Marston Group

Newsletter – Is It The Right Time To Sell Your Business?
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FREQUENTLY ASKED QUESTIONS

A business broker's job is to match buyer and seller and facilitates the transaction. A fee or commission is earned when a contract is signed. The commission is usually paid at the closing of the transaction. Regardless of whom the broker represents, it is imperative that full disclosure of agency be made to everyone involved at the earliest possible time.

To objectively evaluate the company.
To package the business for sale.
To effectively and confidentially market the company
Screen prospective buyers, which includes the signing of a non-disclosure agreement, obtaining buyer financial information and references and determining the buyers' interests and pertinent experience.
To skillfully point out the advantages of a company to a buyer and helping a buyer visualizing himself/herself in a particular business.
Assist the seller in negotiating the price and terms.
Assist with finding financing for the buyer.
Handle the logistics of the transaction.

An accountant or banker may lack objectivity if he/she deals with the seller on a regular basis.
While an accountant or banker may be able to understand financial statements and financing the transaction, they may not be able to locate qualified buyers, especially those outside of the immediate geographic area.

While an attorney may understand how to structure a transaction, they may have no idea how to price a business or find qualified buyers.

The typical real estate broker may know how to bring a buyer and seller together but has no knowledge of preparing a business for sale or how to finance a business sale.
No ability to effectively market while still maintaining confidentiality.

Many times when a business owner decides he/she wants to sell, an attempt is made to sell the business "For Sale By Owner" or FSBO. While this may save a seller a commission, usually the price of "going it alone" is much higher than just hiring an experience Marston principal.
The first trap is lack of objectivity. Since in many cases the seller has an extreme emotional attachment to the company, he/she is probably the worst suited as negotiator.
No understanding of the marketplace and what is desirable or undesirable to potential buyers.
Sellers normally do not have access to the plethora of buyers that Marston does, he/she limits the market for the business and therefore reduces the price.
A business owner probably does not realize the implications of confidentiality or is not skilled at handling confidential issues.
Attempting to run a business effectively and sell it at the same time is almost an insurmountable task.
Potential buyers normally feel that the business broker can always show them another business but a seller negotiating for himself does not have that option.

The first contact Marston makes with the Potential Universe of Buyer for your business is via a blind (anonymous) one or two page profile of your company. Your location is described in general terms and so are the details of your company. Key financials are presented as well as a description of your products and services, along with a short list of salient growth opportunities. Your company is not identified in the summary.
The next piece of information a prospective receives is delivered only after he/she signs a binding non-disclosure agreement. At that point, the buyer receives a Confidential Memorandum, which describes the business in-depth. Upon reviewing the information they normally know if they are interested in pursuing the opportunity.

One year - In most cases, a competent mergers and acquisitions firm should be able to sell your company successfully within a year.

No. You will only know that you have received the best possible offer for your company if you have multiple, simultaneous offers to choose from. Offers result from generating buyer excitement, which we do very well.

Generally buyers determine a company's prospects on the basis of recent results, growth opportunities, overall company quality, as well as on a multiple of EBITDA common for that industry at the time of sale. PE is not a relevant measure for valuing private companies, and book value is not an accurate reflection of a business' worth in the marketplace.

We always find buyers for our seller clients due to two major factors:

Our customized, broad-based marketing system produces a diverse pool of potential strategic and financial buyers for each of our clients; and
We do not accept engagements from clients with unrealistic value expectations.

The number one reason a transaction is not completed is weakening financial performance. If the financial performance of a seller is off materially from the original forecast, the business loses value. Therefore, we always emphasize to sellers how important it is to stay on top of their business and to continue to actively grow it as if they'll continue to own it for another couple of years.
The number two reason deals fall apart is surprises in the due diligence process. We work with both parties to ensure all relevant business issues are disclosed up-front. Surprises lead to lack of trust, and lack of trust kills deals.

Either way is possible. You may receive offers for just the business with rental income to you, as well as offers to purchase the business along with the real estate. You can choose whichever option you prefer.

The current owner typically stays on for a period of time to ensure a smooth transition, or longer depending on the structure of the deal. The former owner's compensation is negotiated based on the buyer's estimate of what would they need to pay someone in the market to replace you.