M&A Blog

Are you the day-to-day manager of a valuable and profitable company? What happens when the owner of the business you manage wishes to sell? You’d like to buy the business yourself, of course, but you can’t afford it. The owner knows this. But the owner has earned the right to have his or her payday. To maximize his or her payday. Selling it to you just does not seem like the path to a sale that maximizes value.

The biggest mistake buyers make is definitely overpayment. It can be heartbreaking. Just last week I met with a former client we helped sell out. He understood the value of skilled assistance, we worked the proven process and he made a lot of money. He then turned around and vastly overpaid for another business (he didn’t use my firm) and he’s really struggling right now.

The hardest part about helping people buy and sell businesses is watching or hearing about business buyers and sellers that made mistakes that cost them substantial amounts of time, money and, often, credibility. As I’ve said, M&A deals are complex, time consuming and risky, and unfortunately there’s a concept that exists, for whatever reason, that great deals are completed by happenstance.

Debt financing remains available for business purchases, it’s just more cautious than it was a couple years ago. Much more cautious. My firm has closed a few deals in this climate but banks have been burned and they must operate conservatively to ensure they have enough capital to withstand any bad debt losses they may suffer in the coming months and years.

Every business owner deserves his big payday. This is true, but not assured. There’s a right way and a wrong way to go about it. The right way is quietly, orderly and assuredly, for absolute maximum value. Unfortunately, few know how to get this accomplished and it’s far more complicated than people realize. The methodology is neither common sense nor common knowledge.

M and A activity crashes during a recession. This is because, for an M andA transaction to occur, someone has to sell. During a recession, the price owners can obtain for their equity in the business falls. Their desire is not to “sell low,” of course, so they wait on the sidelines until the price they can obtain is more attractive.

Acquisition Advisors helps people put winning deals together. Deals for the purchase, sale and recapitalization of mid-size U.S. companies. Our focus is deals that involve businesses with annual profits between $1 million to $25 million, which is deal sizes of $4 million to $150 million.

Reserve your seat complements of Acquisition Advisors, by registering here. All eyes will be on William D. Cohan at noon on October 15 when the former Wall Street banker and author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Street takes the stage in Tulsa, Oklahoma.

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It seems the conventional wisdom is there must be a lot of activity in the deal business right now — lots of business owners wanting to sell because business conditions are so poor. In reality, however, most business owners are choosing not to sell today because valuations (i.e., the prices buyers are paying today for businesses) are down. This makes logical sense because business ownership, after all, is an investment and investors of all types endeavor to buy low and sell high.