Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

June 3, 2012

Offer Received…Now What?

By Joseph Eneldas

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Receiving a purchase offer on a business is very often perceived by business owners as the “finishing line,” whereas in reality, this is only the first step in transferring a business.

“Too often, we can sense the business owner’s excitement and relief from finally having received an offer” says Achim Neumann, President of A Neumann & Associates, New Jersey,” however, in reality the work only starts at this point.”

Typically, the first step is to review the type of offer. If the offer is a Letter of Intent, then in most cases it is binding on the seller’s part, but leaves a buyer with considerable freedom to make decisions— including whether the buyer wants to ultimately move forward or not. Preferably, both parties will agree on an Offer-To-Purchase agreement that spells out specific timelines and tasks for each party, and if they are not maintained, will render the offer invalid.

“Each offer differs, and in this process it’s important to provide the least amount of credit exposure for the seller” says Gary Herviou, Director Marketing, Central New Jersey. “For example, if the offer provides no credit collateral for a desired seller note other than just the business assets, then we need to determine if the assets can be ‘secured’ by way of an UUC (Uniform Commercial Code) filing, and whether they are sufficient as loan security.”

Once the offer is accepted by both parties, the due diligence process starts.

“Very often buyers perceive the due diligence period as a time when they can ‘make up their mind’ about whether to purchase the business or not,” explains Michael Gersten, Director Marketing, North Jersey, ”whereas due diligence is indeed a period to merely verify the information presented in the confidential memorandum.”

For instance, if the information presented in the prospectus differs significantly from the documents received—such as payroll records, banks statements, tax filing, etc.—then the buyer has to determine if he wants to abandon the deal or renegotiate it further. It is important that a seller is forthcoming with all documents that the buyer requests at this time.

Part of the due diligence process includes establishing the lending facility for the buyer to acquire the business. “Fortunately, we have been in an excellent position and can refer various lending sources to a buyer” says Neumann, “and despite a few exceptions over the past three years, obtaining funds to acquire a business has been successful in the majority of closings.”

Sophisticated Merger & Acquisitions professionals such as A Neumann & Associates will have a well-established network of lenders to ensure sufficient funding at closing.

Finally, a seller needs to help a buyer to transfer licenses. This can be applicable for professional licenses, such as medical practices, legal, engineering, architectural or plumbing licenses, or it can be a matter of transferring Medicare vendor numbers, etc. Each business transfer has its own challenges and a good M&A firm will have experience in the transfer of such licenses. A solid offer will also spell out how long the current business owner will stay on to train and facilitate the license transfers after the closing date.

In sum, it is important for a business seller to recognize that receipt of an offer is the “beginning” of the business transfer process, not the “end.” A well orchestrated transfer will not only result in a successful future business and a happy new owner, but will also yield a timely and consistent payments on the seller note— a goal both parties should keep in mind.


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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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

“I utilized A. Neumann & Associates to assist in an M&A process. They are VERY thorough in using their time-tested process to calculate the value of investment opportunities, a process which provided a very detailed explanation for the value of the potential opportunity. Additionally, they also went above and beyond to extend other services including connecting with others who specialize in your industry and can assist with necessary steps including legal and accounting. Highly recommended!”

Edward Lane , Business Owner

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Achim, who explained the process in detail. He had his colleague Gary come to my office 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 when the time comes for me to sell my business for max value. They gave me great insight into the steps I need to take now to get the best deal in the future. I highly recommend this firm to anybody who wants to sell now or down the road. They not only know their stuff, their actually just real nice guys.”

Robert Kardane, Business Owner
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