Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

November 7, 2011

Where is “the beef?”

By Joseph Eneldas

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Borrowing from a recently revamped Wendy’s advertising campaign, the question “where is the beef” is often translated by business owners into “how will the buyer finance the transaction?”

“In times when financial resources are more limited, a financial structure becomes paramount in facilitating a deal” says Achim Neumann, President of A Neumann & Associates in New Jersey.  “A few years ago, deals would usually consist of 75% cash to the seller and a 25% seller note. Increasingly, we’ve seen changes to this ratio.”

When analyzing a financial acquisition structure further, a lender would quite often contribute 50% to a transaction amount— included in the previously mentioned 75% cash. Additionally, where the industry type might be ONE determining factor in defining the contributing amount, it has increasingly become THE determining factor.

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

Most asset heavy businesses, 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 marked by more stringent lending criteria, cash flow-based lending is increasingly in retreat and asset collateral, whether from the investor or from the company itself, takes a more profound position.

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

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

“Our company has been fortunate during the past three years, that we had no deals rejected on the basis of financing” says Neumann. “It has always been possible to put deals together. Sometimes, it did require a little bit more seller financing, but ultimately, the deal was closed.”

Achim Neumann, President of A Neumann & Associates, LLC
Atlantic Highlands, New Jersey

The leading Mergers & Acquisitions and business brokerage firm in the tri-state region.
Visit the firm at www.neumannassociates.test or call 732-872-6777

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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“ I appreciate your diligent approach to screening buyers and sellers as well as the high quality CIM that you produce.”

Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“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
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