Buying or selling a business may be the biggest deal you will ever do in your life. Done really well, it can transform generations, help communities thrive, and propel a business forward. Done poorly, it can have the opposite effect.
Below are a few examples of the value that a great deal team can create.
- Maximizing value before a deal: Getting ready for a deal with a good team can add hundreds of thousands or even millions of dollars to the sale price. That may sound extreme, but the math can be fairly simple. In some industries, the difference between an EBITDA multiple of 5 and 7 could be as little as $100,000. Helping a company increase EBITDA by that much in that scenario has already added $700,000 of purchase price on just the additional $100,000 of EBITDA. Even if the increase in EBITDA didn’t change the multiple at all, simply increasing EBITDA in this scenario would add $500,000 to the sale price. Sometimes this process can take a year or more, but it can be a gamechanger on valuation.
- Finding a great deal partner: At the very outset, a great deal team can help identify a great deal partner. An experienced provider such as an investment banker or a good broker can create an incredible amount of value by running a good search or sale process to find the right deal partner, and helping filter through any that may not be a good fit.
- Effective negotiations: Good negotiations set up the rest of the deal for success and help to optimize value. A good team has the experience and expertise to understand your priorities and help negotiate the key points to create value based on those priorities.
- Optimizing tax structuring: Great tax advice can save tens of thousands or more in after-tax proceeds for the seller, and post-closing after tax income for the buyer.
- Managing and preserving relationships: Good teams help create good relationships with the other party and the other party’s team. We’ve worked on deals where the relationships involved were so good that it probably saved our clients 20-30%+ on their legal costs. Deal teams that don’t manage relationships well can add a substantial amount of cost and time to a deal process. Especially in deals involving family members, the value of managing relationships well is far greater than the dollars involved, and can positively contribute to family harmony for years to come.
- Managing risks: Having great deal documents is only part of the equation to managing risk. Great deal teams can help identify key risks before closing and either help with resolving those items before closing, or putting in place clear and equitable ways to deal with those risks.
- Freeing you up to focus: The more time you have to focus on what only you can do, the more value you can create out of the deal process. Having a great team to handle the minutiae of the deal can help to free you up to focus on the biggest decisions, managing relationships, planning for success after closing, and continuing to run your business.
- Supporting great decisions: Every deal includes hundreds and thousands of decisions. A great team brings together the experience and expertise to help make great decisions that optimize value throughout the process.
- Successfully transitioning key customers and team members: Retaining a key employee, for example, can save a business $100,000+, and retaining a key customer can save many times more than that.
- Being on time: Getting a deal done on time can save both parties money on direct deal costs. For the buyer in particular, delays in closing can cost company with $5M+ revenue $100,000+ per week, and a substantial amount in lost profit.
- Successfully closing the deal: Great teams get good deals closed. The long-term benefit for buyer and seller can often be in the millions. The cost of not closing a good deal can easily be $100,000+ depending on how much of your time was lost in the process, the direct costs paid to the deal team, and other considerations.
- Securing adequate liquidity: Good banking partners in particular to can help obtain financing on favorable terms, and equally as important, help ensure that you have access to adequate liquidity after the deal closes.
- Valuable ongoing advice: After the deal closes, a good deal team can be a great source of ongoing advice, and can provide access to a wealth of resources and connections.
These resources are provided for informational purposes only, and are not legal advice. No attorney-client relationship is formed through this page. Please contact us if you’d like to inquire about our services.