Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

July 14, 2015

How will a buyer finance a transaction in Delaware?

By Achim Neumann

512px-Wilmington_Delaware_skyline

One question we often receive from our business sellers in Delaware is, “how will the buyer finance the transaction?”

Achim Neumann, President of A Neumann & Associates, a firm with premier business brokers in Delaware and offices in many northeastern states said, “In times when financial resources are more often limited, a financial structure becomes paramount in facilitating a deal”.  “A few years ago, deals would usually consist of 75% cash to the seller and a 25% seller note. More and more frequently, we have begun to see changes to this ratio.”

When looking more closely at a financial acquisition in Delaware structure further, a lender would quite often contribute about 50% to a transaction amount – in the previously mentioned 75% cash. Additionally, where the industry type might be just one of the determining factors in defining the contributing amount, it has progressively become THE determining factor.

“Businesses for sale in Delaware that are cash flow-strong and have less assets, such as service and distribution businesses in Delaware, need to be matched with business buyers in Delaware that have a strong net worth position” says Neumann.  “These businesses for sale in Delaware tend to have less of an asset base that can be used as financing collateral for a lender.”

Most asset heavy businesses for sale in Delaware such as manufacturers—and to a certain degree retailers—have sufficient assets in place to allow a lender to find more collateral within the business, rather than looking at the buyer’s net worth.

In an environment punctuated by more stringent lending criteria, cash flow-based lending is increasingly in retreat and asset collateral, whether from the business/company itself or the investor, takes on a much more profound position.

Another mitigating factor is the SBA lending process. However, it is not the cure-all or a game changer. “Often, we are approached by business buyers in Delaware who believe that the SBA pre-qualification of our engagements makes any acquisition possible, independent of the buyer’s finances” says Achim Neumann, “but nothing could be further from the truth in this regard.”

While SBA pre-approval is an important measure for determining the interest level of banks and the underlying financial requirements for a business sale in Delaware, at the end of the day, it will not significantly divert from basic lending parameters.

“Our company has had the good fortune over the last three years, that we have had no deals rejected on the basis of financing” says Achim Neumann. “It has always been possible to put deals together with happy parties. Sometimes, it did require a little bit more seller financing, but ultimately, the deal was closed.”

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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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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