Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

March 8, 2016

Save The Commissions – Forget the Advisor!

By Joseph Eneldas

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Not surprisingly, the value of an M&A Advisor or business broker is often questioned. The intuitive reaction of a business owner is to question the commissions involved in selling a business and to try to avoid such “cost items.”

“Rarely, though, does a business owner take into account the opportunity costs of not selling at all, or of improperly or underselling a business,” says Achim Neumann, President, A Neumann & Associates, LLC, a leading New Jersey-based mergers & acquisitions and business brokerage firm. “We have seen a lot of scenarios where an improper transfer has resulted in many years of litigation after the closing.” So, what exactly is the role of a good transaction advisor?

Generally speaking, the advisor should help the business owner in preparing the business for a sale. This includes assembling all accounting records, checking the proper financial presentation, and establishing a coherent narrative about the business, especially its competitive advantages and growth prospects. Once that is established, an accredited third-party valuation should be obtained, not merely a “back of the envelope” value assessment, a common shortcut. Upon agreement about the value of the business, a comprehensive set of marketing documents needs to be prepared. A good advisor will be able to provide the right package to entice investors to take the next step.

“We have seen many poorly prepared marketing documents,” says Frank Arcoleo, Managing Director, Central PA and NY region, “missing essential information such as ownership structure, market position, or a description of key personnel.” As a matter of fact, without a qualified advisor and a properly prepared marketing package, the seller cannot make a “good first impression” – leading to the investor to heavily discount the contemplated purchase or to not pursue the business acquisition at all.  After all, if the business owner has such low standards in selling a business, why would standards be higher for its management?

The next step in the business sale process involves properly reaching out to investors. First, reaching investors needs to be done in a non-divulging way, so that the confidentiality of the sale is not compromised. Only advisors who have been in the business for some time have the network and experience to do this properly. Secondly, investors need to be pre-qualified to sort out any “tire-kickers.” Pre-qualification verifies that the prospective buyer has sufficient funds for the execution of an acquisition, and that the right non-disclosure agreements have been put into place.  All of this needs to be done while generating a healthy flow of buy side inquiries – no small task!

Once a business investor has been identified, introductions need to be arranged, facility reviews established, and an offer needs to be negotiated – one that can ultimately be converted into a final transfer agreement by the legal counsel of each party.  It is here that the deep experience of a well-established advisor can mean a purchase price several hundred thousands of dollars – or more – larger than it otherwise would have been.

The negotiation phase is also the point where the advisor acts as a “relationship buffer,” exploring the concerns of both parties and finding common ground for the key issues in order to propel the deal forward. This allows the parties not to be on the “front line” when being confronted by demands by the opposing party – an invaluable advantage to maximize the deal outcome and the post-deal cooperation during the transfer process.

Finally, in the due diligence and closing process, the advisor acts as conduit to facilitate the document flow ensuring that the deal “stays alive.”  “Not long ago, we actually had a business seller who wanted to increase the transaction price by 100% only two months after having accepted an offer from a buyer, and then to proceed to the closing table to sell the whole company, including the shares of his co-shareholder who was not appraised to any of the negotiated terms!” says Achim Neumann. “These are the type of scenarios where only a good advisor will be able to save a deal.”

One common saying is “Good advice does not have to be expensive, but bad advice will cost a fortune.”  This is nowhere more applicable than in the world of mergers & acquisitions and business brokerage.

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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“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!”

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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.”

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