selling the professional services firm role play version - 60 minutes iii

Selling or Buying

a Professional Services Firm

Learning Objectives1. Deciding to transition, how to, and to whom?

2. Valuing your business

3. Making the Sale – the process

4. Making the Acquisition– the process

Question 1

“I’m 60 years old and I need to start thinking about transition. I want to keep working but I want to cut back my hours

and get rid of ownership duties while leaving a legacy for my employees and

team.”

Deciding to Transition – Selling Your Business

You are thinking about retirement, other business opportunities, and/or suffering burnout.

You are tired of the responsibilities of business ownership like payroll, taxes, insurance, HR but would like do what you do best and continue in business.

Or, you need to get out of the gap by expanding people and resources, and wish you were bigger to play in bigger markets.

Question 2

“I’ve been thinking about selling or merging or partnering with another

organization to help with that. What do you think of that?”

Ways to Transition (sell) your Business

1. Sell to family members

2. Sell to employees

3. Sell to fellow partners if any

4. Sell to Venture Capitalist/Private Equity companies

5. Sell to larger firm in your industry, i.e., strategic acquisition

Question 3

“What is your process of representing me and my firm if I decide to approach the

open market to be acquired/sell my business?”

The Selling Process Engagement Agreement Exclusivity Fees Valuation Cost Valuation Process Marketing Package Target Marketing Discussion

Question 4

“What is the timing of all that?”

Timing Preparation – Valuation and Marketing Package First Wave of Marketing Subsequent Waves of Marketing Initial Conference Call Visit and More Review LOI Due Diligence Closing

Question 5

“How do I protect the confidentiality of the situation?”

Confidentiality General Approach to the Market Non – Disclosure Agreement Continual Reinforcement

Question 6

“How is Value Determined?”

Question 7

“What kind of information will you want for the valuation”

Question 8

“How long is a typical transition and

what goes in to it”

Employment Agreements – Staying On With New Company

Are there premiums for being a past owner Will the seller be paid the same even though

there are less ownership duties Will the seller become billable What is the length of time –

specified or ongoing

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Employment Agreements – Staying On With New Company

How are benefits like insurance handled? Is this part of the purchase agreement? Are there any considerations for employment

agreements as it relates to SBA financing?

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Question 9

“What is the market like now?”

Question 10

“Can we get references?”

References

Email us for references:

Al Lautenslager - al@stonemillpartners.com

Patrick Neal - patrick@stonemillpartners.com

Question 11

“How do we get started?”

Buy Side Considerations

Question 1 – “Why should I consider an acquisition?”

Considering an Acquisition

In the Gap A need to diversify projects and services New geography The need of people Capacity

Question 2

“What is the process to acquire a firm?”

Acquisition Process Respond to Business Opportunity Summary after

signing NDA. Schedule a conference call and/or personal visit Submit a non-binding letter of intent Due Diligence Determining how to fund the acquisition Prepare closing documents and agreements Closing

Question 3

“How Do I Fund an Acquisition?”

Acquisition Funding Cash Local Bank SBA backed funding Promissory Note with Seller Earn-out – How is this defined and when is it

used? Incentives

Question 4

“What does the structure of a deal typically look like?”

Question 5

“What should I expect to pay for a firm that I am acquiring?”

Doing Things On Your Own VS. Using an M & A Advisor

Things To Watch Out For

1.     Beware of the M&A firm that is charging a large retainer fee up front, does not deduct it from the final fee and does not perform.

2.     Beware of the M&A firm that does not have a focus in the Architectural / Engineering / Construction / Interior Design markets.

3.     Beware of the M&A firm that lists businesses for sale, online and then adapt a “hope” strategy, especially in the A/E/C industry, with no targeted selling.

4.     Beware of firms with a lack of experience in your markets.

5. Make sure you work with a firm that understands value, the valuation process and pricing of the business to be sold.

Things to Consider – Internal Transition vs. External Sale

Do you have an effective leader to replace you? Can a new leader(s) work together as a team like you did Do they have money to pay you upon a sale Are they willing to take on debt for a sale and can they

make debt payments Will new cash flow allow for growth? Do they have an entrepreneurial mindset - steady

paycheck vs. ebb and flow of ownership Is a larger, acquiring firm more appealing 

Wrap-Up/Summary Selling Your Business

Transition Planning Contact Stonemill Partners – Engagement Valuation Marketing Package Approaching Targeted Prospective Buyers Entering the buying process once a

prospective buyer is interested

Wrap-Up/Summary Acquiring a Business

Review a Business Opportunity Summary (BOS) Initial Conference Call/Visit with Seller Review of Information Letter of Intent Due Diligence Financing Agreement Preparation Closing

Wrap-Up/Summary Using an M & A Advisor - Advantages Things to Watch Out for Internal vs. External Transition – Things to

Consider & External Advantages

Thank You Its your business Your future depends on your decision Sell to capture value Buy to increase value and grow Rely on Experts Capitalize on your dreams, vision and

passions!

Contact Us:Al Lautenslager - al@stonemillpartners.com

Patrick Neal - patrick@stonemillpartners.com