Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

February 10, 2014

Don’t drink the Kool-Aid – Get an Arms-Length Valuation

By Joseph Eneldas

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One critical flaw that key executives and business owners make is, not knowing the business fair market value. Fair market value is defined by the international business glossary as: The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.

Quite often ignored or miscalculated, this error in judgment creates a false sense of direction. We can all agree that personal financial decisions should be based on knowledge of your particular position. Knowing your business value is no different than your personal financial dashboard, i.e. one’s 401K’s value or overall net worth.

Most businesses tend to be highly illiquid and leave an executive in a very vulnerable position when it comes to leverage. From a deal making stand point, sellers quite often see their business at the high end of a valuation calculation. Buyers vice-versa on the low side. In actuality, business owner’s forward decision making should be made based on the lowest value. Owner’s should operate under a worst case scenario, as if they would need to sell their business at any given time. But of course, most owners operate at their maximum value scenario. This exposes the business to downside risk in the market and allows for faulty decision making in the process. A simple third party valuation gives an executive an arms – length view of their position. Essentially, a quality, prepared Third Party Fair Market Valuation by someone who does not drink the kool-aid .

Once the executive obtains this valuation, future decisions come with greater clarity. It is like any other value determination, high level decision making needs the proper analysis. Knowledge of their position allows executives to see how their worth is calculated. This allows them to focus on particular areas where they may be stronger or weaker, for example, the valuation report might show that the business is underpriced, in comparison to their competitors. Therefore, they have more room to maximize their price point and increase their value. The findings may also show the areas of strength and weaknesses, allowing  for a adjustments in strategy to maximize value.

Rewarding moments come with effort.  The person in charge of the Kool- Aid process, most certainly is drinking it as well. At A. Neumann & Associates, LLC, we see ascending buy side transactions occur when there is a comfortable assessment of the business to be purchased. Buyers want to feel confident that the different valuation methods reach the same conclusion. Valuations that are in-line, with the various valuing approaches, carry a lower risk grade on the buyer’s investment.  With a third party FMV valuation, a business owner can lead the business down the right path and maximize shareholders value.

Successful transfers of businesses come from an honest assessment of the business. Executives who know their true position make better decisions on company strategy – all at relative little cost to obtain a Fair Market Valuation and often with significant returns.  At A. Neumann & Associates, we find these executives to be the foundation of our success.

For more information on obtaining the proper Fair Market Valuation please contact A. Neumann & Associates, LLC.

 


About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional merger & acquisition and business brokerage firm with 30 years of experience in New Jersey, New York, Pennsylvania, Delaware and Maryland that assists business owners and buyers with the business transfer process in a completely confidential manner. The company is affiliated with BBN, with 450 offices and access to a national network of qualified buyers and sellers. For more information, please contact A Neumann & Associates at 732-872-6777.

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 info@neumannassociates.com

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“ 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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