Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

May 6, 2013

Who Is The Right Buyer, Anyhow?

By Joseph Eneldas

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One interesting question we are consistently confronted with is “who will be the buyer for my company?” This question is even more relevant in light of a recent Wall Street Journal article describing the sale of a company to its employees by way of an ESOP.

“There is no question that a sale of a company to its employees is possibly an appealing option”, says Achim Neumann, President, A Neumann & Associates, a leading M&A and business brokerage firm headquartered in New Jersey. ”However, there are often more downfalls than upsides.”

One of the most significant – and immediate – factors is the risk exposure to a business owner.  Initiating a discussion about a sale to employees will instantly raise a host of concerns with employees regarding their job security; with lenders regarding repayment of of credit lines; and with customers about continuity in service and product flow.

From an employee’s point of view, there is a double risk exposure, inasmuch as the employee’s stockholdings will be highly concentrated in one investment. Holding substantial amounts of stock in one’s own employer has never been a good idea (recall WorldCom or Enron), and it’s even worse when it occurs at precisely the time when the established, proven management leaves.

“There is another problem for employees,” says Steve Wrubleski, Managing Director, Southern New Jersey. “Right now, we are working with a few companies that are attempting to sell a company from an ESOP to an oustider. This requires the consent of ALL employees – a definite challenge to say the least. Establishing even a simple valuation appears to be difficult.”

An additional pitfall is the proper valuation of the firm. An inflated value will provide little incentive for a lender to lend to the ESOP trust in order for the trust to buy out the shares of the owner, using only such shares as loan collateral. In that particular scenario, a business owner / seller might have to guarantee the loan, in essence putting the seller at risk for future decisions of a new – and potentially inexperienced –management.

So what looks on the surface as an easy exit strategy for a business owner, given an economic environment that incorrectly suggests that there are no business buyers, a business owner can ultimately experience more disadvantages with an ESOP than pursuing an outright sale.

So what is a business owner to do?

Counterintuitive to common perceptions, the market has been and remains good for business sellers. “We most definitely have more buyer and investor inquiries than we have businesses available, even more than what we’ve had in the past”, reiterates Gary Herviou, Managing Director, Central New Jersey.

In essence, the true Fair Market Value and salability of a business can easily be established by way of a third party valuation, providing a business owner with a base line to make a sound decision.

“With a realistic asking price, a business owner will not have a problem obtaining a Fair Market Value for his well-run company”, says Neumann. “It’s mostly marginal operations with poor management that face the challenges of finding a proper buyer, a trend we can confirm throughout all of our seven offices across the region.”


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 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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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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