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Thread: Considering selling my business... should I go with a business broker, or M&A expert?

  1. #1

    Question Considering selling my business... should I go with a business broker, or M&A expert?

    I have a truck parts business which I've owned for 15+ years, and which I've grown to a decent size. Revenue generally falls somewhere between 5 and 10 mil per year, it fluctuates, but last few years have been steady around the 10M mark.

    I'm looking for a local business brokerage in the South Florida area, but some folks are saying that I need an M&A intermediary, and not a regular business broker, due to the level of revenue.

    Thoughts on who I should decide to represent me in the deal? Has anybody sold their business, and if so, how was the process?

    I'm honestly tired, and need a break... I have a boat, and want to travel with the wife.

    Any advice would be much appreciated. Thanks.
    Last edited by JvilleJeff79; 08-04-2021 at 08:41 PM.

  2. #2

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    Also, would you go with an asset sale or stock sale? Something else I keep hearing about...

  3. #3
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    Yes to both questions. Not much help, I know, but have you considered reaching out to both brokers and M&A and seeing what they say? As for asset or stock sale, it all depends on your tax implications and what the buyer wants as well.
    Brad Miedema
    Fulcrum Saw & Tool

  4. #4

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    I sold my company about 4 years ago, so I know exactly where you are coming from. I ran our family business for about 20 years and was ready for a change.

    To answer your second question first, you would probably prefer a stock sale over an asset sale for tax reasons, however your buyer would prefer an asset sale to avoid those taxes. You might be able to negotiate a higher price for an asset sale so the buyer will cover at least some of your tax burden. I was able to get my buyer to add the majority of the tax cost to the purchase price by selling my assets rather than stock.

    I used an M&A firm to try to sell my company right before the 2008 recession. Our sales were about 5X yours at that time, so we were substantially larger. First, I had to go through presentations from 4 or 5 different firms to ultimately pick the one to sell my company. In the end, it was pretty expensive ($100k+), time-consuming, stressful, and difficult to hide from the employees. We eventually ended up with just one decent offer, but I decided not to sell since I thought my company was undervalued, plus part of the funding was based on future earnings. When the recession hit, that portion of the sale price would have been lost anyway. The entire process took about 9 months and we didn't even end up with a deal.

    Once we got past the recession and things were improving, I looked to sell my business again. Rather than go through an M&A brokerage firm this time, I decided to contact a few indirect competitors (same industry selling different products) and customers discretely myself. By doing that, I was able to find a good fit and sold my company at my asking price without broadcasting it to everybody in the industry.

    You probably have some contacts at businesses that might be interested in your purchasing your company - either competitors, suppliers, or customers of yours right now. Those companies will recognize the value of your business much better than companies that M&A firms or business brokers will contact and that makes negotiation a little easier. If that doesn't work out, then I would suggest looking for a business broker that has worked with companies of your size before. Be prepared to talk to at least 3 or 4 brokers to find the best fit.

    One thing I recommend that you find right now is a good M&A attorney. They may also be able to steer you towards the best type of sales process to use for a company of your size. Be prepared to spend a lot of time talking things over with your attorney to make sure that you get everything you want from the sale.

    Hope this helps. Good luck with your sale!

  5. #5

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    Quote Originally Posted by Fulcrum View Post
    Yes to both questions. Not much help, I know, but have you considered reaching out to both brokers and M&A and seeing what they say? As for asset or stock sale, it all depends on your tax implications and what the buyer wants as well.
    Thanks for your input, Fulcrum, is indeed helpful. Will try reaching out to both before I make a decision.

  6. #6

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    Quote Originally Posted by RetiredMfr View Post
    I sold my company about 4 years ago, so I know exactly where you are coming from. I ran our family business for about 20 years and was ready for a change.

    To answer your second question first, you would probably prefer a stock sale over an asset sale for tax reasons, however your buyer would prefer an asset sale to avoid those taxes. You might be able to negotiate a higher price for an asset sale so the buyer will cover at least some of your tax burden. I was able to get my buyer to add the majority of the tax cost to the purchase price by selling my assets rather than stock.

    I used an M&A firm to try to sell my company right before the 2008 recession. Our sales were about 5X yours at that time, so we were substantially larger. First, I had to go through presentations from 4 or 5 different firms to ultimately pick the one to sell my company. In the end, it was pretty expensive ($100k+), time-consuming, stressful, and difficult to hide from the employees. We eventually ended up with just one decent offer, but I decided not to sell since I thought my company was undervalued, plus part of the funding was based on future earnings. When the recession hit, that portion of the sale price would have been lost anyway. The entire process took about 9 months and we didn't even end up with a deal.

    Once we got past the recession and things were improving, I looked to sell my business again. Rather than go through an M&A brokerage firm this time, I decided to contact a few indirect competitors (same industry selling different products) and customers discretely myself. By doing that, I was able to find a good fit and sold my company at my asking price without broadcasting it to everybody in the industry.

    You probably have some contacts at businesses that might be interested in your purchasing your company - either competitors, suppliers, or customers of yours right now. Those companies will recognize the value of your business much better than companies that M&A firms or business brokers will contact and that makes negotiation a little easier. If that doesn't work out, then I would suggest looking for a business broker that has worked with companies of your size before. Be prepared to talk to at least 3 or 4 brokers to find the best fit.

    One thing I recommend that you find right now is a good M&A attorney. They may also be able to steer you towards the best type of sales process to use for a company of your size. Be prepared to spend a lot of time talking things over with your attorney to make sure that you get everything you want from the sale.

    Hope this helps. Good luck with your sale!
    Man, sounds like it was a long and arduous process the first time around... possibility that the sales guys who presented to you from the M&A firm were just great, and that their actual service was not? Just thinking of the possibilities. May still consider reaching out to a few different groups in the area.

    As to your second approach, what ended up working for you, that sounds interesting. I would have to give it some thought on who would be the right companies to contact, but have several in the area who I think would possibly be interested... just would need to make sure they're financially capable. Also, really don't want the word getting out.

    I appreciate the advice, and congrats on your retirement my friend, enjoy.

  7. #7

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    Oh, and as to the asset and stock sale differences, good advice there. Was reading about how the tax liability lands more on the seller during an asset sale, and the other way around on stock sales. Working at least part of that tax cost into the sales price in an asset sale is a good idea!

    Thanks again.

  8. #8

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    I've never sold, but I purchased a restaurant in 2020 using a broker. They are only intermediary, so you would want a quality accountant and lawyer to be with you during the entire process.

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