June 2019

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Determine Why a Seller is Selling

By JoAnn Lombardi, VR Business Brokers/Mergers & Acquisitions, President

When looking for a high-quality company to acquire, it does not take long to discover that it’s a seller’s market out there at least at that moment. For every business in your targeted industry worth owning, many more will turn out to be troubled, a poor fit or maybe both. That’s why due diligence is such an important part of the acquisition process.

Before purchasing a business, it’s important to thoroughly understand the company’s you are considering and a big part of the understanding is getting a handle on why the current owners are looking to sell their stake. Doing so may help you avoid overpaying for an acquisition or even spare you from making a very costly mistake.

Do Your Homework

Sellers may have good reasons for wanting to sell with equally good reasons for not wanting to share that information with you. Look beyond the seller’s words and search for any unstated motives, including:

Personal Issues.Has the company lost key executives or employees that were vital to its past success? Can the company continue to be profitable in their absence? Try to determine why those employees left. The same reasons that motivated them to depart might be reasons for you not to buy.

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Timing the Sale of Your Business

By Peter C. King, VR Business Brokers/Mergers & Acquisitions, CEO

In a perfect world, business owners sell their companies when banks are anxious to lend, the economy is strong, their industry is booming and the business is enjoying record profitability, with the future looking even brighter. Naturally, a perfect convergence of all these variables would enable you to maximize the value of your business allowing you to sell it at the highest price and on the best terms.

But most business owners don’t sell when market conditions are perfect. Instead, they make the decision for more personal reasons, such as retirement or to free up cash to pursue other investment opportunities. Unfortunately, many businesses are sold when the owner dies unexpectedly or is otherwise unable to run the business. These unplanned events increase the chance that the business will realize a lower selling price than it would in better circumstances.

Questions to Ask

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Why Exclusivity Periods Are Scary and How Sellers Can Minimize Risk

By Axial, Meghan Daniels

If you’re selling a private company, there will almost inevitably come a time in the deal process when the potential buyer demands an exclusivity phase. “Virtually every deal goes into a no-shop phase,” says Michael Shaw, the chairman of the business and finance group at Chicago-based law firm Much Shelist, where he focuses on M&A and private equity.

We talked to Michael about what can go wrong during no-shop periods, how sellers can mitigate risk, and more.

MMR: Are there any exceptions when it comes to no-shop phases?

Michael: The more competitive the deal, the more the buyer wants to have exclusivity. The only exceptions we see are where the seller has enough leverage that he or she can refuse the demand for exclusivity.

We see this sometimes in an auctioned deal with a lot of interested buyers. A seller may say, “No, I won’t give you exclusivity,” or “I’m going to run a couple of processes simultaneously and the first to the finish line wins.” That does scare off a lot of buyers, especially of lower middle market and middle market companies — most buyers aren’t willing to spend the time and resources for those type of deal sizes and take the risk that the seller will sign up with someone else. So it’s pretty uncommon, but there are cases where the seller has enough leverage to make it happen.

The other exception is if the deal is so proprietary that none of the parties are really worried about the seller shopping it around elsewhere.

MMR: What’s the typical length of time of a no-shop period?

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The Mastermind of Business

Becoming a Genius in Your Industry

Leading product brands think and act differently such as the vision of Apple, passion of Nike, irreverence of Jones Soda and the entrepreneurship of Jet Blue.

Today, the mastermind of business lies in the ability to connect with external and internal elements such as customers and shareholders, creativity and analysis, promises and reality, today and tomorrow. You have to combine customer insight, creativity with the analytical and commercial rigor that drives strategy, innovation and profitable growth.

Dodging the Dogmatic Tendencies

Too many businesses are obsessed with their internal elements - how to do what they do better, reduce their cost base and automate their processes - rather than the external. This can lead businesses to often miss what matters the most. Kodak was the market leader in photographic film for many decades. Then within a handful of years, they found that their market had disappeared. In place, the digital world led by Sony and HP took over with a bang. By the time, Kodak reacted, it was over.

The best opportunities and biggest challenges are found externally. The starting point of any business strategy should focus on when the market changes. Since its implications are often discontinuous, more significant responses are required. Market thinking should be at the heart of not only decision-making, but business in general.

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Wholesale & Retail Garden Center Nursery | $4,650,000 | Tampa/Apollo Beach, FL

Cocktail Bar with Property/Apartments | $1,016,000 | Artesia, CA

High End Fitness Club & Spa | $850,000 |Aspen, CO

B2B Industrial & Construction Services Business | $2,250,000 | Charleston, SC

On-line Home Furnishings Business | $925,000 | Wyomissing, PA

Licensed UHF LPTV Station | $7,487,910 | Wichita, KS

Click to Search Businesses For Sale

VR Located in Dallas, TX is Assisting in The Sale of a Roadhouse Bar & Restaurant

This upscale, artisan designed Restaurant & Bar located outside of Tyler, TX draws in business from the nearby lake developments and more populated cities & towns. The building was designed and built by the ownership with an amazing attention to detail. The “rustic chic” ambiance stays true to its East Texas roots. A stage within the restaurant & bar area promotes business through live entertainment, currently scheduled every weekend. With the land & building alone being valued at $550K, this business & real estate combination provide an excellent investment opportunity.

Financing 101 for Small Business Owners

by Tom Ethen, Stearns Bank Director of SBA Lending

It doesn’t matter if you’ve been a small business owner for decades – or just beginning the process of buying or starting a new business. Looking for business financing can feel like a daunting task.

Anyone going through the loan application process for business financing likely has questions running through their head.

As small business owners gain experience in financing, knowledge becomes power. Your experience and knowledge give you the ability to make informed choices about your business loan.

Here are some key things small business owners should be aware of.

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Congratulations VR Business Sales, Mergers & Acquisitions in New Haven, CT for Facilitating the Sale of a Chemicals Company.

This specialty chemicals company was a manufacturer of fire retardant coatings that are used primarily in the building materials market. The product has strong patent protections and is highly profitable generating annual earnings in excess of $2 million. The business was sold to another coatings firm that is a platform company for a private equity group. The acquisition allowed the platform company to offer products to their customers that enhance the value of their existing offerings. The sale allowed the sellers to profitably exit a venture they started from scratch in 2005 and the buyers to further build value in their business.

We congratulateJeff Swiggetton this successful transaction!

Machine Shop in West Suburbs of Chicago | $800,000 | Oak Brook, IL

75 Year Old Plumbing/HVAC Business | $679,000 | Springfield, MO

Technology Company Trucking Industry | $1,525,000 | Miami/Coral Gables, FL

Bar & Restaurant with Banquet Room | $1,500,000 | Milwaukee/Waukesha, WI

Semi-Truck & Trailer Repair Shop | $850,000 | San Antonio, TX

Multiple Home Residential Care | $825,000 | Minneapolis, MN

Thinking of selling your business or looking for an established

business to purchase?Contact a VR Office Near You!

Have you ever considered selling businesses?

Small businesses make up over 56% of the annual U.S. GDP and every year a large amount of them change hands. VR is the industry leader in facilitating such transactions. Click here for more information on how to join VR.