GRAND RAPIDS, MI – 2020: Owners aiming to sell their businesses don’t always have to look far to find the right buyer. There may be a key manager or managers already on board who have the knowledge, experience and desire to move into an ownership role.
But such deals can be stymied by the daunting and unfamiliar task of transferring ownership. It’s difficult to cross all the T’s and dot all the I’s when you’re feeling your way through the dark. While specialists such as accountants, bankers or attorneys can provide their own expertise, it often takes someone with a broader view to bring all the elements together.
Nuvescor Group, a West Michigan mergers and acquisitions service provider, has the resources to help. Nuvescor partners with other professional service providers to provide the full array of disciplines needed to complete successful and timely business transactions, including management buyouts. Once Nuvescor is engaged to help with such sales, they’re able to break through the fog and get a deal done in a few months.
“Lately, we’ve seen many companies interested in selling to an internal party. We’ve helped in a lot of these situations because people have the interest, but they don’t know how to put it all together,” said Nick Good, Nuvescor’s managing director.
“They’ll work with an attorney, and an attorney is great at the legal side of things, or we see them go to their banker. Banks are great at helping on the financing side, but not negotiating specific deal terms between the parties,” he said.
“We’ve found that people are hiring us quite often to come in and be that intermediary, not only explaining things to both parties, but acting as a hunting or fishing guide. Business owners and the potential buyer or buyers know what they want to do and what they want to have accomplished. We know how to get them there, we have a proven process of doing so, we know the supplies needed, and we know the people you need to talk to to get to the finish line.”
Many family-owned companies are changing hands as the business world experiences a generational shift. The average small business owner in the U.S. is 60 years old, and 40 percent of owners are 65 or older, according to Barlow Research Associates. These owners represent the tail end of the Baby Boom generation, the millions of Americans born after World War II and now at or near retirement age.
The COVID epidemic and its economic and emotional effects may accelerate that exodus, as aging business owners reassess their personal and professional priorities. Some may balk at the time, effort and money needed to adapt or rebuild their business, especially when weighed against other desires such as recreation, travel or time spent with loved ones such as grandchildren.
An internal sale that Nuvescor completed in December displayed the typical challenges such deals can present. The company owner and an employee started talking in spring 2020, with an eye on closing by mid-year. But like in many such scenarios, progress stalled. Nuvescor was hired in September and closed the sale three months later.
“The parties had gone as far as they knew to go, but they didn’t know what they didn’t know,” Good said. “They had talked about a deal structure, but hadn’t signed a letter of intent, and they hadn’t agreed to all of the deal terms simply because they hadn’t thought to discuss certain specifics at certain points of the proposed transaction.
“We walked them through it and got things drafted and signed so the attorneys had the framework they needed, the bank had the documents they needed for the financing, and the shareholders had what they needed to understand the proceeds from the sale.”
Another recent deal was between the company’s owner and general manager. With the help of a banker, they’d been discussing a sale for almost a year.
“Trouble is, they had never really agreed on all of the details of the transaction, simply because they didn’t know what the details needed to be, so the bank didn’t have what they needed to put forward financing,” Good said. “After some initial months of frustration, we got involved in October, and we’re going to close the transaction for them in January.”
Selling a business to an internal buyer has advantages – for the outgoing business owner as well as the company and employees going forward. For the new owner, there’s less of a learning curve and more potential for success.
“With internal sales, there are fewer questions like: Are your employees, your customers and suppliers going to like the person you are selling to?” Good said. “All the customers are familiar with the buyer, all the employees know him or her, all the suppliers know them. They’ve been working with them all along. There is typically less of a worry on these things from the seller’s perspective.”
That knowledge helps reassure the outgoing owner that his or her legacy is in good hands, a major concern when selling a business. What’s more, leaving a viable business behind improves the owner’s prospects of receiving his or her payout. Such deals are often structured with the owner receiving a portion of the payment at close, and the rest over time.
“If an employee is buying the company, and they’ve been doing things the same way that the seller has been, the seller has a pretty good idea of what the company is going to do in the future,” Good said. “This business is going to continue to grow, for example. The picture is much clearer to the seller.”
Nuvescor helps owners sell their businesses whether or not they have a buyer in mind. The company utilizes a proprietary proven process that greatly increases the success rates for business transactions as well as the customer experience. If no buyer has been identified, Nuvescor employs a detailed step-by-step process to market the business, vet potential buyers, and help the parties negotiate a deal. Beyond the “matchmaker” role comes a lot of hard work on the back end to bring the deal to a close.
A business sale that requires marketing the company and finding the buyer is typically a 6-to-8-month process, Good said. If a buyer is already identified that period is reduced to 3 to 4 months. Likewise, a deal with a known buyer costs the selling owner about half as much in fees.
Good sees 2021 as still a good time to sell a business. Interest rates remain at rock bottom, and investors and large companies are looking for acquisitions.
“There is a lot of money out there right now in private equity, and those people exist to buy and grow businesses,” Good said. “Also, in the corporate world, there are many businesses that have cash on their balance sheets and are willing to spend when they see an opportunity to grow.”
About NuVescor Group
NuVescor Group, based in West Michigan, is a distinguished mergers & acquisitions service provider that partners with other professional service providers to provide the full array of disciplines needed to have successful and timely business transactions. NuVescor works within many different industries and has a strong focus and track record specifically in the manufacturing sector. NuVescor utilizes a proprietary proven process that greatly increases the success rates for business transactions as well as the customer experience. For additional information, please visit www.nuvescor.com.
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