Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

April 7, 2019

5 Essential Secrets In Selling A Business

By Jeremy Albelda

This month, we will touch upon five essential secrets to make a business sale to a new owner successful.

“Needless to say, there are many ingredients for a smooth transfer, “says Achim Neumann, President, A Neumann & Associates LLC, a New Jersey based Mergers & Acquisitions advisory and Business Brokerage firm, “but a few key issues have resurfaced again and again in the past 15 years for successful transitions.”

#1 Urgency or Deal Motivation

One of the key ingredients for a successful business sale is urgency – for both parties, seller and buyer. A famous mantra in the M&A profession is ‘no motivation, no deal’, and it rings true quite often.

Typically, business buyers look at many businesses for sale and investment opportunities before deciding on the “right one”. Unfortunately, they have been misled in the past by business sellers not ready for a sale during this process.  Usual telltale signs for hesitant sellers include delays in accepting a full-price offer or referring all matters to the attorney thereafter. Buyers are very sensitive to such indicators, and they will avoid everything not to spend $15,000 in accounting or legal fees for due-diligence and three months of wasted time – for a seller who ultimately does not want to execute a transaction.

Reversely, there are buyers, often among the Private Equity (PE) investment community, who issue many letters of Intent (LOI) to see which LOI will ‘stick’. A favored strategy is to low-ball the offer and terms to “sort out” desperate sellers. Worse yet, more often than not, the LOI is written in such vague terms that even upon acceptance by the seller, the seller then finds themselves tied down for an extended period of time with little results to show at the end.

Thus, the objective for the M& Advisor needs to be to consistently ‘probe’ the motivation on both party’s ends and consistently make both parties aware of the urgency to close the deal.

#2 Established Management Structures

The most significant challenge in purchasing a business is to ensure continuity in the business operations during the immediate six to twelve months past transaction closing. The new owner needs to ensure that customers stay with the company, employees don’t leave and suppliers continue to provide products and services. As a matter of fact, studies have shown that in less than five percent of mid-market transactions a buyer himself/herself won’t make any significant personnel changes in the first 12 months of ownership.

The best ‘insurance’ is to have a capable, well-experienced management team in place to facilitate such continuity. Thus, the management team is key – and part of the “goodwill” – and every buyer wants to ensure this is in place.  A business owner ‘who does everything’ is of little benefit to a buyer.

Thus, the implication from an owner’s point of view has to be the positioning of the right professionals well in advance of the contemplated transaction date. The lack of a well-versed management team will most certainly delay a deal, in the best case, or most likely not facilitate a deal at all.

#3 Growth Perspectives

Not a single Investor will acquire a company for its current performance, but all buyers want to see that a company has growth potential.  Thus, it is absolutely essential that a seller steps back and thoroughly defines all potential growth paths for the company, including the underlying capital infusion required to execute such growth plan.

Such expansion can encompass a variety of different approaches, such as geographical expansion by opening offices in new regions, synergistic product or service line expansions either by way of organic growth or by acquisitions, the bolstering of human resources by hiring additional personnel – just to name a few.

Rest assured, every business has growth potential. Naturally, the current business owner – most familiar with the business – is the most qualified individual to provide guidance for such growth, but sometimes said owner is tired after all the years of running the business and it might take an external consultant or business coach to help define such growth and to formulate a plan. Money well spent!

Business buyers are motivated by positive, consistent cash flow with good company growth projections. Obviously, a qualified M&A advisor needs to document such in the confidential memorandum for the company to entice the buyer to make an offer.

#4 Consistent, Superior Marketing Presentation

The market for ‘companies for sale’ is very competitive, to say the least. There are thousands of companies for sale at any given time, there is great ‘market transparency’ with the Internet and with the impending demographic shift, there will be many more ‘baby boomers’ to sell a business than to buy a business. Worse, the subsequent generations have been exhibiting a significant degree of ‘risk adversity’ in running – and acquiring – a business.

The implication is that investors will need to find concise, convincing information to explore an acquisition. The most critical marketing documents in this process are the Blind Profile, Confidential Memorandum (CM), and an accredited business valuation by a third party.

The blind profile should give an approximate synopsis of the key metrics of the company – assets, employment, cash flow – but should not divulge the company name, specific operation, or address.

The CM – to be obtained by the investor after pre-qualification – should include a detailed asset listing, tax-return-based financial information, growth projections and current and projected EBITDA with normalized Sellers Discretionary Cash Flow (SDCF) – including an explanation how it was developed. For example, discretionary personal owner expenses being run through a business should be indicated. In addition, the company’s competitive advantage needs to be illustrated, revenue streams explained, company org charts shown and so forth. Essentially, everything an investor needs to make a decision should be truthfully disclosed.

Moreover, the financials need to be consistent, for example, past tax returns can’t be on an accrual basis, while P&Ls for the current and future years are on a cash basis – never mind that all financials should be current.

In short, the Confidential Memorandum should represent putting ‘the best foot forward’ by the business owner in selling a business. Neglecting such, or simply relying only on a valuation, will significant reduce the transaction price or jeopardize a sale altogether

# 5 Qualified, Professional Legal Representation

Finally, one aspect neglected and overseen by many sellers so often, is the selection of good, professional legal support.  Rest assured, the investor will have a very sharp attorney with extensive transactional background on his team, and this is not the time for the seller to be under-represented – by his familiar attorney having handled all the seller’s affairs in the past, except transactions.

As a matter of fact, the most frequent cause for terminated deals is a sell-side attorney who is not familiar with the “ins and outs” and having to “read up on” it.  At best, such situation results in a much-delayed transaction, at worst, both parties will ‘dig in their heels’ and the transaction will fail in the end.

In sum, these are the five essential secrets for a smooth transaction. Addressing these issues will have all other adversity appear as small. Naturally, having a well-experienced, professional Mergers & Acquisitions Advisor on the team will exponentially faster execute a deal.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or

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Client Testimonials

“ I appreciate your diligent approach to screening buyers and sellers as well as the high quality CIM that you produce.”

Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi
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Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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