| Perhaps the most important business
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| | created for MCI shareholders because of
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| transaction you will ever pursue is the
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| | the competitive bidding between Verison
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| sale of your business. Many healthcare
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| | and Quest Communications.
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| business owners attempt to do it
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| | 7. Balance of Experience. Most corporate
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| themselves and when asked if they got a
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| | buyers have acquired multiple businesses
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| good deal, many respond with "I think
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| | while sellers usually have only one sale.
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| so," or "I got my asking price," or "I
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| | In one situation we represented a
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| really don't know," or "It was a
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| | first-time seller being pursued by a
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| disaster." Often times these very
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| | buyer with 26 previous acquisitions.
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| capable business people approach the sale
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| | Buyers want the lowest price and the most
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| of their business with less formality
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| | favorable terms.
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| than in the sale of a home. The purpose
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| | The inexperienced seller will be
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| of this article is to answer the
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| | negotiating in the dark. To every term
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| questions - Why would I use an M&A
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| | and condition in the buyer's favor the
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| Advisor and what am I getting for the
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| | buyer will respond with, "that is
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| fees I will pay?
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| | standard practice" or "that is the
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| 1. Confidentiality. If an owner tries to
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| | market" or "this is how we did it in ten
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| sell his own business, that process alone
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| | other deals." An investment banker can
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| reveals to the world that his business is
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| | act as the seller's advocate with a
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| for sale. Employees, customers,
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| | similar experience base to help preserve
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| suppliers, and bankers all get nervous
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| | the seller's transaction value and
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| and competitors get predatory. Engaging
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| | structure.
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| an advisor protects the identity of the
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| | 8. Maximize the Value of Seller's Outside
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| company he represents for sale with a
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| | Professionals. The seller can save
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| process designed to contact only owner
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| | significantly on professional hourly fees
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| approved buyers with a blind profile - a
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| | by allowing his merger and acquisition
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| document describing the company without
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| | professional to manage several important
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| revealing its identity. In order for the
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| | functions leading up to contract. His
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| buyer to gain access to any sensitive
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| | compensation is usually comprised of a
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| information he must sign a
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| | reasonable monthly fee plus a success fee
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| confidentiality agreement. That generally
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| | that is a percentage of the transaction
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| eliminates the tire kickers and deters
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| | value.
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| behaviors detrimental to the seller's
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| | The M&A Firm and seller negotiate with
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| business
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| | the buyer the business terms of the
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| 2. Business Continuity. Selling a
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| | transaction (sale price, down payment,
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| business is a full time job. The
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| | seller financing, etc.) prior to turning
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| healthcare business owner is already
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| | the purchase agreement over to outside
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| performing multiple functions
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| | counsel for legal review. In the absence
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| instrumental to the success of his
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| | of the Advisor, that sometimes-exhaustive
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| business. By taking on the load of
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| | negotiation process would default to the
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| selling his business, many of those
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| | outside attorney. It is not his area of
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| essential functions will get less
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| | expertise and could result in significant
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| attention, sometimes causing irreparable
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| | hourly fees.
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| damage to the business. The owner must
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| | 9. Maintain Buyer - Seller Relationship.
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| maintain focus on running his business at
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| | The sale of a business is an emotional
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| its full potential while it is being
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| | process and can become contentious. The
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| sold.
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| | intermediary acts as a buffer between the
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| 3. Time to Close. The faster the sale,
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| | buyer and seller. This not only improves
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| the lower the risk of business erosion,
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| | the likelihood of the transaction
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| customer defection, employee problems and
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| | closing, but helps preserve a healthy
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| predatory competition.
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| | buyer - seller relationship post closing.
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| 4. Large Universe of Buyers.
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| | Many times the seller will become an
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| Intermediaries subscribe to databases of
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| | integral part of the management team of
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| the various healthcare business
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| | the buyer's company after the sale. Often
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| categories that enable them to screen for
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| | buyers want sellers to have a portion of
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| buyers that are in a certain SIC Code and
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| | their transaction value contingent on the
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| have revenues that would support the
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| | successful performance of the company
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| potential acquisition.
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| | post closing. Buyer and seller need to
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| In addition they maintain custom
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| | be on the same team after closing.
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| databases of the various healthcare
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| | A model that is becoming quite popular in
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| categories refined even further to hone
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| | the healthcare industry is for the big
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| in on only the best potential buyers for
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| | players to identify good technologies in
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| your business. A good M&A Advisor also
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| | smaller companies and to forge
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| has access to private equity groups
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| | partnerships or strategic alliances with
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| databases that outline their buying
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| | them. The larger company will have the
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| criteria.
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| | smaller company spend a great deal of
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| 5. Marketing. A Merger and Acquisition
| |
| | their resources and attention in
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| Firm can help present the business in its
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| | educating the bigger player on their
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| best light to maximize selling price.
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| | product and market.
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| They understand how to recast financials
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| | The smaller partner will often work very
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| to recognize the EBITDA potential post
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| | hard to integrate their offering into the
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| acquisition. Higher EBITDA = higher
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| | broad product set of the bigger partner.
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| selling price. He understands the key
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| | Finally, the smaller company will put all
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| value drivers for buyers in a particular
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| | their eggs into this one basket of
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| healthcare segment and can help the owner
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| | opportunity. After the larger company has
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| identify changes that translate into
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| | effectively removed most of the
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| enhanced selling price.
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| | integration risk on the smaller company's
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| 6. Valuation Knowledge. The value of a
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| | nickel, they then make an unsolicited
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| healthcare business is far more difficult
| |
| | offer to buy. The smaller company is
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| to ascertain than the value of a house or
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| | often less profitable during this "try it
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| even the value of a "bricks and mortar"
| |
| | before you buy it period." The bigger
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| type business. Every business is unique
| |
| | player then predicates their offer on the
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| and has hundreds of variables that effect
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| | latest period financials.
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| value. Investment Bankers have access to
| |
| | A good investment banking firm can help
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| business transaction databases, but those
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| | the smaller company navigate and recover
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| should be used as guidelines or reference
| |
| | from this situation. Our experiences
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| points. The best way for a business owner
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| | with businesses that engaged our firm as
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| to truly feel comfortable that he got the
| |
| | a result of an unsolicited offer from a
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| best deal is to have several financially
| |
| | buyer have been quite instructive. The
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| viable parties bidding for his business.
| |
| | eventual selling price averaged over 20%
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| A healthcare industry transaction
| |
| | higher than the first offer. In no case
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| database may indicate the value of your
| |
| | was the business sold at the initial
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| business based on certain valuation
| |
| | price.
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| multiples, but the market provides the
| |
| | To conclude, seller's intermediary helps
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| real answer.
| |
| | reduce the risk of business erosion with
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| An industry database, for example, can
| |
| | improved confidentiality while allowing
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| not put a value to a particular buyer on
| |
| | the owner to focus on running the
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| a key customer relationship or a
| |
| | business. The M&A Advisor led sale helps
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| proprietary technology. Most business
| |
| | maximize sales proceeds by involving a
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| owners that act as their own selling
| |
| | large universe of buyers in a competitive
|
| agent get only one buyer involved -
| |
| | bidding process. Finally, the investment
|
| either another business that approaches
| |
| | banker can improve the likelihood that
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| him with an unsolicited offer or a
| |
| | the sale closes by buffering buyer -
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| referral from his banker, accountant, or
| |
| | seller negotiations and by balancing the
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| outside attorney. Just look at the
| |
| | experience scales.
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| additional billion plus dollars of value
| |
| |
|
