How to Effectively Buy or Sell a Business2 Feb, 2015 By: Michael Dudek
As owner of Zygoquest Group, considered by many as the number one resource for Merger and Acquisitions (M&A) in the office products industry, I am thrilled to have the opportunity to appear at ITEX 2015, to conduct an interactive presentation session for attendees, including entrepreneurs, business owners, and individuals that aspire to be owners.
The purpose of the upcoming session (March 12 at 12:00pm) is to coach owners and their staff on how to effectively buy or sell a business. This presentation will allow attendees to ask important questions, such as how to prepare a business for sale and improve its value; what elements are considered most important and valuable by buyers; and how to mitigate pre-closing and post-closing risk whether buying or selling a business. Every attendee will walk away with practical M&A knowledge & real deal examples to give them valuable insight to rely upon now or later.
Ownership is risky but rewarding
Owning your own business is among the most rewarding experiences in life. Granted, owning a business is fraught with potential risk; however, ownership is filled with opportunities, self-satisfaction and potential rewards which makes risk-taking worthwhile.
Owning a business does not qualify an owner to buy or sell a business
Whether you create your own business from scratch or buy an existing business, you need to either have or acquire expertise in a number of business disciplines to be able to successfully run the business.
However, owning and running your business only partially prepares someone to effectively buy or sell a business which is why many owners, including owners of the largest private and public companies, recognize the need to retain someone with M&A expertize to advise them.
Extensive knowledge of financial, operational, legal issues is required
To effectively buy or sell a business requires extensive and specialized knowledge and experience about financial, operational and legal issues which arise in every M&A transaction.
While every M&A transaction has some key similarities, every situation is unique. One can only gain sufficient M&A knowledge and experience by participating in many different transactions. By participating in many types of transaction, one is able to effectively anticipate and manage the predictable issues as well as unique issues and considerations.
ITEX has invited us to present on “How to Effectively Buy or Sell a Business” because business owners are seeking to find more knowledge about M&A, and because of the unique opportunity we have had, to be in the middle of countless M&A transactions in the office products industry alone; including over 400 consummated transactions - both buy-side and sell-side transactions. And if being in the middle of over 400 consummated transactions is not enough to gain the requisite experience, then being in the middle of many additional transactions which never consummated provides informative lessons learned.
To effectively buy a business without expert assistance, it would be extremely beneficial if you have had experience not only in buying other businesses, but also in selling businesses. As you can imagine, buyers and sellers have very different perspectives and expectations and only extensive experience gained on both sides of the table prepares one to be effective on either side of the table.
By participating formally and informally in many of the largest, medium and small industry transactions over the last 20 years, more than everyone else combined – both public and private transactions – we have gone to school multiple times on virtually every conceivable deal issue. Being a CPA, an attorney and a business owner with 30 years of experience in M&A in the office products industry, enables us to present this M&A topic at ITEX for the benefit of interested ITEX attendees.
Two examples of key presentation topics will be explored more in depth at ITEX. Due to time limitations, the presentation will be fast-paced and cover lots of key issues to expose attendees to as many critical topics as possible in the short time frame allowed. In addition, we’ll be available to answer any questions which attendees have. Therefore, owners should come prepared with challenging tough questions.
Example #1 - Effective due diligence when buying a business
Conducting effective due diligence when acquiring a business in essential. Utilizing personnel with expertise, including personnel with extensive accounting, auditing, finance, tax and legal knowledge and experience significantly reduces acquisition risk. Whether or not you decide to conduct an effective due diligence is a “pay now or pay the lawyers later” scenario. In other words, if you do not conduct an effective due diligence, then the odds increase dramatically that you will experience issues after the transaction closes. Involving only personnel having knowledge of finance, accounting, tax and legal issues is not always sufficient to accomplish an effective acquisition. Personnel with expertise in sales, service, IT, HR and operations should also be utilized to accomplish a comprehensive and thorough acquisition.
-Knowing the most critical issues to assess is critical. Being familiar with the most important deal issues and elements goes a long way to conducting an effective due diligence. While many personnel would know how to assess what they are given to assess, most do not know how to effectively discover issues which are not apparent. Such oversights are commonplace and create extraordinary risk.
-Knowing what can go wrong is invaluable. Unless you have participated in many due diligence engagements, it is virtually impossible to have obtained sufficient experience in conduct effective due diligence. Inexperience results in increased acquisition risk.
-Due diligence programs must be tailored to the engagement is vital. Having due diligence programs tailored to the industry and the specific engagement goes a long way to ensuring effective due diligence is conducted.
Example #2 – Properly preparing a business for sale to increase value
-Preparing a business for sale is often overlooked by owners. Most owners naturally invest most time running the day-to-day business and do not adequately prepare their business for sale. The presentation at ITEX will include discussion about critical fundamental processes to instill, which will prepare an owner for sale.
-How to enhance the value of your most valuable asset. Attendees to the M&A presentation at ITEX will gain insight into what attributes make businesses most valuable to acquirers. Attendees will walk away with knowledge about valuation fundamentals and how to make their business more valuable – including the do’s and don’ts.
We look forward to meeting and sharing with you at ITEX! To register, visit http://www.itexshow.com