Components of the Deal
Mergers and acquisitions (M&A) are transactions in which the ownership of companies, other business organizations, or their operating units are transferred or consolidated with other entities. Purchase agreements cover everything from definitions and executive provisions to representatives, warranties and schedules, indemnifications and interim and post-closing covenants. Indemnification provisions help define who should be liable for issues that arise after the deal closes. The closing conditions detail requirements for buyer and seller between the signing of the purchase agreement and the ultimate closing date. Such agreements also have “break-up fees” that detail the circumstances either party will be able to terminate the deal and whether the party terminating the transaction will pay a set fee to the other side.
Advice for Sellers
Negotiating a purchase agreement (as well as the different stages involved in finalizing that agreement) can be both time-consuming and stressful, Daniels warns business sellers.
As any good business broker will tell you, business owners have to be careful not to let their businesses suffer while they are going through the complex process of selling. Selling a business is hard work, and this fact underscores the importance of working with a proven broker.
Likewise, any serious buyer will look quite closely at your business’s financials, yet another reason to work with key professionals during the process. Business sellers risk losing the sale altogether if the financials are off; so don’t wait until the last moment to get your “financial house in order.”
The sooner you begin working on getting your finances together, the better off you’ll be.
Use Trusted Pros
During negotiations to sell a business, tension is inevitable because every party is looking to protect their own best interests, Daniels warns. Having an experienced negotiator in your corner is a must. Make sure your negotiator has bought and sold businesses in the past, and they will understand what pitfalls and potential problems may be lurking on the horizon. The sale price isn’t the only variable of importance, Daniels notes. The terms of the deal matter. Such terms include “how much control will you have, what stake is being transferred, is there any seller financing, (and) what are your liabilities” after the closing?
The bottom line is that there are many reasons to work with a business broker. Brokers who are members of the Georgia Association of Business Brokers have committed to a code of ethics and understand the diverse complexities of an M&A purchase agreement. They also have experience helping business owners organize their financial information and are valuable partners during negotiations. For most business owners, selling their business is the single most important business decision they will ever make. Find someone who understands the process and can act as a guide through the process.
The post Understanding M&A Purchasing Agreements appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Are you a business owner who is interested in selling? If so, there are some strategies you should undoubtedly use. At the top of the list is the all-important offering memorandum. The offering memorandum, often referred to as a selling memorandum, is a straightforward but highly effective way to help you obtain the highest possible selling price.
Shaping the Executive Summary
The offering memorandum must be factual. However, at the same time, this memorandum allows for a bit of business promotion and selling, which can be included in the executive summary portion of the document. After all, potential buyers will want to know more about your business and why buying it would be a savvy decision.
In short, the executive summary section of the offering memorandum goes over the highlights of your company. It should include an outline of several key factors. Everything from an outline of the ownership and management structure, description of the business and financial highlights to a general review of your company’s products and/or services should all be covered. Additional points to include would be variables, such as information about your market, and the reason that the business is for sale.
Your executive summary, simply stated, is extremely important. A coherent and compelling executive summary will motivate prospective buyers to learn more. In short, you want the executive summary of your offering memorandum to shine. It should capture the attention and the imagination of anyone that reads it.
Other Essential Elements to Include
Some elements are absolutely a must to have in your offering memorandum. An overview of your company and its history as well as its markets and products are all good places to begin your offering memorandum. Other key elements ranging from distribution, customers or clients and the competition should also be included.
Factors such as management, financials and growth strategies should not be overlooked, as many prospective investors may flip to those sections first. Finally, be sure to include any competitive advantages you may have as well as a well-written conclusion and exhibits. The more polished and professional your offering memorandum, the better off you’ll be.
An easy way to improve the overall quality of your offering memorandum is to work with a seasoned business broker. A professional business broker knows what information should be included in your offering memorandum. He or she will also know what not to include. Remember that your offering memorandum may be the first point of contact between you and many prospective buyers. You’ll only get one chance to make a first impression.
The post Exploring the Offering Memorandum appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
The Georgia Association of Business Brokers will host the group’s annual Holiday Gala on Dec. 12, 2019.
The annual celebration will be held at the Capital Grill in Dunwoody’s Perimeter Mall area starting at 7 p.m.
Members are asked to bring an unwrapped toy, diapers, child’s clothing item or other donation for the Foster Care Support Foundation, a Roswell-based charity that helps foster children statewide. Visit their website for a complete list of the things they need.
The GABB will also honor the recipients of the 2019 Million Dollar Club. The deadline has passed for members to RSVP for this event, which is full.
By Lou Vescio, CBI, M&AMI, Managing Partner, Coastal Business Intermediaries & Agency Brokerage Consultants
2017 Chairman of the IBBA, Fellow of the IBBA, Fellow of The M&A Source
Having been part of the Business Broker or Business Advisor Profession for about 16 years, I have seen many new Brokers come and go! I have also seen many grow their practice into very lucrative and profitable enterprises. Why do some Brokers succeed and prosper, while others give up in six months to two years? Having participating in several professions in the past fifty years, from flying jets in the Air Force, to a 15 year career with a Fortune 500 company, to building a couple computer training businesses and selling them, and finally becoming a Business Broker, I believe I have identified a few traits that make the great Brokers great and why some Brokers fail.
Perseverance – If you have ever read anything about Navy Seals, they never give up! The Basic Underwater Demolition/SEAL (BUD/S) school includes some of the most difficult training that exists, and most participants drop out due to the physical and mental stress. Perseverance is the key to their success.
This is not to say that becoming a great Business Broker comes close to becoming a Navy Seal, but all successful Business Brokers that I know exhibit the “failure is not an option” mentality. The Business Brokers workday is not a “9 to 5” type of day; it’s an “I will do whatever work I need to do, whenever I need to do it” type of day!
Education – Great Business Brokers are always learning more about their profession. Education obviously includes taking IBBA and M&A Source courses and workshops attending professional conferences sponsored by associations like the GABB, but it also includes reading everything available that is pertinent to the profession. Great Business Brokers also network with other great Brokers across the country and even across the world. Every business is different, every deal is different, and sharing and networking with other professionals offers new and fresh ideas and concepts.
Learn to say “No” – One of the Brokers I admire is Jim Afinowich, Managing Partner with IBG Fox & Fin in Scottsdale, AZ. Many years ago, he taught a workshop on saying “no” to bad listings. New Brokers tend to take almost any listing just so they have something to sell, but statistics tell us that 75% to 90% of businesses listed by Business Brokers do not sell! On the other hand, great Brokers sell 80% to 95% of their listings. Learning to price businesses properly (that Education thing above), properly analyzing good businesses when writing a great CIM (again that education thing), and walking away from unreasonable sellers by “just saying no” (in a nice way of course) are a few keys to success.
Marketing – While we all like to receive great referrals, most Brokers would go out of business if they did not market their services. Without going into the details of what kind of marketing a Broker should undertake, the key is marketing costs money and it is a requirement to succeed. The IBBA offers courses, workshops and webinars on every type of marketing, and the costs can vary from hundreds of dollars to tens of thousands of dollars. Fifty years ago, Tom West, author of The Complete Guide to Business Brokerage, suggested mailing a hundred letters a week and calling that same hundred business owners a week later. That is probably the bare minimum and may still be one of the most effective tools. Marketing is one of those “just do it” activities, and do as much as you can afford!
Salesmanship – While many people may disagree with me, we are saleswomen and salesmen. If we do not sell, we don’t make money! Some Brokers like to refer to themselves as advisors, consultants, or intermediaries, but in the end, we are still salespeople! More precisely, we engage in consultative selling, meaning we focus on creating value and trust with the prospect and exploring their needs before offering a solution. Our first objective is building a relationship, and then we provide the right solution to the problem. There are many courses and books on how to sell everything under the sun, but one of the best sales books a Broker can read is How to Win Friends and Influence People by Dale Carnegie (1936). It is more about getting people to like you, and that is the first step in selling. You can download and read it here for free.
Find a Mentor – Having a mentor when starting out as a Business Broker is a big plus, and joining a professional association like the GABB can help with this. Having an experienced and trusted adviser who will assist in training can shorten the timeline from “Start” to “Success!” It is also advisable to work in a successful brokerage when starting out to avoid many costly and time-consuming mistakes. Whether it be a franchised brokerage or an independent brokerage, find a mentor that meets the following criteria: 1) knows how to make a lot of money selling good businesses, 2) promotes IBBA education and certification, 3) assists in valuing and critiquing potential listings and 4) assists in negotiating difficult transactions.
Become an IBBA Contributor – One of the best ways to enhance your IBBA experience is to actively participate in the annual conferences, courses and workshops and share your experiences with others. Join a committee or two and be active. The friends you make and the experiences you share with others will enhance your Business Brokerage experience. (Note, the GABB also offers conferences, committees and monthly meetings.)
Finally, to all you Great Business Brokers out there, make friends with a new member at the next IBBA Conference and offer yourself as a mentor. You will find it very rewarding!
Reprinted with the permission of the International Business Brokers Association.
ATLANTA–One-off factors, combined with an ongoing global slowdown, the U.S.-Chinese trade spat and a deteriorating domestic investment climate have resulted in unusually large deviations from average monthly job gain expectations in Georgia, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s Robinson College of Business.
“Monthly job creation numbers always fluctuate, just like monthly rainfall totals, and rarely is there a month that hits the so-called average mark. However, it’s rare to see three negative growth months out of nine, without a special reason,” Dhawan wrote in his quarterly “Forecast of Georgia and Atlanta,” released today (Nov. 20, 2019).
How big were the fluctuations? Georgia gained 23,200 jobs in the first quarter of 2019, followed by only 300 job gains in the second quarter, then roared back with 29,100 jobs in the third quarter of the year.
“Three marquee sporting events between December 2018 and February 2019 – the MLS Championship (Dec. 8), the Chick-Fil-A Bowl (Dec. 19) and Super Bowl LIII (Feb. 3) – delivered a positive hospitality boost to Atlanta,” Dhawan said.
From October 2018 to January 2019, Georgia added 39,100 jobs – a 33 percent boost to the 2018’s monthly jobs creation pace of 7,400 – with 20,800 of those gains in retail trade, hospitality and administrative services (proxy for temporary jobs). These service sectors account for 30 percent of the state’s employment base, but they produced 53 percent of job additions during those four months.
When the events were over, the three sectors shed 6,200 of the 9,700 jobs lost in March and April, explaining the ups and downs of job growth over the first two quarters.
The forecaster examined premium job creation in the state’s catalyst sectors – corporate, technology and manufacturing. The three sectors account for roughly one quarter of Georgia’s employment base, pay well above the median wage, and lead to demand for products and services, resulting in jobs in supporting sectors. One support sector, transportation, warehousing and utilities, has added only 700 jobs in the first three quarters of 2019 despite the growth of e-commerce.
“But what about future prospects for transportation? E-commerce is not the entire story,” Dhawan said. “The health of the sector is also tied to activities at the port of Savannah and its network of warehouses. A slowing growth rate of tonnage generated at the port and a record high proportion of empty containers on outbound ships means fewer trips from warehouses to the port, less demand for storage and fewer jobs.”
Savannah exports are mostly manufactured products – cars from the Kia plant in LaGrange, paper and pulp products from Albany-area mills, automotive machinery from Athens and Gainesville, and industrial carpeting from Dalton.
“If the global slowdown, coupled with a strong dollar, reduces demand for Georgia exports, we will produce less, which will show up in the performance of the state’s manufacturing sector and employment growth in the Savannah metro area,” said Dhawan. “The global growth climate is so bad that Savannah-based Gulfstream announced it will lay off 362 people at its main facility in coming weeks. Loss of these high paying jobs is never good for the metro area where they happen.”
With the current economic expansion in its 10th year, the business cycle is maturing, and job quality is deteriorating, according to the forecaster. For example, in 2014 Georgia added 128,100 jobs of which 40 percent were in high-paying catalyst sectors. In 2018, when Georgia added 89,000 jobs the proportion of catalyst jobs had plunged to 12 percent.
According to Dhawan, the chance of an upsurge in total job creation is low for the coming six to eight quarters.
“Chalk it up to the ongoing global slowdown in Europe and Latin America, coupled with our trade spat with China and a weakening domestic investment climate. Global and domestic headwinds are buffeting Georgia’s catalyst sectors, making for an overall lower future growth path.”
Highlights from the Economic Forecasting Center’s Report for Georgia and Atlanta
- Georgia employment will add 72,200 jobs (13,200 premium jobs) in 2019, gain 49,700 jobs (8,900 premium) in 2020 and increase by 45,900 (8,900 premium) in 2021.
- Nominal personal income will grow 5.0 percent in 2019, 4.9 percent in 2020 and 4.7 percent in 2021.
- Atlanta will add 51,200 jobs (10,000 premium positions) in 2019, moderate to 38,100 jobs (7,800 premium) in 2020 and 34,300 jobs (7,300 premium) in 2021.
- Atlanta housing permitting activity will fall 16.4 percent in 2019, decline 6.9 percent in 2020 and fall another 5.5 percent in 2021.