Dear GABB member,
Send Proxy for Nov. 26 Meeting: We look forward to seeing everyone at the November 26, 2013 meeting, when business and tax attorney Germaine Curtin, Chris Fonzi of Logic Environmental and Cheryl Beer of Cornerstone Bank will discuss legal, environmental and lending issues related to buying or selling a business.
Every November the association takes a few minutes to elect the leadership for the next calendar year. If you are not going to be at the meeting (which is the Tuesday before Thanksgiving) and you are an active member of the association, please e-mail a “Proxy” notification to either Matt Slappey (email@example.com) or to Jeff Merry (firstname.lastname@example.org) and either designate one of them as your proxy, or notify them of the GABB member to which you assign your voting rights for this meeting. We recommend that this be a person who will be present at the November 26th meeting. This will help us ensure that we have enough votes (a quorum) to complete this annual requirement.
GABB’s annual Holiday Gala is set for Maggiano’s on the evening of Thursday, December 5. All GABB members and affiliates may bring one guest to this festive evening of fellowship and wonderful food. We ask that each guest bring one, new, unwrapped toy to be donated to Children’s Hospital of Atlanta. There will be no other charge unless a person not signed up attends, or someone signs up and doesn’t show, in which case we will charge $25 per head for those not compliant. GABB does this to insure an accurate head count.
GABB’s monthly meetings are free and open to the public. Networking begins at 9:45 a.m. with a free light breakfast before the groups 10:30 a.m. meeting.
Thank you!Read More
It is with sadness that make our members aware of the passing of a long time Atlanta business broker and former GABB member Joe Sofet. Joe owned and ran the business brokerage firm Prime Business Investments for almost 30 years. Joe died of unexpected but natural causes. He is survived by his daughter, Rita “Lynn” Rappaport of Tucker, and his granddaughter Taylor. Joe’s family has asked that donations be made to The American Heart Association instead of flowers.
2013 President Georgia Association of Business BrokersRead More
Surprise #1: Substantial Time Commitment
In the real estate business, once the owner engages the broker there is very little for the owner to do until the broker presents the various offers from the potential buyers. In the M&A business, there is a substantial time commitment required of the CEO/Owner in order to complete the sale properly, professionally and thoroughly. The following examples are worth noting:
This 30 + page document is the cornerstone of the selling process because most business intermediaries expect the potential acquirers to submit their initial price range based on the information presented in this memorandum. The intermediary will heavily depend on the CEO/Owner to supply him or her with all the necessary facts.
Suggestions of Potential Acquirers:
Chances are that the sales manager is the only person who knows the best companies to contact and those not to contact (competitors). Arguably, this information should be mostly supplied by the intermediary, but as a thorough team effort, the CEO/Owner should play a major role in this endeavor.
Assuming the intermediary conducts the normal process of boiling down the bidders to 4 or 5 potential acquirers, it is then customary to have management presentations before the final bids are submitted. In order to help extract the best offers, it is advisable that the CEO show the benefits of combining the acquirer and seller and/or the future upside for the selling company.
Surprise #2: The Need to Enjoin Other Employees in the Process
A number of owners selling their company are paranoid about a confidentiality leak regarding the sale of their company. In fact, some owners prefer that no other person in the organization is aware of the pending sale of the company. At a bare minimum, the CFO and Sales Manager should be informed. The CFO will be asked to pull all the financials together, to supply projections, to articulate reconstructed earnings (add-backs) and to supply monthly statements…all of which suggest that the company is being sold. The Sales Manager will be asked to supply the names of synergistic companies in or around the particular industry. And, perhaps, the CEO’s secretary will be asked to set up a “war room” where all legal and contractual information is assembled for the buyer’s due diligence team. In order to protect the company from confidentiality leaks and assure retention of key employees, the CEO/Owner should implement “stay agreements” for these key employees.
Surprise #3: The Need to Maintain, or Accelerate, Sales
The tendency for some owners is to become so distracted with the M&A process that they take their “eye off the ball” in running the business on a daily basis. Potential acquirers will be watching the monthly sales reports like a hawk to see if there is a turn-down in business. Acquirers become very apprehensive when they see a recent downward trend in the company they are about to acquire and may, as a result, want to negotiate a lower price.
Surprise #4: A Confidentiality Leak
Naturally, most CEOs expect the M&A process to go smoothly and usually it does. However, there should be a contingency plan in place for such occurrences as confidentiality leaks. The degree of damage determines what action should be implemented. On one occasion the draft of the Offering Memorandum was e-mailed to the CEO/Owner for his corrections; however, the sender from the brokerage firm used one incorrect letter in the CEO’s e-mail address. As a result of this misstep, the e-mail was rejected by the CEO’s computer and ended up in the company’s general mailbox which was administered by the employee in charge of IT. The employee was told by the quick-thinking CEO that the Offering Memorandum was being used to raise growth capital. Luckily, the incident went no further. Much more serious confidentiality leaks can occur, and it is wise to discuss ahead of time how the matter is going to be handled with those concerned.
Surprise #5: Unexpected Low Bids
Ultimately, the M&A market sets the price of the company. However, rarely does a seller go to market without having certain expectations of price. Let’s use a hypothetical case in which a company is growing at 15% annually. The CEO/Owner believes that it is worth $6 million based on $1 million of EBITDA. However, the top bid is $5 million cash or, obviously, 5 times EBITDA. Assuming the business intermediary has exhausted the universe of acquirers, the seller has two choices to reach his desired $6 million selling price. Either he can take the company off the market and return several years later when either the company’s earnings have improved or when the M&A market has heated up. Alternatively, the CEO can negotiate further with the top bidder by selling 80% of the company now and the remaining 20% in three years on a pre-arranged formula on the expectation that business will improve. Or, the CEO can sell the company now for $5 million with an earnout formula that might give him the additional $1 million.
Surprise #6: The P&S Agreement is Not What the CEO Expected
Numerous CEOs drive the M&A process to the letter of intent and then turn over the deal to their attorney to iron out the details of the purchase and sale agreement. While the CEO should not micro-manage his designated professional advisors in the transaction, he should be involved throughout the process, or otherwise the CEO will invariably object to the final wording of the document at the signing state. The area most likely to be overlooked by the CEO/Owner is the critical section of reps and warranties.
Surprise #7: Agreement of Other Stakeholders
While the CEO can negotiate the entire transaction, the sale is not authorized until certain stakeholders agree in writing, namely the Board of Directors, majority of the shareholders, financial institutions which have a lien on certain assets, etc.
For many CEOs, selling their company is a once in a lifetime experience. They may be very experienced, very talented executives, but they can also be blind sided by surprises when selling their company.Read More
The Georgia Association of Business Brokers get your paperwork together and start signing up for the GABB’s Million Dollar Club. GABB members who have eligible sales at least $1 million during the 12-month period ending Oct. 31, 2013, are eligible to apply.
The deadline to apply is 5 p.m. Nov. 15, 2013. Recipients will be honored at the GABB Holiday Gala on Dec. 5 at Maggiano’s.
For more information on the GABB Million Dollar Club rules and to apply online. Please contact GABB Executive/Communications Director Diane Loupe at email@example.com.
There are five categories of membership which are:
MILLION DOLLAR CLUB MEMBER: A person who has been elected to the Million Dollar Club for eligible sales from the previous year totaling $1,000,000 to $ 1,999,999.
MULTI-MILLION DOLLAR CLUB MEMBER: A person who has been elected to the Million Dollar Club from the previous year for eligible sales generated totaling $ 2,000,000 or more.
LIFE MEMBER: A person who has been elected to the Million Dollar Club for 3 consecutive years or any 5 years.
PHOENIX AWARD MEMBER: A person who has been elected to the Million Dollar Club for any 10 years.
SILVER PHOENIX AWARD: A person who has been elected to the Million Dollar Club for any 25 years.Read More
Dear Georgia Association of Business Brokers Member,
The IBBA’s Fall 2013 Conference is coming up November 18-23 in Savannah, GA and the IBBA has a special offer for you:
- Register for the Fall 2013 Conference using the GABBF13 code and receive the Member registration rate – a minimum of $100 in savings
- BONUS OFFER: Affiliate members who join the IBBA for the first time are eligible to receive a 10% discount on their annual membership dues until December 31. Contact IBBA Headquarters to request the code.
When you factor in the high cost of airfare due to the convenient location of this conference, and you have access to significant savings in travel expenses, conference registration and IBBA membership.
Whether you need to attend courses to maintain a certification or you find the most value in sharing “war stories” with others, you have a great opportunity to gain in-depth knowledge from fellow brokers and service providers from all over the world at this conference, and with minimal travel time and cost.
We hope to see you at the IBBA Affiliate Leadership Meeting during the Fall 2013 Conference in Savannah on Thursday, November 21 at 2:00 pm EDT in the Plimsoll room of the Hyatt Regency Savannah. We will have new updates on Affiliate policies and benefits to share with you, as well as the latest Affiliate Rewards Program rankings for the “Race to the Grand Prize”! The current rankings are attached for your convenience. Remember that you can increase your ranking significantly if one of your members joins the IBBA, as well as through conference and course attendance:
|Affiliate’s member attends an IBBA Conference (IBBA member)||
|Affiliate’s member attends an IBBA Conference (non-IBBA member)||
|Affiliate’s member takes Course at a Conference (IBBA member)||
|Affiliate’s member takes Course at a Conference (non-IBBA member)||
|Affiliate’s member joins the IBBA in 2013||
Please remember to submit your latest membership list if you haven’t already done so (ideally with full name and email address in order to avoid discrepancies between common names and/or nicknames). This will help ensure that your Affiliate receive full credits for your members’ participation.
In the meantime, please do remind your members about the special offer we recently extended to them for discounted IBBA membership and conference attendance. Feel free to forward the original message as well!
Thank you for your continued support of the IBBA. We hope to see you soon in Savannah! If you have any questions in the meantime, please do not hesitate to contact me.
IBBA Director of Operations