Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

October 7, 2019

Finding The Right Investor

By Joseph Eneldas

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In their retirement planning, many business owners approach our firm very convinced to know who is buying their business.

‘I know exactly who will buy my company’ is a statement quite often heard, as Achim Neumann, President of A Neumann & Associates, a leading M&A Advisor and Business Brokerage firm, headquartered in NJ, explains. He continues, “as a matter of fact, these folks are so convinced that often it is difficult to even start engaging into the most basic preparation steps for selling a business.”

In preparing a business for sale, first an extensive interview is conducted with the business owner, mainly defining the competitive advantage and grow aspects of the business, among many other factors. A cash flow recasting is conducted and a valuation by a third party, accredited valuation firm is requested. Thereafter, a business owner will decide whether to move forward with a sale, and it’s at this point, that the marketing documents are prepared and the buyer/ investor target markets are defined.

Conducting the subsequent marketing to the target investors includes a passive and active marketing component. The passive one primarily consists of “posting” the business in a non-divulging fashion to various investor-used websites attracting interest from the buying community. The active marketing approach typically includes searching a company’s proprietary database of previous buyer inquiries, the acquisition of additional investor data, and then actively reaching out to such folks by letter, email and phone call.

In order to succeed, and more importantly, in order to provide selling leverage to the seller by multiple, simultaneous buy-side inquiries, this investor recruitment approach has to be wide spread. Only such approach will provide the seller with options. A singular focus on one particular buyer will never enable a seller with any type of leverage, and the seller will be solely dependent on this single buyer’s whimps.

However, by “casting a wide net”, multiple investors are attracted and the right investor needs to be chosen – identifying the true motivation and financial qualification of the individual or company. There is little sense to waste time with an investor, who either can’t financially execute a particular acquisition, or is not really motivated to proceed with an investment opportunity. Worse yet, taken a business “off the market” for such unmotivated buyer will not allow for qualified investor inquiries in the interim (typically precluded by an exclusivity provision in the LOI)

Reputable, established M&A firms have a sophisticated process in place for such selection process. For example, an investor who is refusing to provide a POF statement (proof of funds) automatically obtains a “lower rank” in being considered. Alternatively, an investor who feels compelled to heavily redact the Non-Disclosure Agreement (NDA) of the M&A Advisor is immediately viewed as less motivated.

Essentially, every investor pre-qualification should include three parts:

  • Non-Disclosure Statement
  • Management & General Background
  • Financial Statement with POF

Investors, who after an initial contact with the M&A firm immediately start tampering with these essential requirements, set ‘red flags’, and are usually moved to the “end of the line”. These initial problems often forebode subsequent troubles in the deal making process, and as the old mantra in this trade says, ‘no motivation – no deal.’

Further, these negative signs are particularly troublesome for investors who refuse to provide both – the NDA and detailed financials; or for investors insisting on “their own NDA”. Reputable M&A advisors will always refuse dealing with these folks.

However, at times, business owners eager in pursuing a deal at all cost will invite such folks – only to find themselves in an extended, head scratching due diligence process with the buyer either walking out or making a ridiculous low-ball offer at the end  (and potentially compromising the seller’s confidential information in the process).

In sum, our experience over the past 15 years has shown, that not only multiple buyers need to be attracted, but also, that pre-qualification standards need to be established among investors to ensure a business owner can ultimately transfer the business to a motivate, qualified successor.

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This blog contains excerpts out of the recently published book

The Road Beyond – What Nobody Tells You About Selling a Midsized Business

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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Client Testimonials

“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

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer
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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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