M&A Intermediary - The Pen Group, LLC.

What is a Business Intermediary?

Business intermediaries work collaboratively between buyers and sellers of a business. They perform the important marketing function of searching, attracting and engaging potential buyers and sellers while working directly with the owners and their legal counsel to reach a mutually beneficial agreement.

Why Engage a Business Intermediary?

Experienced Business Intermediaries understand the seller’s attachment to his or her business and the potential for the seller to place an unrealistic value on their business. Similarly, a buyer may fail to appreciate the amount of work involved in building a business to a certain point. Business intermediaries can provide an objective assessment of the true market value.

What are the Key Business Intermediary Functions?

Sale-side Engagements

Develop a comprehensive company prospectus while making recommendations to enhance the value of the business. The prospectus can run between 40 to 50 pages
Identify and engage potential strategic industry buyers and private equity firms
Diplomatically address sensitive questions and concerns that could adversely affect the sale while acting as a mediator between the parties

Buy-side Engagements

Provide access to industry-specific buying channels and acquisition targets
Uncover, pre-qualify and communicate directly with acquisition targets
Target acquisition management’s deal objectives and purchase criteria
Identify businesses that match the buyer’s capabilities, business objectives and financial requirement

Why do owners sell their businesses?

The Magic is Gone: The most common reason a business is sold is due to owner fatigue, burnout or boredom. The daily routine of managing a business, the constant demands from customers, employees, and vendors, the stress of making endless decisions and the pressure of being the company’s rainmaker can keep owners up at night and drain them of the original passion for owning the company. Ultimately, the thrill of entrepreneurship is replaced by mundane acts of management and oversight

Retirement: Many owners adhere to their personal time line for retirement looking forward to reaping the rewards of a recreational lifestyle.

Risk Tolerance: In the later stages of the business life cycle, owners may develop a more conservative risk tolerance and when the company requires additional capital to grow or to overcome obstacles, the owner may decide to exit rather than reinvest. No more personal guarantees.

Change in Environment: Family dynamics, partnership disputes, business climate, competition and market conditions can impact the business prompting a change in business ownership.

The Timing is Right: Selling while the company is at its most competitive will help realize a higher selling price. Macro-economic factors can influence the price at any time.

Key Issues to Enhance Company Value:

1. Enterprise Value: Instill confidence in the buyer that the business can run smoothly during the transition and beyond. Show how the company has: a stable and motivated management team; documented processes and procedures; a scalable platform, and; consistently generates revenue without the owner’s direct involvement.
2. Sustainable Sales & Consistent Financial Performance: Demonstrating a loyal and diverse customer base that will transfer to the new owner can be just as important as exhibiting growth in sales, gross margins, and EBITDA. Providing three years of financial statements reinforces the buyer’s confidence in the solid operating performance and the overall value of the business.
3. A Strong Competitive Position: A strong market position and clearly identified value proposition shows how the company will remain competitive in the future.
4. Attractive Facilities and Equipment: A positive first impression adds to the sense of value and can boost a buyer’s assessment of the operation. A seller should prepare the physical aspects of the business as if they were presenting a home for sale.
5. Reduce Risk: It’s important to remove or reduce as much of the buyer’s risk as possible. Any legal, regulatory, environmental or labor force risks can pose impediments to a sale.

Experienced M&A Intermediaries Always Protect Your Interests