WHAT SERVICES CAN AN INVESTMENT BANKER PROVIDE TO THE SELLER OF A BUSINESS?

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Upon engaging an Investment Banker to sell their business, a seller can expect the firm to find a buyer for the sellers’ business at the highest possible price with the most advantageous terms. The Investment Banker would provide the following services to accomplish this goal:

  • Provide the seller with a business valuation confirming the expectations of the seller with the realities of the market place. Investment Bankers are a great source of information on current market conditions, issues related to pricing and financing and many other facets of the business buying and selling process.
  • Develop a Comprehensive Information Memorandum of the company for outlining the business to potential buyers.
  • Prepare a marketing strategy for conducting buyer searches and marketing the business to prospective buyers. Qualify and pre-screen buyers for the ability to financially complete the purchase.
  • Coordinate negotiations and provide deal structuring advice making the sale progress smoothly.
  • Facilitate the transaction until the sale is complete.

Most importantly, an Investment Banker ensures confidentiality of the sale, and provides the owners the ability to stay focused on their business during the entire sale process.

MAXIMIZING THE SALES VALUE OF YOUR BUSINESS

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Maximizing the sales value of a business involves focusing on the “value drivers” of the industry. Value drivers are the set of key factors that reduce financial risk, improve financial returns and create value for the company. These aspects are used by buyers, investors and financial lenders to determine the value of a company. Value drivers are not unique to maximizing the sales value of companies but are sound business practices.

Value drivers for all industries include: a solid diversified customer base, a strong management team, operating systems that improve the sustainability of cash flows, an achievable growth strategy, a facility appearance consistent with the sales price and effective financial controls.

Industry specific value drivers include: extent of referral network, certifications, competition, specialized processes, geography served, affiliations, environmental issues, growth opportunities, seasonality, supplier relationships, equipment quality, technological expertise and backlog of contracts.

The sale of one’s business may be the most significant financial transaction of an owner’s life. Early planning for effectively maximizing the sales value of a business is the first step in a successful exit plan.

THE VALUATION OF REAL ESTATE AS PART OF A MERGER AND ACQUISITION (M&A) DEAL.

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When real estate is a component of an M&A deal, the following, similar, lasting questions will arise:

  • Is the real estate an operating asset, a part of the business, critically necessary to continue the operations, un-separable for any other possible use or rezoning, or possibly used at its highest and best use?
  • If the real estate is separable from the business, could the property be leased or sold to a third party for investment, and is it possible to put the property to a higher and best use?
  • If the real estate is a non-operating asset of the business, is it nonessential to the on-going operations of the business, and could the property generate income?

The valuation of real estate; calculated separately from the ongoing operations of the business (separately priced or leased), or as a part of the operating assets of the business (balance sheet item), may create significant differences in values depending on how the above questions are answered. There is not necessarily a preferred method here, and often times, the value will be dependent on the desires of the buyer and seller.

Allston Advisory Group is an experienced boutique M&A advisory firm providing a variety of services to lower middle market companies. See our footer for contact information.

(502) 742-2933
[email protected]
P.O. Box 21266, Louisville, KY 40221

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