Insights Magazine Volume IX - Page 6

M&A Activity Planning Assistance Helps Multi-National Auto Repair Business Sell to PE Firm Bryan Graiff, CPA/CGMA, CVA, CFE, CM&AA Sometimes a strategic buyer is not the best fit for an exit plan. Perhaps the owner wants to work for a few more years, or the strategic buyer would fire long-term employees because their positions duplicate those of other employees. for $50 million, which exceeded the owner’s original expectation. Customers and vendors could also react negatively if a competitor bought the company and had unfettered access to confidential information. Beyond preparing quality financial statements dating back at least two years and a sound forecast projecting out results at least three years, a seller might need to tidy up some back-office aspects before a transaction. In those situations, a company looking to sell might consider a financial buyer, such as a private equity firm or family office. In any selling situation, sellers need to get their house in order before going to market. However, sellers should be prepared for a financial buyer to perform extensive due diligence before a transaction. Whereas a strategic buyer may already know the company and the industry well, a financial buyer, such as a private equity firm, is more likely to need to do more research before they use their investors’ dollars to buy a company. Recently, the owner of a large multi-national auto repair business prepared to sell his company to a private equity firm. The sale closed 4 The business owner followed these key steps to prepare his business prior to the sale. 1. Get the house in order The auto repair business benefitted from the support of entrepreneurial services professionals who assisted with day-to-day bookkeeping needs to clean up the business’ financial statements. The professionals also set up foreign subsidiaries in the company’s general ledger system, something that the company’s CFO had not had the time or internal resources to properly account for at the level of detail required for a due diligence analysis. 2. Calculate net cash proceeds Once the business’ back office is in order, but before pulling the trigger on a deal, an owner needs to understand the realistic takeaway from a transaction. A financial buyer is more likely to need to do more research before they use their investors’ dollars to buy a company. In the previously mentioned example, transaction advisory professionals performed a fair market valuation that took into account research they performed on past transactions within the industry. After that, tax professionals performed a state sales tax exposure analysis and helped the owner calculate the net cash proceeds he could expect based on his current and future tax positions. 3. Recruit the right team An investment banker, a transaction advisor and a transaction attorney all have critical roles to play in an exit transaction. In this case, transaction advisory professionals provided a referral to three reputable transaction attorneys