getting rid of tire kickers. People who are just trying
to aggressively get through it just to see what's on the other side,
but they're not taking the steps to really educate themselves through the process.
(19:03):
And they're asking us to do it for them, kind of.
Ron used a term yesterday when I was talking to him in the hall.
He said, yeah, there's a lot of hobby buyers.
They just like looking at businesses
as a hobby. They just like reading through the business reviews.
We all have them. Yeah. We do. And when I get a request from one of those folks,
(19:23):
I really, I just tell them right out, after all the deals that we've looked
at together and what you've turned down, this is in that realm.
You're not going to go after it. This isn't for you.
So this isn't meeting your requirements. You want an absentee-owned business
so that you and your wife can keep operating your jobs.
(19:45):
This isn't going to allow for that. So there's no sense in me sending information.
Well, if you want to be a hobby buyer, I don't want to be mean about it.
I sound kind of rough here, but, you know.
Well, I think it's just the amount of, you know, you did just get back from Bourbon Trail.
Well, look, if you're looking at information on how to buy or sell a business,
(20:08):
including these podcasts or blogs, there's tons of blog topics on this.
There's tons of information and educational resources out on our website that
you can go out to and kind of brush up.
Contrary to apparently our aggressive tones today, we really do like educating
people on the process and educating people on the way to make this most efficient
(20:32):
for you, buyer, seller and broker.
And sometimes when people come after they've done some research through Google
or something like that or how they think it's supposed to go, it's just not the case.
And, you know, when you kind of get outside of process, oftentimes it's to the detriment of the buyer.
So we're always happy to take those conversations and, you know,
(20:55):
really kind of help with the education on that.
So much stuff. That's part of the reason why we do the blogs.
That's the reason why we do the podcast.
That's the reason why we have all the educational tools out on the Apex website
is, you know, we want people to be informed and, you know, kind of do their homework.
And then we're happy to fill in the gaps. That's why I'm a consistent guest
on your show, Andy, to educate. So you're a guest now.
(21:22):
That's because I get it. I think that's what you call me. I introduced you as
the president of Apex, my mentor, the keeper of the Kwan.
I mean, weren't people handing you drink tickets too, or just me?
(21:42):
All right, we're getting out of here. If you're looking at buying or selling
a business, we got you, fam.
Music.
Music.
(00:08):
That when you have a strategic, when you have a competitor, two companies that
are competitors, two companies that are in the same industry,
one's looking to acquire, one's looking to be acquired.
Music.
(00:30):
Welcome back to the Apex Business Advisors podcast.
I am your host, Andy Kavanaugh, Oh, joined, as always, by the president of Apex, Doug Hubler.
Doug, how was your bourbon trip? I mean, your conference trip.
It was really nice. I think I'll go back.
You'll attend next year's conference? I hope that it's at the same spot.
(00:55):
Maybe not Mother's Day weekend next year. I hope not.
Can we avoid the Mother's Day weekend? I think they'll get some advice on that,
probably some feedback on Mother's Day weekend.
Now, in my case, Mom came along with me, so that worked out all right.
Well, neither my mom or my wife came along with me.
(01:20):
I also missed a musical on Friday, so, you know, really hitting all the levels
that you need for that husband hall of fame.
Yeah, right. Just really kind of wondering where I go to pick up my certificate.
Next year there's always next year there's always next year well not here to talk about,
(01:43):
was a good conference but um and we'll get into detail on that maybe there's
always so much information that comes back from those things that you really
as a team we have to get around and digest it there's so many great presentations
i mean there was one that i heard stood out above Above and beyond everybody else's.
Can we talk about you next time? Oh, mine?
(02:05):
Oh, I heard that you presented. Did you hear? You heard mine was the best.
Oh, wow. That's so kind of you.
I wasn't going there. You were going on and on about that.
Hey, I got lots of free drinks out of that. So today, our topic today is an
extra level of screening. reading.
(02:26):
So sometimes it becomes important to screen an additional step.
So oftentimes the process will go that somebody will inquire on a business and
then they will complete their NDA.
And then at that point, they're disclosed the CBR, cashflow,
(02:46):
any other information that is pertinent.
Typically after that, after they read that, the buyer-seller meeting comes next.
Except there's certain cases where we have to do a little extra screening.
And I thought it'd be interesting to talk about that today because I'm actually
involved in a deal right now that was under exclusivity for, it had two buyers.
(03:11):
Mm And unable to obtain the licensing, which went hand in hand.
So it was a relatively specialized business that required the license holder
to have specific experience that
(03:31):
he didn't have and the people that he was going to bring in didn't have.
And so Bank got skittish on it and said, you know, we just don't like the plan here.
We're going to pull the financing, which caused him to come back.
And, you know, it wasn't his fault.
Of course it was, you know, I just don't think I'm gonna be able to get this licensing. Right.
(03:52):
So then we, we bring another buyer on that was an out of state buyer. And this is a.
Business that deals with the state agencies. And I don't know if you've ever
dealt with state agencies, but navigating those can be a little bit of a challenge.
And, you know, they kind of were very reliant on an attorney in town that,
(04:12):
you know, claimed to be experts on the transaction and the process.
However, it was completely different than our seller's understanding of how
the process goes and the reality of it.
And the seller's been successful for years and years under their certifications and licensing.
And so what you're saying is the second buyer that came in outsourced part of
(04:36):
it to supposed experts, and they're just seeing it differently.
Yeah. And you get different answers. If you're talking to this particular state,
you may talk to five people. You're going to get three different answers.
Yeah. My favorite part of that one, and I won't spend a lot of time on it,
But my favorite part of that was when the person that said that our client needed
(04:59):
this specialized license and that there was no way that they would ever be approved
literally signed a credential renewal two weeks earlier.
So they don't seem to have a problem. So they didn't have a problem,
you know, signing the credentials.
So, but then when they were asked by this attorney, they were like,
(05:22):
oh, well, they're going to have to go through this, this, this,
this, this, this, and this.
And when asked by our guy, he's like, she's like, oh no, you, you're good.
Yeah. And I think, well, one of the things is I recall on that deal,
they were also, it seemed like they were using that as leverage to renegotiate a deal.
Right. Well, actually, I thought that until they decided to back out.
(05:45):
Yeah, the entire time. I mean, basically, they did. They said they couldn't do it.
They renegotiated the deal. They tried to take essentially a third off of it,
and they were unwilling to negotiate back to a, well, look, tell you what,
if you get in here and you're able to do this, perform this service,
chip in an extra 50 grand on the business. Yeah.
(06:07):
And they'll, they'll come off the price 50 grand and do it as a hold back or,
you know, something like that. And then if you can't do it, then,
you know, you keep it there.
And, and they walked and I was like, I was actually kind of shocked.
Like you guys just spent, you guys spent 30 grand on attorneys to,
for you to walk. Well, I think this brings up then, so we've had a couple of
(06:29):
lessons learned on this particular deal.
This isn't all that unusual. I mean, on the specific industries,
this one, now you're going into business has done well, price changed.
Price changed because the business had actually had a remarkable year last year.
And then in that time, that approximate four to five months that it was under
(06:51):
the two periods of exclusivity, we probably got 75 inquiries on the business
that, you know, people were receiving an email. Hey, thanks for your inquiry.
This business is under exclusivity. Can't really, you know, we'll put you on
the list. Right. I'm not thinking you're going to ever have to use that list.
Well, so now we've got 75 interested parties that we've got to disclose,
(07:14):
get information out, and learn about them.
And that's where we dive into what we're talking about today.
There's an extra layer of screening because we've learned from these two deals
that fell apart what will cause the deal to fall apart again.
So now we've got 75 interested people. And this is kind of similar to what we've
(07:37):
talked about with our buyer searches that like probably half these people are
no longer interested. They've moved on.
They're not going to respond to the email. They, you know, whatever.
So then you're still left with about 40 people that are interested.
Of legitimate interest, right.
And of those 40 people, we're certainly not going to hold 40 buyer-seller meetings.
(08:00):
We're not going to do that to the seller. We're not going to send out 40 packages
and disclose everything about the business either.
Well, unselfishly, I'm not sitting in on 40 of these buyer-seller meetings.
After you're on the fifth one, it's like, and then in 1986- You could just do it yourself. Yeah.
So what we've done is we've created a very simple five question form that helps
(08:25):
us with an extra layer of screening.
And what that does is.
Gives us the idea of the people that are most qualified and have the most likely
ability to make it to closing.
So, you know, specific, I'll give specifics on this.
One of the questions are, you know, tell about your background and after reading
(08:48):
this licensing requirement, do you have the background to qualify for this? Right.
Now, I think anyone that kind of realizes that, and maybe if they check that
no box that they're probably, it's probably a disqualifier, Right.
But we want to know, you know, if you can't, then let's move on. Let's move on.
We also know that the seller is okay with seller financing, but we still want
(09:10):
to understand what is, what's the financing funding source?
Is it going to be private money? Is it going to be bank loan?
Is it going to be seller financing?
You know, tell us a little bit about how you plan on funding this,
because while they're open to seller financing.
They're not going to do it all. Oh, they're they're going to prioritize those
are like, hey, we'll pay you cash at close.
(09:31):
The other thing is, is we ask about specifically, do you specifically understand
the credentialing and licensing process of the state of Kansas?
Fantastic that you've got a
New York based business, but can you get it done in Kansas where this is?
And this actually brought up one of my favorite quotes as a guy was like,
well, we've done some business in Missouri.
(09:53):
We qualified in Missouri and it's like, yeah, buddy, you don't know how these
two states, Missouri and Kansas, they get along very well.
They've gone all the way back to civil war time. These guys have been lockstep
on everything, right? Like, so.
So I think, you know, qualifying buyers is something that we do normally.
(10:14):
Like you were talking about, there are certain cases where we're going to have to come back.
And in this case too, you know, we're working for a seller who we've had,
we've brought two buyers.
So we feel like, you know, we don't want to have egg on our face, right?
We want to, we want to do a proper job, get the right people in.
You've got 40 people to look at. We've got to make sure maybe after that you
(10:35):
have five people, right?
But that's a real five qualified folks financially, their background,
the certifications or licensing.
And so you've done your job doing that. And I, and I think we,
We have to do that on every deal.
But there's another case where qualifying might be an additional step with the
(10:58):
seller. And we may have talked about this before.
But the seller may also ask or have them sign additional non-disclosure documents.
You know, we're going to go to this stage, but before I supply anything.
That's I would, I would say is, you know, extremely confidential.
Then they may have to supply another specific confidentiality agreement for that seller.
(11:25):
Their attorneys have said, you know what, we know we want another layer of protection.
So we'll maybe talk about what the apex NDA entails and why that step may be
necessary in a case where you may see that extra NDA.
Yeah, because I think the NDA that we have the buyer sign is protecting the information,
(11:48):
protecting the seller from people
who are trying to gather information to potentially compete with them.
But it really is also around, you know, not going around Apex to talk directly to the seller.
We don't want them talking to their employees. We don't want them talking to
(12:09):
suppliers, vendors, et cetera.
But the one thing that the seller may want to do in addition is really get down
into the non-compete part of that and expand on it.
And I'm going to give you information. We've got some proprietary information that I don't want out.
(12:31):
And I may not give that until the day of closing, and I'm going to make it specific
to my business and to that buyer.
Yeah, and we often see that when you have a strategic, when you have a competitor.
Who's in the market. Two companies that are competitors, two companies that
are in the same industry. Right.
One's looking to acquire, one's looking to be acquired.
(12:53):
And you just don't want to give away the trade secrets until the deal is done.
And you've got to put some protections in place.
And so that extra layer of screening.
So there's really a couple of scenarios where extra layer of screening comes
in. Number one is, do we just have a ton of buyers and ton of interest in this?
And we just simply cannot accommodate all of the 40 or 50 people that would
(13:18):
like to meet with the seller.
And then the other scenario is when you have an extra level of security that
you need to do in order to make sure that proprietary information is being safeguarded
and not used as a, well, sure,
I'll sign this nondisclosure because I think a common misconception with many buyers is,
(13:39):
well, I'll sign your NDA and then I'm entitled to get whatever I want.
To get everything. Right. Send me the tax return.
Send me how they make the sausage. I want the employee information.
Yeah. Social security numbers.
Yeah. And that's simply not the case, is that information becomes available
as steps are taken. As we get through the process.
And the first thing would be, I want an offer on the business.
(14:01):
So I'm going to supply enough information and have the buyer and seller meet, most likely.
Might be a conference call, but they're going to have a discussion,
get an offer from the buyer, and that, if it's accepted, then can open up more information.
Then there may be another confidentiality agreement to sign.
(14:23):
If I'm going to give you this.
And the seller oftentimes will say, like you said, I'm not going to give you
this bit of information until the day of closing.
Yeah, the information gets released as we get closer to closing.
So to your point, I want to give you enough information that you're comfortable to make an offer.
(14:43):
So some people, they're going to be financial buyers.
They're going to see it as financial and operations. So, hey,
let's talk operations first or let's talk finances before I meet operations.
But they're going to marry those two together and go, yes, I want to make an offer.
Now, if you're a financial buyer and you want to see the tax returns of the
(15:03):
P&Ls first, and then you want to have your operations meeting, that's fine.
But what we're not going to do, and I actually had this on the deal that I was
telling you about. So we send out an announcement.
Hey, this business is coming back to market. Here is the timeline that we're abiding by.
You're under NDA. So I'm just going to disclose to you the CBR and cashflow
(15:26):
because with you being under NDA, you're head of the line as opposed to these
people that didn't fill out their NDA.
You know, they're getting a different message. It's like, Hey,
this thing's coming back to market. You better get your NDA out because you're
behind these other people.
Well, one of my NDA buyers immediately comes back.
I kid you not. I sent a message at like say 322 at 329.
(15:48):
I got an email back from him. Hey, can you get me these five things from January?
Buddy, you haven't even read the information that I sent you.
In the message, I said, I've got 75 people that are getting this message.
Do you, what do you think my appetite is for taking off?
You think I got a big appetite for taking off process questions right now?
(16:10):
Like, like we're at the point where the people that have gotten the meetings,
we will take data requests after their meeting.
Hey, thanks for meeting with us. Let us know. Is there other data we can pull
for you? You know, and we pull that stuff and then we provide that information
to get them the information they need to make an offer.
But to your point, it's all to what can we get to you to make an offer?
(16:31):
And we know that at that point because they've had a meeting,
they have continued interest, and also the seller has an interest in them.
Because there are plenty of times where they're like, yeah, that buyer's not
right for me. I'm not going to work with that guy.
So after they've had the meeting, they
get back with you and ask for more information, and they may not get it.
(16:54):
So, again, there's more qualification that comes in.
Yeah, and I'll coach buyers as well and just say something to the effect of,
like, look, while you're – I sometimes think that people think we're lying or
bluffing, and we're not.
If I tell you I've got five people on it, I've got five people on it. We really do.
(17:14):
If I tell you I've got 20 people that are interested in it, I've got 20 people
that are interested in it.
If I tell you that I'm going to take five to eight buyer-seller meetings,
I'm going to take five to eight buyer-seller meetings.
That's what the seller has said, look. That's all I've got time for.
I've got, you know, if I start getting into 12 and 16 buyers,
(17:35):
all it's going to do is just confuse the seller more as to who's the right person
for me to, because I've only got one.
So, yeah, when we start getting the data requests early, it really does kind
of push people down towards the bottom of the line, especially in,
and we've talked about this in the green room, how competitive the market is right now.
(17:57):
Like it is incredibly competitive for a buyer.
And so if you're not understanding the process and you don't have yourself organized
and you don't have yourself teed up, even to the point where you receive a CBR and cashflow,
can you read that information and make a decision on, do you want to,
do you want to make the next step?
You read that information. Do you think you could put in an offer on this business? Yeah.
(18:21):
That's how competitive and how quickly things are moving because you may be
four days behind somebody and they've already written their offer and they're
going back and forth negotiating. Well, I think one of the things you mentioned
a little bit ago was you know if somebody's read the CBR you've sent them.
If they're asking some of the basic questions that were covered in that,
we send that out to cover a lot of the basics.
(18:43):
And so they should be ready with more in-depth questions, things that aren't covered in that.
And so ultimately, we're getting rid of tire kickers. People who are just trying
to aggressively get through it just to see what's on the other side,
but they're not taking the steps to really educate themselves through the process.
(19:03):
And they're asking us to do it for them, kind of.
Ron used a term yesterday when I was talking to him in the hall.
He said, yeah, there's a lot of hobby buyers.
They just like looking at businesses
as a hobby. They just like reading through the business reviews.
We all have them. Yeah. We do. And when I get a request from one of those folks,
(19:23):
I really, I just tell them right out, after all the deals that we've looked
at together and what you've turned down, this is in that realm.
You're not going to go after it. This isn't for you.
So this isn't meeting your requirements. You want an absentee-owned business
so that you and your wife can keep operating your jobs.
(19:45):
This isn't going to allow for that. So there's no sense in me sending information.
Well, if you want to be a hobby buyer, I don't want to be mean about it.
I sound kind of rough here, but, you know.
Well, I think it's just the amount of, you know, you did just get back from Bourbon Trail.
Well, look, if you're looking at information on how to buy or sell a business,
(20:08):
including these podcasts or blogs, there's tons of blog topics on this.
There's tons of information and educational resources out on our website that
you can go out to and kind of brush up.
Contrary to apparently our aggressive tones today, we really do like educating
people on the process and educating people on the way to make this most efficient
(20:32):
for you, buyer, seller and broker.
And sometimes when people come after they've done some research through Google
or something like that or how they think it's supposed to go, it's just not the case.
And, you know, when you kind of get outside of process, oftentimes it's to the detriment of the buyer.
So we're always happy to take those conversations and, you know,
(20:55):
really kind of help with the education on that.
So much stuff. That's part of the reason why we do the blogs.
That's the reason why we do the podcast.
That's the reason why we have all the educational tools out on the Apex website
is, you know, we want people to be informed and, you know, kind of do their homework.
And then we're happy to fill in the gaps. That's why I'm a consistent guest
on your show, Andy, to educate. So you're a guest now.
(21:22):
That's because I get it. I think that's what you call me. I introduced you as
the president of Apex, my mentor, the keeper of the Kwan.
I mean, weren't people handing you drink tickets too, or just me?
(21:42):
All right, we're getting out of here. If you're looking at buying or selling
a business, we got you, fam.
Music.
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