Divestiture

Bringing your company to market, locating the right buyer or buyers and finally closing the transaction all involves a proven four tiered approach.

Packaging – From a marketing perspective, your company is a product and as such sold in an expertly designed package. Some of the necessary items in your package include:

1. Re-Cast Financials – A meticulous in-depth study to determine Sellers Discretionary Earnings (SDE)
2. Visual Appeal – First impressions are everything! We develop a custom marketing piece that including:
   • Company specific history – A look at your company as a whole keying in on major successes and accomplishments during your tenure.
   • Photographic tour of the company
   • Industry reports – Third party reports quantifying growth opportunities, industry trends, market size, average operating expenses across a broad array of categories and historical data.
3. Real Property Details – Lot and building size, legal description, environmental study phase I and/or II, title and utilities.
4. Business Valuation – A professional report that determines a reasonable range of value using numerous factors and variances weighted and tailored to fit your specific industry.
5. Tax Returns – Your compiled financial history used in supporting the financial re-cast.
6. Growth Forecasts – Expected growth in your Metropolitan Service Area (MSA)
7. Sales Tax Reports – Supports claims made on tax returns
8. Employee Details – Number of employees, salaries, length of service and key individuals.
9. Competitor Analysis – Your competition their longevity and market share.
10. Lender Pre-Approvals – Working with local lenders and SBA preferred lenders to speed financing when a buyer is located.
11. Asset Lists – A list of assets that will convey with the company and their Fair Market Value (FMV).
12. Justification for Purchase – Defendable proof that the subject company will meet the three criteria for sale.
    • Will the company pay the new owner a living wage?
    • Will the company service the debt load?
    • Will the company give the new owner an acceptable ROI (Return On Investment)

Timing – Most buyers are on a schedule that is dictated by outside economic forces, therefore it is critical that the seller respond quickly to buyer interest. Some critical timing considerations for a successful transaction are:

1. Be Prepared – Often times a buyer will travel from long distances to view a business opportunity. Having all of the company information and supporting documentation is critical.
   • There are many business opportunities available to buyers.
   • When a buyer tours your company we want them to stop looking!
   • The only way to achieve that is to have everything a buyer needs to make an informed decision. It is not the time to be looking through the files for receipts and supporting documents.
2. Buyer Re-investments – A buyer may have recently sold a business and for tax purposes has a limited time to re-invest.
3. Accurate Financials – “If the water is dirty, don’t drink it.” The same holds true for your financials. If you can’t explain them, how do you expect an interested party to make a commitment to purchase the company? We will examine your financials with you to make sure your business is represented unambiguously.
4. Interest Rates – Interest rates play an intricate part in business value.
   • Higher interest rates reduce a companies’ ability to service debt resulting in lower business value unless there is company growth to offset it.
   • Lower interest rates provide excess capital to service additional liabilities ultimately increasing business value. Even if revenues have decreased the impact on business value can be minimal.

Control – Control is an interesting aspect of business divestiture. Maintaining control of the transaction is essential because there will be several people involved in the process with competing agendas.

1. Once the buyer enters due diligence, some may be overwhelmed and need some guidance to assist them in verifying the sellers financials.
2. The buyers CPA will be most interested in getting his client a “good deal” and therefore will, in our experience, certainly undervalue the opportunity.
3. The lending institution will be most concerned with their equity and risk, by understanding their requirements versus their desires we can “re-direct” them from making unreasonable demands on the transaction that might kill the deal.
4. Family members on both the buy side and sell side will have opinions that often need a “reality check” to keep emotional escalation to a minimum.
5. The buyer’s attorney will primarily be concerned with protecting his client and minimizing his or her exposure to future risk.
6. Understanding what representations and warranties are reasonable and expected versus conceding to unrealistic demands can be the difference between your exit being a pleasurable experience or a regretful one.
7. By implementing control in the process and running our plan we can have a predictable outcome.

Valuation - How can you gauge an offer on your company if you don’t know its value? Not to over simplify the situation, we absolutely must know what your enterprise is worth in order to successfully negotiate the best price.

Valuing your business is much easier said than done. As you might imagine, “value” isn’t an absolute…it’s a variable. Value of the business ultimately is what a willing buyer and willing seller can agree upon on the open market. In fact, your business will truly have a range of values rather than a value point, determining that range and the reasons that govern it is really as much art as it is science. Combining that art with science is where your VR representative becomes an invaluable asset. We will help you understand what determining factors drive value and having that knowledge is what allows us to effectively negotiate on your behalf.

At VR Bentonville we know that fear is the one thing that will destroy the sale of any company. In the end, all of the steps explained above are designed to remove fear and consummate the deal. We believe by removing the fear from the transaction your company is 90% sold. Your business is too important to accept mediocre representation. Our firm will carefully plan the course then vigilantly execute the strategy to deliver optimum value. A partnership with VR Bentonville offers you the confidence of knowing you have enlisted unmatched, Valued Representation that will manage the sale of your most important asset with total confidentiality.

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