If You Are A Buyer, Here Is Why You Need A Buy-Side Broker
The typical business broker is representing or selling very much like a real estate agent represents or sells. The business broker and real estate agent alike, totally have the interest of the seller, not yours. Their goal is to get the highest price for the seller as fast as possible for the highest commission. If you are a buyer, you are one of dozens of people looking at that one business opportunity, just as you would be one of dozens of people looking at a house.
Your interests and the interests of the sell-side broker are not aligned. So what does a serious buyer have yo do when he is faced with looking at particular listing on a webpage or a broker throwing a bunch of things at him that many people are looking at as well?
Here is what to do:
1.You need a buy-side business broker to only represent your interests.
- New York Private Equity is the leader in lower middle-market buy-side presentations. We acquire that leadership by having a huge team of callers in Belize, an English-speaking country, making over a million calls a year
- We target industries, sales volume and location to you your suiting.
- We call the sellers before they are in the market. If someone is in the market, I promise you it is too late for you to buy something at a competitive price. If someone is not thinking about being in the market, there are no words that we can use to talk them into the market.
- We reach people in that unique stage when they are deciding to do something. People who feel that they are getting old, tired etc.. who are looking for an exit plan but they haven’t taken action yet.
- Our first call is to make sure they are receptive and open to the right buyer at the right price. That may be the owner of the company and in general fit the sales range that our buyer is looking for.
- Our second call, at the level of a Vice President, is to make certain that not only all of the above is true, but they are realistic on the price. It is amazing that sometimes sellers think that they are entitled to ten years worth of cash flow or three times sales volume with some old-fashioned tune that someone played them, which bares no resemblance to reality.
- Armed with a willing and motivated seller with a realistic price expectancy and understands the process, we then introduce you via a phone call.
- You get a chance to talk about yourself exclusively in a positive atmosphere and ask the seller questions as well.
- At the end of all of this, if you feel so inclined, you ask the seller to produce additional data, such as financial statements tax returns breakdown by customers etc…
- At the end of receipt of that data, the next step is to write an indication of interest letter to the seller. This is an expression of interest of what you have in mins.
- Never, never, never, never make a meeting with the seller until he had agreed that the letter of interest is consistent with his goals. If your letter of interest says $5 million and his psychological price is $10 million, then that is one meeting that you don’t need to have. Sometimes we can get a short exclusiveness with an indication of interest letter. Sometimes we cannot.
- Then a meeting is held and depending on your proximity to that meeting and the timing we and/or you will attend that meeting.
- At the end of that meeting if you feel good about that company, you will ask for additional data historical financial data, historical tax returns and examples of litigation. The list varies from industry to industry.
- If everything meets your distinction, then we write a letter of intent for you, which among other things, clearly has a an exclusive provision in it. It talks about the time table leading to closing
- At this stage there are two different directions. One direction is to help get together the money you need to make the acquisition. You may have all of the money that you need, in which case what I am about to tell you is not relevant.
17 The sources of money include seller’s financing, which is typically in most small to mid-size transactions. Accounts receivables ____ senior bank lending, mezzanine lending and minority equity partners. All of the above gives you leverage in making a purchase of company.
- Assuming the financing is in process or you already have it in hand, you then may complete four types of due diligence
- Human Resources
- The most important step in purchasing a company is the Quality of Earnings Report or Q of E Report. You want to get that report so it may tell you whether or not hat company is what it is supposed to be. This is a critical stage.
Armed with your own research the Q of E Report and due diligence, you then draft the following contracts with your mergers attorney:
- Agreement of sale
- Employment Agreement or a short-term consultant agreement if the seller is going to continue
- A shareholders’ agreement or an operating agreement if the seller is going to keep some minority equity.
The above process is very meticulous and takes on average six months form start to finish. When you see the specificity of all of the things required, you will see why you need a buy-side business broker.
New York Private Equity Group, Inc., provides advice and direction in a consultative fashion for buyer and seller representation in the sale of companies, with ten million dollars to one billion dollars in revenue. Our services Include representing buyers and sellers through our buy side and sell side divisions and assisting companies in raising equity capital. Contact Us