In the acquisition process after the “Letter of Intent” has been agreed to and signed by all parties, there is a “no look” period in which the potential buyer has exclusivity for a period of time prior to the date of purchase, usually 45 to 75 days, depending on the size of the deal. The biggest risk to the seller is that the buyer is not moving things along in good faith. It may be clear the deal will not likely be consumated, but the seller is still bound to the exclusivity period and has to wait. In the meantime; the business is not getting sold and the seller cannot explore the market for fresh interested buyers until the end of that period. One of the best ways to protect the seller in this instance is to set deadlines or milestones within the exclusivity period. Example; the buyer must complete the due diligence by a certain date or present a purchase agreement by a set date, so the seller has the right to get out of the exclusivity period if the deal doesn’t stay on track. If the buyer is having difficulty where the deal is taking longer than anticipated and the exclusivity period is running out, but the buyer is still working diligently and asks for an extension, the seller has an opportunity to use some leverage. For instance; the seller may trade items in the purchase agreement to get things moving faster or make a financial request or whatever the creative seller thinks of because the leverage has shifted. The buyers will want the extension to get the deal done. Lesson learned here is that there may be a lot of nuances in an LOI and it’s important to get your attorney involved early to make sure the
The article, The 1 Secret to Employee Retention, hits upon some key points to talent retention in organizations. What I came to realize early in my career was the need to communicate clearly and often with all employees. You will never find out what each employee’s hot buttons are or what motivates them without open and true listening discussions with them. The discussions have to be done frequently and must be done with focused understanding from both sides. If each side is not honest can also be a detriment to the discussion. Team is often overused in the business world, but being able to identify motivating characteristics of all of your employees will bring a team atmosphere that will be challenging and beneficial for individuals as well as the organization. Please read the full article HERE.
When a decision is made to move a career into a whole new direction, you can find yourself exposed to new traits of your chosen profession. When that elected calling is in sales, you are constantly taking an introspective read on a daily basis. The reason may be knowledge based, research, or possible a need for self-assurance. Although sales may look like the primary responsibility, providing consulting with wisdom to clients is the ticket to get the needed trust and respect established and a strong lasting relationship started. As the learning process moves forward, you learn more about who and what your current and potential customers may be thinking or feeling. The need to understand and feel the customer’s pain. Forget about your needs. Listen and most importantly understand the needs of the client. The financial reward should not be the goal. Best to serve the client or customer and the money aspect will work its way out. The thought and approach to seeing sales as just a job. After closing a deal, immediately start on the next one. The job becomes part of life in so many ways. Letting yourself get upset over small things. Rejection and being told no is part of the job. As difficult as it may be, carrying a positive attitude 100% of the time is a must. Preparation, preparation preparation! Do your homework and do the research well. Know not only the answers, but the questions clients may ask before you enter into a meeting or discussion. Practice until your confidence is present. Treat everyone, no matter who or what they do with respect. Before you can gain anyone’s trust, there has to be mutual respect. Relationships take work, effort and do not happen overnight. Over time, relationships grow but you must understand each
These two kinds of buyers have fundamental different goals. In the M&A world, strategic buyers often pay higher multiples than financial buyers. In many instances, strategic buyers are looking at different elements of the acquisition and they may have different mechanisms in which to generate a healthy return on their investment. Strategics often have an existing customer base and relationships they can leverage with acquiring a company. They want to acquire customers to rapidly increase their market share. One of the largest synergies that companies seek to formulate is a one stop shopping scenario. When a financial buyer acquires a standalone company as a new platform there isn’t an existing business in which they can merge anything together so there are no economies of scale for efficiency. There are two fundamental reasons why financial buyers tend to be unable to pay as much as strategics. The financial entities are under pressure to hit a target return percentage on their investment. The three main drivers of returns are entry price, exit price and leverage. Therefore, financial buyers are focused on pricing for a certain rate of return during the acquisition process. Secondly, financial buyers usually can’t benefit from operational synergies like a strategic buyer most often can. For those reasons, synergies usually result in strategic acquisitions and are the driving force that determines how much a buyer is willing to pay. For financial buyers these synergies don’t exist unless the deal is an add on of an existing portfolio, they can’t benefit from operational synergies.
Buying a business or investment property? Learn about how depreciation and a cost segregation study can save you a bundle on your taxes on this episode of Just the Facts with John Foster. Listen to Just The Facts
Abraham Lincoln wrote…. “Character is like a tree and reputation like its shadow. The shadow is what we think of it; the tree is the real thing.”
A corporate reputation is the shadow…. The organization is the tree, the real thing.
A well-executed M&A process demands a significant amount of due diligence from the buyer. The buyer wants to know what they are acquiring, and which obligations the purchase will entail. Due diligence is all about clarifying that picture. In some cases, this process may affect valuation, since undisclosed liabilities that come out during due diligence may have far-reaching effects on the company’s value.
A quick Google search defines a reputation as the beliefs or opinions that are generally held about someone or something.
The reputation of a business is the opinion of the organization by its internal and external stakeholders. A company’s reputation is based on its past actions and the probability of its future behavior. Its reputation is an integral part of the goodwill of the business, that part of business value over and above the value of identifiable business assets.
I have a buyer’s agency contract with a local business man. He’s interested in purchasing a large commercial building adjacent to his property so that he can open an “add on” to his business.
Business owners’ traditional routes to selling their companies was to a strategic buyer, a financial buyer or handed it down to family members. Today, more and more business owners are entertaining selling only a portion of their business and staying on to assist operating it.
Most business owners who have grown their business for years are confident it will sell for top dollar and enable them to retire comfortably after all their hard work and sacrifice. They don’t realize that some of the decisions they’ve made in running their company may negatively impact the real value of their business.
10 Things Successful People Never do Again
I had a recent business scenario that took me in, and when I look back I realize I was ignorant of many of the 10 things mentioned in this article.
