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FAQ

FAQ

The top ten questions most often asked by business owners considering hiring an M&A advisor to sell their business.

Q. How long will this take?
A. Based on thirty years of experience completing transactions for small to middle-market companies, we can tell you that it generally takes 6 to 9 months to complete the sale of your business. Contact us and we’re happy to share with you why it takes so long.

Q. How much will this cost?
A. Before you engage us to sell your business, we will complete a Business and Value Assessment at a cost of $7,500. If we decide to work together, there is an upfront fee of $20,000 to cover the development of marketing materials (including a blind Executive Summary and a detailed Confidential Information Memorandum) and the development and implementation of the marketing plan. Upon the successful sale of your company, there is a success fee of 10% of the first $2 million of consideration and 2% of all consideration above that level.

Q. Can’t I find a mergers and acquisitions advisor who won’t charge me up-front fees?
A. Absolutely. However, we take on only a limited number of engagements, and will spend a significant amount of time, energy and money to market your business, so we have to cover costs with the two up-front fees.

Q. Do you set a purchase price for my business?
A. No. While our Business and Value Assessment will provide you with information about the likely range within which we expect to see offers for your business, we do not share this information with buyers. In our experience, sophisticated strategic, private equity and investor/operator buyers are able to complete their own analysis, and setting a price only caps the amount that they might pay. The buyer for whom you fill a strategic need may pay significantly more for your business than the financial metrics would suggest.

Q. How will you market my business while maintaining confidentiality?
A. VERY CAREFULLY. First, you will approve every potential buyer before we contact them. Second, if we determine that listing the company for sale on any internet sites makes sense, the listing will not reveal your name or identifying details about your business. Finally, when we reach out to potential buyers, we will not reveal your name or identifying details about your company until the potential buyer has been screened and has agreed to the terms of a non-disclosure and confidentiality agreement.

Q. Do my employees need to know I am selling my business?
A. The answer is “it depends”. In general, we recommend that you tell only a very limited number of employees who have a need to know, but we are happy to discuss your situation specifically if you Contact us.

Q. Why do you run an auction process?
A. The market for the sale of private businesses is incredibly inefficient. There is very little publicly-available information available on the pricing of small private companies. Additionally, each buyer may view the value differently depending upon their needs and synergies. Over the last 30 years, we have found that offers for the same business can vary from the average price by from 25% below to 25% above. The best way to ensure that you complete a transaction with the best price and terms is by ensuring that a competitive process exists that causes buyers to put their best offers on the table.

Q. Can I get all my money in cash at the closing?
A. The short answer is “no”. Some of the elements of deal structure that impact the cash you receive at closing include:

• Hold-backs or escrow account set-asides for 18 to 24 months to provide for payments to the buyer if they have claims under any Representations and Warranties in the purchase agreement

• Earn-outs are deal structures that pay you some amount of money in the future based on the business’s performance after the closing. Most often, earn-outs are structured as a multiple of future earnings, occasionally as a multiple of future revenue, and occasionally as a flat dollar amount based on a meeting an agreed-upon level of revenue or earnings, or the retention of clients. For business services companies where there are very few hard assets being acquired, it is not unusual for 30% to 50% of the purchase price to be structured as an earn-out.

• Seller notes. There are times when the buyer either cannot finance the transaction with his or her own equity combined with bank loans, or they don’t wish to do so. In those situations, they may request the seller to take back a seller note for part of the purchase price.

Q. Do I need a valuation?
A. No. Valuations serve important purposes, particularly for estate tax planning, partner buyouts, financings, etc., but they are not necessary or cost-effective when you are planning a sale of the business. Our Business and Value Assessment, at $7,500, if far less expensive than a certified valuation, will identify the range in which buyers are likely to value your business, and will also provide information about risk factors or areas where you may be able to increase the value of the business before a sale, which are not included in a valuation.

Q. Will my business sell?
A. I don’t know. There are many reasons why companies aren’t sold: the economy tanks; the business’s performance begins to decline during the process; the offering prices received don’t meet the goals of the owner. But in every case, we will be tireless in our work on your behalf.