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How to choose a business broker

WHAT YOU SHOULD KNOW BEFORE CHOOSING A BUSINESS BROKER

The sale of your business asset is one of the most significant decisions that you'll make that will affect your family and financial survival. Choosing the right business broker, mergers and acquisitions specialist or third party representative to sell your business can mean the difference between a smooth transaction or a painful and costly experience.

Careful preparation of our your exit strategy and timing your business sale well, will help ensure that your business opportunity has time to work on all levels and revenue and profit trends can positively gear towards a higher sale price. A good strategy is to start preparing at least two years ahead of placing the business for sale on the market. Having an experienced Mergers and Acquisitions advisor or business broker during this period can assist in directing you along the right path.

Before you decide to sell a business, it's critical that you have your financials up to date and in order, and have a good quality information memorandum prepared. Guidelines are available on the internet or can be prepared professionally by a business broker or mergers and acquisitions specialist who is experienced with how to present your business well for a successful sale. The document needs to be clear, concise and to the point.

Once a prospective buyer reads the Information Memorandum and there is a strong level of interest, the document can be passed onto a number people including his or her accountant, financiers and legal advisors. The information will need to be written in favour of your target audience and have the ability to sell your business not only to the buyer but the buyer's advisors. A good Information Memorandum has the ability to sell businesses site unseen. A buyer may become emotionally attached to the business but you can be sure that his or her team of advisors will be less attached to the business opportunity and have their say on the business. They will be relying heavily on the Information Memorandum. Any offers will be based on the facts presented, not feelings. The more clearer your information, the quicker the decision.

Your solicitor and accountant may be actively involved in the transaction and may be required to assist in answering complex questions from the buyers side. It's important that you instruct them to be co-operative and proactive in assisting you to obtain a positive result.

We generally advise any prospective sellers that they should operate their businesses as if it were for sale today. That is, a prospective buyer may knock on your door for an immediate acquisition. The business model and management structures should be in place today to ensure that the prospective buyer is not deterred upon further due diligence and an attractive sale price can be achieved along with a smooth transition.

Dependant on your industry, prospective buyers will typically examine the history of the business, future sustainability and growth.

Whether you decide to place the business for sale with a price or as an expression of interest (no price tag), it's important that you price the business right. Going to the market with inflated expectations will only create disappointment and deter buyers who may have otherwise paid good money for your business. To work out the value, it would be wise to obtain an independent market appraisal from at least three Mergers and Acquisitions houses, Business Brokers and/or Licensed business valuers on the current market value and discuss strategies on how to best structure the sale of your business to gain maximum value.


WHAT TO LOOK OUT FOR WHEN CHOOSING A BUSINESS BROKER

Prior to listing the businesses for sale with a facilitator, request references on his or her experience in working closely with buyers and sellers transactions of your size business and industry.

Additionally, it's equally important to obtain references from other professional advisors including accountants, solicitors, stockbrokers, private equity specialists, tax specialists that have previously dealt with your facilitator. Each party works from their own perspective and your facilitator will require the skills and experience to work with each party from both sides of the transaction and keep the harmony alive. This can entail complex negotiations and problem solving with a realistic and solution-focused mindset.

By implementing key strategies, your facilitator should be in a position to assist you in maximizing your business' sale value, by structuring a tailored marketing campaign to suit your market position and to the right market. This improves your chances of dealing with several potential buyers, rather than being forced into negotiations with only one prospective buyer. It's important that your facilitator deals only with pre-qualified prospects, upon their signature of a confidentiality agreement and your approval prior to releasing your business details.

It may be an idea to be a "secret shopper" and contact the facilitator's office and enquire about one of their businesses for sale. This will give you an idea of how the facilitator qualifies prospective buyers, protects the business' confidentiality, and promotes the business itself

During your initial conversation with a business broker or mergers and acquisitions agent, most facilitators will discuss their past successes. It's equally important to ask them about some of their failures, how deals collapsed, how they avoid repeating the same mistakes, and how they've avoided some close calls to deals collapsing. This could give you good insight into the integrity of your facilitator and also give you an idea on what not to do when selling your business.

The most important key to engaging a facilitator is the level of trust. From the facilitators' perspective most want to feel they are marketing a business with proven financials, owner transparency and within a realistic price range. Equally, a business owner wants to know that he or she is not wasting time with unqualified buyers, an unmotivated facilitator and very little communication. Establishing trust on both sides will give both parties a level of comfort that they are in good hands.

You should demand consistent communication and market feedback. Even if there is no news or the news from the market may not be so good, it's important that you and your facilitator have a transparent relationship to work through any challenges and move towards a positive commercial outcome.

The key reasons that a business does not sell are: price; contract terms conditions; and poor communication between the parties.

An experienced facilitator will be able to guide you through each of the processes of selling your business and advise you of any potential pitfalls before they happen.

Depending on your industry, most buyers fall into one of the following categories:

  • Public companies
  • Private companies
  • Private investors
  • Former CEOs
  • Business migrants
  • Private equity firms
  • Seasoned operators


The right facilitator should have established networks in each of the above categories and able to quickly draw on resources to ensure that your business is being offered to the right audience.

 

This article has been provided by Anthony Glinatsis who is the Director of TGBN Mergers & Acquisitions, based in Sydney. To view more about Anthony Glinatsis or TGBN Mergers & Acquisitions, please visit: www.mergersandacquisitionsaustralia.com.au