Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

October 7, 2018

Top Five Concerns When Selling

By Jeremy Albelda

Business

After countless business owner conversations during the past 15 years, a few common concerns have surfaced again and again.  “Indeed, selling a business in New York City or any metropolis can feel overwhelming and be very complicated,” says Achim Neumann, President, A Neumann & Associates, LLC, a New Jersey based Mergers & Acquisitions and Business Brokerage firm, “It’s understandable that business owners have many concerns.”

Following are the top 5 most often heard concerns by business sellers.

#1 Expectations About A Business’ Value

The majority of business owners are very emotionally invested in their companies – quite often translating into unrealistic expectations about the business’ value.

Furthermore, owners often ignore significant value drivers such as market share, macro economic market forces, competitive advantage, growth aspects, and relative profitability.

Good professional advisors have a thorough understanding of how such value drivers in combination with the overall marketplace affect the ultimate value of a business transaction. The advisor’s role consists of assessing such market environments and to package a business into a compelling deal.

This includes the analysis of the business’ operational and financial information, the determination of the business’ true cash flow and benefit to the owner, and the formal valuation process to be executed by an external accredited valuation firm.

Finally, an advisor’s negotiation and communication skills can further substantiate the value of a business in negotiations with buyers.

#2 Breach Of Confidentiality

Almost without exception, all business owners are concerned with preserving confidentiality throughout a sale transaction. Violating such can have significant negative impact with lenders, employees, landlords, customers, and suppliers.

A good M&A firm in Connecticut or any state for that matter has the proper security measures in place – not only starting with a fourfold investor pre-qualification process, but also to provide information to an investor as the investor shows increasing interest and motivation to execute a deal.

For that matter, the advisor prepares a blind profile, sometimes called a teaser, outlining the generalities of the transaction, market place, and business. Subsequent to a thorough pre-qualification, the investor will then obtain the Confidential Memorandum. Once the investor expresses interest and can respond properly to the initial questions, an introduction to the seller will be arranged.

This refined process of ‘leading the horses to the water” ensures the confidentiality of a transaction.

#3 Insufficient Financial Reporting

Insufficient financials don’t necessarily have to prevent a business owner from selling a business or to accept a lower business valuation or transaction price. A good advisor will give sellers an early heads-up as to what needs to be improved in the financial reporting system. Often this can be accomplished with rather small adjustments.

Business owners and advisors need to honestly discuss such deficiencies, remedies and how it will impact the anticipated business valuation in New Jersey or any other state. A seller needs to understand the need for an immediate, consistent and correct financial reporting system as it will surely be requested from potential buyers.

Moreover, good advisors will help owners to deal with financial challenges by offering an early and confidential picture of operational costs, recurring expenses, and implied transaction value. Streamlining financial reporting in preparation of a sale will reduce time during due diligence, and more importantly, will avoid generating mistrust on the buy side once an offer has been agreed upon.

Finally, a professional advisor will produce a professional blind profile/teaser and a Confidential Memorandum – substantially driving the value of the transaction.

#4 A Difficult Transfer Process

Business owners are usually industry experts – highly competent in the day-to-day operations of their business. Selling a business is a completely different transaction – one in which business owners are not familiar with.

Generally speaking, most business owners feel intense anxiety during the sale process, particularly during periods of uncertainty or conflict. Every deal comes with a unique set of challenges.

A good M&A advisor in NY or other state does not expect a business owner to be an expert, but he/she will navigate the owner through the deal process. Being proactive, a good advisor can reassure a seller during these uncertain times.

Such re-assurance prevents a loss of momentum that ultimately can kill deals. Buyers sense uncertainty on the sell-side and are inclined to lose interest in a deal in such a scenario – often interpreting such uncertainty as lack of motivation on the sell-side.  Good M&A advisors can put a stop to this process before it spirals out of control by instilling confidence and ensuring the deal is appealing and efficient to all parties.

#5 The Process Will Be Too Time Consuming

Indeed, selling a business takes a lot of time – all distracting from the owner’s day-to-day operations (resulting in lower profitability and thus, value). Owners should not take their eye off their business during the transaction process.

Selling a business is a full-time job in its own right, and for that reason, we always suggest to hire an external advisor as opposed to “doing it yourself”.  Well-experienced advisors indeed know that the 8-12 month time line needed for a business sale can be detrimental to the business’ performance.

Thus, the best advisors urge owners to maintain their business’ performance – freeing up the owner’s time by navigating through the ins and outs of the sale. This includes a lot of “after hours” meetings addressing that most owners work around the clock.

One industry mantra is that every deal dies three times – no deal is a certainty, but consulting with an experienced M&A advisor will significantly increase the odds for a successful closing.

 

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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“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.”

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“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

“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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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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