bodySome Plain Talk
About Selling Your Company
body Questions When Considering the Sale of Your BusinessbodyManagement Buyouts

bodyManagement Buyout Questions & Answers

Some Plain Talk About Selling Your Company

As an owner of a successful business, you have probably managed all of the major events in your company. You’ve used your experience, business acumen, specialized knowledge and judgment about your industry to make the right decisions at the right time. Now that you may be selling your business, this formula for effective action is no longer viable.

A One Time Event
Your past successes furnish little guidance. The ways and rules of selling a business differ completely from managing a business. Selling your business is a unique event. Your files may contain numerous letters from business brokers and finders. You have undoubtedly talked with friends who have sold their businesses.

You may have read articles about mergers and acquisitions, or attended seminars. Chances are, you are looking for a more businesslike, professional method of considering, preparing for, and consummating a sale. You think there should be a better way than following the well-meant advice of friends or relatives.
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Some Key Thoughts
We hope the following key thoughts about selling your company will help clear the air. Also, we are going to tell you a little more about Emory & Co. and our way of doing business. We’ll explain something about the companies we sell, how we contact prospective buyers, and our relationships with the acquiring companies.

Your Decision to Sell
The decision to sell your company is one of the most important business decisions you’ll ever make. It may be the largest sale you are likely to negotiate in your lifetime. The importance of the decision warrants the utmost in careful planning, attention to detail, and professional consultation.

One of the most serious errors an owner can make is to put off selling when the business is riding a crest of prosperity. You reason that you need no outside assistance and want to retain your independence. You rationalize that if the business is worth "X" dollars to the acquirer, then it is worth at least that much to you. You believe that your sales and profit curve will continue climbing without interruption.
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Timing Can Be Everything
We have learned from experience that the best time to obtain a premium price is when the future looks great. All industries are cyclical. Dot coms, automobiles, fast foods, discount stores and mobile homes have had their days of glory mixed with days of disappointment. Seven fat years can be followed by seven lean years.

Every day, new factors beyond your control occur. These affect your business. When clouds begin to appear on your company’s horizon, the astute buyer will recognize them and offer a lower purchase price.

He Who Hesitates . . .
A common mistake occurs when an owner considers selling during a record year, and then decides to hold off. A year or two later, when the owner is finally ready to sell, business is in the doldrums. The owner wants to believe that the profitability of the past will return soon, that next year he can sell at the same high price as two or three years ago. But unfortunately the price which the company can command now has dropped significantly.

The fact is many business owners will be victims of change.

Who, among us, has the courage to face the future objectively, or the foresight to accept the modest downward adjustment in the selling price required in the early states of adverse change? True, it is much more difficult to sell a business that is not reasonably profitable. However, it can be done – and sometimes with surprising success. When economic forces, practical business considerations, and estate planning reasons make it wise to sell (and your business future looks good), it’s time to get moving.
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Five Valid Reasons for Selling
There are at least five valid reasons for selling your business:

• Diversification
Selling lessens your personal risks by diversifying your holdings, improving your financial strength, and providing liquidity. The major chunk of your wealth will no longer be subject to the vagaries and risks of your own specific markets and industry – whose virtues and problems you frequently agonize over.

• Estate Planning
It is impossible to sell a business at a fair price during the period following the death of the entrepreneur. Selling establishes a value for active and inactive stockholders and enables the beneficiaries of family businesses to achieve liquidity after the entrepreneur’s death.

• Expansion Capital
Most successful growing companies have borrowed up to reasonable limits and require their available cash to maintain their normal business expansion. A merger allows the small company to utilize the resources and capital of the larger company, to enter areas of business that have a high return and to accelerate growth.

• Tax Savings
It is frequently possible to save or defer taxes through careful planning and structuring of a transaction. In addition, an exchange of your stock for the buyer’s stock can, through careful planning, result in relief from immediate capital gains taxation.

• Continuity and Succession
Selling provides a mechanism for insuring management stability and succession in your company. The security of a large company enhances your firm’s ability to attract and keep key employees, as evidenced through stock options, stock purchase and fringe benefits.
Further, access to large capital resources can provide key employees with a greater opportunity for advancement.
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How Emory Manages The Process
Emory & Co. assists you in every phase of the merger process, including market research, preparation of the Information Memorandum, the approach to the buyer, and key meetings and negotiations. Considerable expertise and specialization is needed to consummate a merger or sale. As in any large transaction, it will be necessary to secure the assistance of lawyers, accountants, and perhaps estate planners. These people can help you best if your business is presented to the right potential buyer at the right time and in the favorable light it deserves, with emphasis on the particular virtues that are attractive to that buyer.

Valuation, Information Memorandum & Normalization
Emory assists you in appraising the value of your business, taking into consideration products, markets, facilities, strengths and weaknesses, and competitive position. Emory & Co. then develops a confidential Information Memorandum describing your business, including market conditions, competitive aspects, and the future growth opportunities which could benefit a buyer.

The Information Memorandum is designed to present the history, present and future of your company. It will emphasize your strengths and put your weak points in proper perspective. When buyers come to meet you after studying this material, they will already know much about your firm.

We will include a normalization of your past earnings and a forecast of future sales and profits. The objective of the normalization is to maximize your after-tax earnings in an acceptable accounting manner to help Emory negotiate the most favorable price the buyer will pay for your company.
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Our Approach To The Buyers
Because of our specialized knowledge, research abilities, and experience in mergers & acquisitions, we are in a position to identify a large number of suitable buyers. We determine the level of interest of a buyer without revealing the seller’s identity. This avoids bargain seekers and minimizes disruption. When a buyer reveals the proper degree of interest, our work begins in earnest. Our objective is to develop a group of at least five qualified buyers bidding against each other to produce the best price, terms and conditions for you.

Meetings and Negotiations
For many buyers, the decision to purchase a company is a group decision. The acquisition departments of major firms prefer to deal with a merger & acquisitions group like Emory & Co. rather than with the seller directly. Acquisition departments know that we will present information to them in a manner that will ease their own workload. Business descriptions, budgets, forecasts, and business valuations will be presented in terms of the buyer’s current needs and objectives.

As specialists in M&A, when we ask for multiple million dollars for a business, it will be supported in ways acceptable to major buyers. The fact that you have employed Emory & Co. to sell your business verifies to a major firm that you are a serious seller. To conclude a successful sale, you want to the key people in the acquiring firm to give your business serious consideration. We will establish the top priority consideration your business deserves. Timing is of supreme importance in mergers and acquisitions.

We know how to speed up matters and when to slow things down. We are specialists in structuring transactions to your benefit and in ways acceptable to the buyer. Before you meet the buyer, Emory will have adjusted the buyer’s preliminary financial expectations in accordance with your requirements. Our expertise enables us to anticipate stalemates – and prevent them.

A Few Words About Emory & Co.
We believe that owners of companies involved in transactions managed by us ultimately receive substantially higher prices than they might have obtained through direct negotiations without our services. The values received are a consequence of our approach. We help ensure that the buyer will pay the best price and that the owner will be able to choose between competing offers. As a practical business person, you know that a merger & acquisition firm should be working on your side, not the buyer’s.
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