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.
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If you don’t exactly understand what corporate social responsibility (CSR) means, don’t worry. We’ll cover the main points you need to know. CSR is increasingly seen as something that companies of all sizes need to be aware of, so let’s take a closer look at a few of the finer points.
There are 4 basic pillars in CSR: the community, the environment, the marketplace and the workplace. The community pillar of CSR refers to your company’s contribution to the local community; this contribution can take a variety of forms ranging from financial support to personal involvement.
The second pillar of CSR is the environment. The simple fact is that people around the world are becoming much more environmentally aware. You can be quite certain that a percentage of your customers and/or clients have environmental concerns.
Increasingly, consumers want to know that the companies that they are purchasing from have good environmental practices. There are many ways that businesses can show that they are environmentally aware. They range from recycling and using low-emission and high-mileage vehicles whenever possible to adopting packaging and containers that are environmentally friendly.
The third pillar of CSR is the marketplace. Proper corporate social responsibility includes the responsible utilization of advertising, public relations, and ethical business conduct. Another key element in the marketplace pillar is adopting fair treatment policies towards suppliers and vendors, contractors and shareholders. In other words, the marketplace aspect of CSR means rejecting exploitative business practices in favor of fairer and more equitable business practices.
The final pillar of CSR concerns the workplace. In the workplace pillar, CSR encourages the implementation of fair and equitable treatment of employees, as well as observing workplace safety protocols and embracing equal opportunity employment and labor standards.
Adopting CSR practices in today’s business climate is a prudent decision, as it serves to increase both shareholder and investor interest, while simultaneously encouraging a company’s value. Likewise, embracing CSR practices can make it easier to attract a buyer and that party may be willing to pay a higher selling price.
Typically, buyers want a business that has many of the attributes supported by the four pillars of CSR. Buyers want businesses that enjoy a high level of customer loyalty and have good overall relations with the local community. Additionally, buyers want businesses that have quality relationships with their suppliers and vendors as well as loyal and dependable employees.
Sellers must realize that buyers want products, goods and services that are in line with the current trends of the marketplace and have an eye towards future trends. Finally, buyers want as little “baggage” as possible. You can be certain that buyers don’t want to find any skeletons lurking about in the company closet. The proper utilization of CSR can address all of these concerns and, in the process, make your business more attractive to a potential buyer.
By Kathryne A. Pusch, President & Consultant, ConsultKAP, Inc.
Potential clients and prospective business brokers often ask GABB “What are the legal licensing requirements of professionals assisting buyers and sellers of businesses in Georgia?”
I think I can answer this question because I was a business broker for many years, am a former Board Member and President of GABB, RE Instructor, and was a past member of the Georgia Real Estate Commission’s (GREC) Education Advisory Board.
Here’s what the law says:
GA Law 520-1-.12 Business Brokerage.
Unless otherwise excepted from licensure requirements by O.C.G.A. Section 43-40-29, a person who brokers the sale of a business must hold an appropriate license issued by the Commission if the sale of the business involves the transfer of any interest (including, but not limited to, leasehold or ownership interest) in real property. A business broker and any of the business broker’s associates who do not hold licenses issued by the Commission may not negotiate or attempt to negotiate or assist in procuring prospects for the sale of a business where:
(a) that sale involves the transfer of any interest in real property,or
(b) where the payment of all or part of a commission or fee to the business broker or any of the business broker’s associates in the sale of a business is contingent upon the transfer of an interest in real estate.
An unlicensed broker may not perform or attempt to perform the acts in the preceding sentence and then secure a person licensed by the Commission to approve that transaction.
Under Georgia law, anyone selling or buying, offering to buy or sell, acquiring prospects to buy or sell or negotiating for the buying or selling of real estate for compensation must be licensed by the GREC. According to section 520.1-.19 of Georgia law, Business Brokers are covered by the same legal requirements as any Real Estate licensee if the sale includes the transfer of any interest in real estate.
While some interpret that to mean you don’t need a real estate license if you are selling a business and not any property (as in dirt or brick & mortar,) in fact, there are few instances in which this is the case.
Active businesses operate out of and occupy premises that are either owned or rented/leased, with the exception of a home-based business. Any business Purchase & Sale contract will contain a contingency that the RE interest (freehold or leasehold) must transfer from the seller to the buyer. (If it does not, the business will not have premises in which to operate after the sale.)
Any third party lenders of the funds to complete the transaction will also require a lease or RE purchase agreement to approve the loan for the business acquisition, which will be a contingency of the sale.
Therefore, anyone who is advertising a non-home-based business for sale listing is offering for sale a business that includes either a leasehold or freehold interest in real estate, whether or not the listing summary/web site ad has a box checked for “Real Estate.” In fact, unlicensed people who sell businesses will NOT check “Real Estate,” despite the fact that there is a business facility owned or leased, because they are NOT LICENSED.
Anyone who is negotiating with sellers and buyers for the purchase and sale of a non- home-based business for sale is involved as a broker in a transaction that includes either a leasehold or freehold interest in real estate. Therefore, that person must have a current Georgia real estate license under Georgia law.
The terms of the real estate purchase or the rent or lease terms (occupancy costs) are always a key factor in business expenses and profits, and therefore a key factor in the investment decision, so it is not possible to negotiate for the purchase and sale of a business without including the real estate factors.
The occupancy of a going concern cannot be separated from the operation of the going concern or from the profits of the going concern on which value of that going concern are based. Business brokers who are unlicensed are operating in violation of Georgia license law, regardless of how they “spin” their advertising.
Business brokers cannot assert that they are not violating license law by claiming that they have an attorney or a licensed broker to “handle” the real estate aspects of a “transaction” because of the above facts related to the inseparability of occupancy from the business going concern which is being offered for sale. The exceptions would be home-based business; non-operating businesses: sale of assets or inventory only from a closed business; or new franchises – sales by a franchisor to a franchisee of a not yet operating unit.
The GABB encourages you to let us know if you come across individuals who are operating as business brokers without the proper licenses. Contact any individual member of the board, or email the entire board at email@example.com.
Questions? Email: KAP@Consultkap.com
Main Office: 770-918-9390 Cell: 770-309-8580
GA Law 520-1-.12 Business Brokerage.
see also O.C.G.A. §§43-40-1; 43-40-2; 43-40-29; and 43-40-30.
Authority O.C.G.A. Secs. 43-40-2, 43-40-14. History. Original Rule entitled “Examinations” adopted as ER. 520-1-0.1-.12. F. and eff. July 12, 1973, the date of adoption. Amended: Permanent Rule entitled “Licensee’s Duties Upon Surrender, Suspension, or Revocation of License” adopted. F. Dec. 7, 1973; eff. Dec. 27, 1973. Repealed: New Rule of same title adopted. F. June 4, 1980; eff.July 1, 1980, as specified by the Agency. Amended: Authority changed. F. Aug.5, 1982; eff. Nov. 1, 1982, as specified by the Agency. Amended: F. May 9, 1985; eff. July 1, 1985, as specified by the Agency. Repealed: New Rule entitled “Business Brokerage” adopted. F. Nov. 12, 2003; eff. Dec. 2, 2003.Read More
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.
ATLANTA–A maturing business cycle, the ongoing global slowdown, and the U.S.-China trade spat are fostering a deteriorating business investment climate, and a slowdown in job growth has made consumers wary of spending, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s Robinson College of Business.
“Investments are always a risky bet. And as the amount of uncertainty rises, investment spending is the first to suffer,” Dhawan wrote in his “Forecast of the Nation,” released today (Nov. 20, 2019).
The Global Economic Policy Uncertainty Index, at its highest level since 1997, has been extremely elevated for the past 18 months. Dhawan attributes the uncertainty in no small part to the imposition of tariffs by the world’s two largest trading partners, the U.S. and China, on each other’s exports.
“Although there are other trade skirmishes [between Japan and Korea, the ongoing Brexit saga, the Catalonia secession in Spain, and even the September missile attack on Saudi oil facilities] the U.S.-China trade spat takes center stage.”
The forecaster posits that as management of U.S.-based global companies consider moving factories out of China and undoing supply chains they spent decades establishing, “their primary focus is on the vexing issue of building new supply chains and not on expanding existing business capacity, i.e. hiring.”
The fallout is readily apparent in investment growth rates. Business investment declined 3.0 percent in the third quarter of 2019, after dropping 1.0 in the previous quarter, which was a dramatic contrast to the first half of 2018, when investment grew 8.4 percent following the Tax Cuts and Jobs Act of 2017. Two other factors, or shocks, contributed to weak investment – reduced fracking investment due to falling oil prices, and the impact of the March 2019 grounding of the Boeing 737 MAX on high tech manufacturing. Looking forward, the Institute for Supply Management Manufacturing Index is below 50, signaling future contraction in the industrial sector.
As for consumer confidence, a 10-point market drop since Aug. 2019 could signal a consumption growth slowdown. The last three Federal Reserve rate cuts should have boosted consumption by lowering interest rates for car loans and on new or refinanced mortgages. However, Oct. 2019 vehicle sales of 16.5 million units were much lower than the average 17.0 million units sold the previous three months.
Damage from the last few quarters of deficient investment growth will be evident in subpar GDP growth, less than 1.5 percent on average in the coming quarters. And Dhawan characterizes business investment equipment growth as “nonexistent” until Boeing’s woes end in mid-2020.
“As growth drops well below the 1.8 percent growth potential, the Fed will be forced to cut rates several times in early 2020, most likely during the March and June meetings of the Federal Open Market Committee,” Dhawan said.
Even with these cuts, Dhawan anticipates GDP growth to drop to 2.3 percent in 2019, then decline to 1.5 percent in 2020 and improve to 1.8 percent in 2021.
“The election will be over by 2021, hopefully, and no matter who is in the White House, businesses can plan again with somewhat more certainty than at present,” Dhawan said.
Highlights from the Economic Forecasting Center’s National Report
- Overall GDP growth will be 2.3 percent in 2019, 1.5 percent in 2020 and 1.8 percent in 2021.
- Investment growth will be 2.2 percent in 2019, 0.3 percent in 2020 and 2.5 percent in 2021. Monthly job gains will be 165,300 in 2019, drop to 90,600 in 2020 and rise to 94,700 in 2021.
- Housing starts will average 1.256 million in 2019, 1.215 million in 2020 and 1.220 million in 2021. Vehicle sales will average 16.9 million in 2019, 15.8 million in 2020 and 15.5 million in 2021.
- The 10-year bond rate will average 2.1 percent in 2019 and 2020, then rise to 2.7 percent in 2021.