Guest Lectures

June 17, 2010
11:30 am to 1:30 pm
Planning Your Exit Strategy? Why your Banker Needs a Seat at the Planning Table!

September 21, 2010
11:30 am to 1:30 pm
Positioning Your Business to Maximize Value -- Keys to a Successful Third Party Sale

October 21, 2010
11:30 am to 1:30 pm
The Fragility of the Privately Held Business - The Need for Business Continuity Planning

More...

Sept. 1, 2010
Nov. 3, 2010

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Advisors
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Planning Your Exit Strategy?
Why your Banker Needs a Seat
at the Planning Table

As an SBA Specialist that is an active participant in the Business Acquisition Financing Market, I visit with dozens of Business Brokers and potential buyers each year. In those conversations, I am often asked to weigh in on the value of a particular business. Why? I am not a specialist in valuing businesses. I don’t keep statistics on current trends in EBITDA multiples or sales multiples or any other valuation techniques.

The reason is simple. For most small businesses, the buyer is not a strategic buyer willing to pay a premium for the business because they see an opportunity to generate greater synergies or efficiencies in their own business.  The most likely buyer is an individual that wants to take a shot at owning a small business. They want the opportunity to live the American Dream of owning a small business, and are willing to take a risk to get there. 

As a result, I would argue that the primary determinant of value is how much the buyer can borrow when financing the purchase of your business.  It may seem as if the primary value driver should be the small business and its cash flow, but that is only part of the equation. Each potential buyer is different, and the amount of financing for which they can qualify is determined as much by their personal balance sheet, income requirements, and skill set as by the cash flow and balance sheet of the business.

Each offer is different. If you are like most sellers, you will evaluate the buyer’s offer on several levels. You will evaluate the offer price and structure for tax implications over both the short- and long-term. You will evaluate how well their skill set, education, experience, and personality fit the ownership requirements. You will want to form an opinion of how likely they are to succeed at managing and owning your business.  This is especially important if you are going to offer to carry part of the purchase price.

At the same time, the buyer will evaluate your business. They will evaluate the systems and employees and how well they believe they fit in.  They will review the books and the operation to get a feel for how strong your accounting and operations systems are.  They will evaluate the cash flow and the balance sheet to try to gauge what the business is worth and if there is an opportunity for growth.

In this presentation, we will explore how banks evaluate a business’ cash flow and balance sheet to help determine a reasonable loan structure for an acquisition. With that as a backdrop, we will look at several potential buyers and how each impacts the financing available for the acquisition and the deal structure. Finally, we will bring all of the concepts together to help demonstrate how all of these factors relate in getting the most for your business.

Join us to learn why you should include a banker at your advisor’s table when you are planning an exit from your business.