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Ebit Buyer Presentation

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What buyers need to know, before their search for that perfect business

What buyers need to know, before their search for that perfect business


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    • 1. Sources of Acquisition Deals - and “ Generating Buyer’s Deal Flow” Todd Cushing EBIT Associates, Ltd.
    • 2. Buyer's Ten Commandments
      • 10. Thou Shalt Not Be Greedy!
      • Sellers deserve a fair price for the years they have spent
      • developing their business. Be prepared to pay for the
      • goodwill of the business.
      • 9. Thou Shall Have A Good Reason For Buying!
      • Buying a business is hard work! It takes a commitment!
      • Spend time deciding why you want the responsibility of
      • owning a business.
      • 8. Thou Shalt Provide Background Information!
      • Be prepared with a resume and financial statement.
      • Remember, the seller will most likely be your banker and
      • will want to know that you can run the business
      • successfully.
    • 3. Buyer's Ten Commandments
      • 7. Thou Shalt Keep An Open Mind!
      • There are no perfect businesses.
      • 6. Thou Shalt Keep In Mind Tax Benefits!
      • Remember tax benefits are realized from intangible as
      • well as tangible assets.
      • 5. Thou Shalt Offer A Reasonable Down Payment!
      • A low down payment indicates a lack of commitment.
      • When sellers question commitment, serious
      • negotiations are in jeopardy.
      • 4. Thou Shalt Realize Businesses Are Priced On Profits!
      • A business making huge profits with a few assets could
      • save you money later in capital outlay for expansion.
    • 4. Buyer's Ten Commandments
      • 3. Thou Shalt Remember Time Is Of The Essence!
      • After all parties have agreed upon price and terms it
      • is important to quickly proceed toward closing.
      • 2. Thou Shalt Be Prepared To Meet the Landlord!
      • Landlords usually have little to gain by cooperation.
      • Therefore,come to meetings armed with resume and
      • financial statement.
      • 1. Thou Shalt Avoid Surprises!
      • Disclose pertinent information early and avoid
      • surprises that might destroy your credibility.
      • Courtesy of BBP
    • 5. Preliminaries
        • What should I do before I begin my
        • search?
          • Pre-Search Fundamentals – Define the Target!
    • 6. If you see two dolphins, you are probably not buying a business!
    • 7. Pre-Search Fundamentals – Define The Target!
        • Tom West reports on the Small Business Target:
        • 700,000 businesses w/revenue >$1 mil <$2.5 mil and 10-19 employees
        • 140,000 are for sale
        • 35,000 will be sold!
        • 570,000 businesses w/revenue >$2.5 mil <$10 mil and 20-100 employees (average 40)
        • 113,000 are for sale
        • 38,000 will be sold!
    • 8. Pre-Search Fundamentals – Define the Target!
        • What am I looking for?
        • Clarify! Prioritize!
        • Build a Buyer’s Profile
        • Incorporate Value Judgments Early On - Wide or Narrow Search?
    • 9. Pre-Search Fundamentals – Targeting Elements
        • Where? – location
        • Industry? – Related to professional/personal experience?
        • Type? – B2B, Retail, Service, Distribution, Mfg.
        • Special Category? – Franchise, troubled
        • Size? – financial resources
        • Skill set? – professional expertise
        • Timeline? – project planning
        • What help will I need? – partners, advisors, financing
    • 10. Where Do I Start?
      • Don’t Overlook the Personal Network – They already know you and its free! Communicate with:
        • Close friends, neighbors, confidants
        • Financial/Tax Advisor
        • Personal Accountant
        • Personal Attorney
        • Insurance Broker
        • Community Organizations if you are active
    • 11. What Else Can I Do On My Own?
      • Professional Industry Experience Network
        • Industry/Work Contacts
        • Former Competitors
        • Former Suppliers
        • Professional/Industry Associations – contacts, newsletters or other publications
        • Former Customers/Clients
        • Former Company Associates
    • 12. The Internet – “101 Sites”
      • Web Listings
        • Ebitassociates.com
        • Acg.org
        • Bizmls.com
        • Bizbuysell.com
        • Bizquest.com
        • Businessesforsale.com
        • Chicagobusiness.com
        • Emerge.com
        • Firstlist.com
        • comglobalbx.com
        • Ibba.org
        • Mbbi.org
        • Restaurants-for-sale.com
        • Mergernetwork.com
        • Sunbeltnetwork.com
    • 13. Professional M&A Resources
      • Business for Sale – “Actively Marketed”
        • Attorneys – M&A, Trust, Bankruptcy
        • Accounting Firms
        • Consultants
        • Financial Advisors
        • Private Equity Groups
        • Trade Association Publications
        • Bankers
        • Business Brokers and other M&A Professionals
    • 14. Professional M&A Resources High Technology Redneck Radar System
    • 15. Professional M&A Resources
      • Companies Not on the Market
        • Industry Trade Shows
        • Trade Association Publications
        • Bankruptcy Court
        • Buyer’s Broker/Intermediary
          • Create Buyer Profile/Bio
    • 16. Why Buyers Use/Don’t Use M&A Pros.
      • Use:
        • Uncover hidden sellers
        • Target a market
        • Industry Specialization
        • 3 rd Party Approach & Negotiate
        • Valuation – Seller’s Reality Check on Expectations
        • Deal Experience
        • Professional Contacts and Resources
      • Don’t Use:
        • It Will Cost Me Money! Will they add as much value as they charge for fees?
        • Exclusivity - Fear of limiting or missing other deals
        • Fear of losing control of Process
        • Unsure how to make selection
    • 17. Sources Of Acquisition Deals… To Summarize:
        • Preliminaries – Set the Target
        • Make your intentions known to the appropriate Personal and Professional Network Contacts
        • Determine how you can most effectively use the Internet
        • Build, communicate with and use your professional M&A network to maximize your personal deal flow
        • If appropriate, retain professional representation
    • 18. Are You An Informed Buyer ?
      • Primarily addresses first time buyer
      • Basic tools to becoming a buyer
      • The process involved
      • Benefits of becoming informed
    • 19. Over 80% of Buyers Have Their Head in the Sand!
    • 20. “ Definition Of An Informed Buyer”
      • Understands the “buy” process
      • Has a feel for the marketplace
      • Can measure business value
      • Knows when to seek assistance
      • Has realistic expectations
      • Responds to opportunities
      • Has patience
    • 21. “ Becoming An Informed Buyer”
      • Requires focus
      • It is a seasoning process
      • It is time consuming
      • Requires participation in the marketplace
    • 22. Benefits Of Being An Informed Buyer
      • Betters the odds -
        • of finding a potential target
        • negotiating the transaction
        • closing the transaction
        • of buying at or below market value
    • 23. Type Of Companies For Sale
      • Formally on the market
      • “Available” but not on the market
      • “ The Hidden Market”
      • Available but not on the market
      • does not mean “I will sell if I get my
      • price ”
    • 24. Typical Buyers Track Record
      • Industry statistics (first time buyers)
      • 100 lookers – 5 become buyers
      • 3 out 5 bought companies that were not targeted profiles
      • 6 – 18 month timeline
      • 95% failed
    • 25. Contributors To Buyer Failure
      • Unrealistic goals
      • Unrealistic timelines
      • Lack of focus
      • Misperception of the marketplace
      • Seller related
      • Buyer’s advisors
    • 26.
      • Buying a business is just like
      • Buying real estate
      One Of The Key Misperceptions Of The Marketplace
    • 27.
      • People related issues
      • Valuation issues
      • Timelines
      • Market efficiencies
      • Deal related problems
      • Closing probabilities
      • Broker “skill-set”
      Major Differences Between Real Estate And Biz Deals
    • 28. “ Deal” Probabilities
      • 50 % fail at the LOI (Letter of Intent)
      • 25 % fail at due diligence
      • 15 % fail at documentation phase
      • 10 % of those make it to closing
      • ? Die at the closing table
    • 29. Bettering Buyer Odds
      • Becoming informed – a continuous process
      • Understanding the marketplace
      • Setting realistic objectives
      • Developing quality deal flow
      • Understanding business valuation basics
      • Seeking out professional assistance
    • 30. Understanding The “Buy” Process
      • Finding the opportunity
      • Analyzing the deal
      • Indicating interest to purchase
      • Negotiating terms
      • Letter of Intent
      • Due-diligence
      • Contract to purchase
      • Transaction closing
    • 31. Workings Of The Market
      • Market is highly inefficient
      • Why companies are for sale
      • Where are the deals
      • How to access the opportunities
    • 32. Setting Acquisition Objectives
      • What do you want to buy ?
        • A job ?
        • A business ?
    • 33. Setting Acquisition Objectives
      • Availability of equity
      • Collateral for financing
      • Target match operating skill-set
    • 34. Setting Acquisition Objectives
      • Requires a reasonable definition of a “right-fit” opportunity
        • Type of company
        • Revenue size
        • Cash flow size
        • Affordability &quot;what can I afford&quot;
    • 35. Setting Acquisition Objectives
      • Understanding what the buyer’s equity can buy
      • A key element of forming a relationship with intermediaries /
      • business brokers
    • 36. Seeking Out Opportunities
      • Reactionary Approach
        • Typically broker sourced
        • Results of networking efforts
      • Proprietary Approach
        • Pro-active activities
        • Buyer managed effort
    • 37. Reactionary Focus
        • Deals formally on the market
        • Typically broker sourced
        • Formal process
        • Highly competitive
        • Buyer lacks leverage
        • Seller controlled
    • 38. Pro-Active Focus
      • Limited if any competition
      • Informal approach
      • Time consuming
      • Shifts leverage to buyer
      • Buyer controlled process
    • 39. “ Working With Intermediaries”
      • What not to say to a seasoned M&A intermediary / business broker
    • 40. “ Working With Intermediaries”
      • 10. How much liquid capital/cash do you
      • have for the down payment?
            • Depends on the deal. Money is no PROBLEM for the right deal!
            • I have investors. Money is no PROBLEM!
      • 9. Why buy now?
            • &quot;I will know it when I see it&quot;.
            • Good question, lets get together so I
            • can tell you what I'm looking for!
    • 41. “ Working With Intermediaries”
      • 8. How much income do you expect to take out of the business?
            • Depends on the deal!
            • Business needs to be very profitable.
      • 7. Have you ever owned your own business before?
            • NO, but I know I'm an Entrepreneur!
            • Business needs to have limited competition.
    • 42. “ Working With Intermediaries”
      • 6. Are you currently employed or unemployed?
            • I'm currently employed.
            • I'm currently unemployed and will pull out equity in my home for down payment.
      • 5. Who besides yourself will be involved in the decision?
            • My investors
            • My spouse said the business has to have
            • proprietary products.
    • 43. “ Working With Intermediaries”
      • 4. Are there any past or current bankruptcy/tax
      • issues?
            • YES, but I'm going to put the business under my father's name!
            • Business will need a lot of seller financing
      • 3. How long have you been searching for a business?
            • Call me when you have a &quot;good deal&quot;.
            • I have been looking for years!
    • 44. “ Working With Intermediaries”
      • 2 . Have you made any offers to purchase a business?
            • Started looking a week ago.
            • I have submitted 5 Letter of Intents and all have fallen apart!
      • 1. Do you have a current financial statement
      • available on yourself?
            • I only give my financial statements to
            • principals.
            • Here is the name and phone number of my
            • banker!
    • 45. Seek Assistance
      • If you have not done it before –
      • get help from someone that has !!!
    • 46. Don’t Fly in Bad Weather Alone
    • 47. QUESTIONS?
    • 48.
      • EBIT Associates, Ltd.
      • Todd Cushing, Principal
      • CBI, FRC, BTS, CBB
      • 117 S. Cook Street, # 212
      • Barrington, IL 60010
      • Telephone: 847-566-0500
      • Facsimile: 847-566-0100
      • E-Mail: [email_address]
      • www.ebitassociates.com
      Contact Information

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