There comes a time when there is a chance to expand your business by buying another company.  But do you really know when it is the right time or which business is actually the best fit for your Company?

When the time comes, who will you talk to about adding another business to your Company?  Do you know all the quesitons to ask during the process to make sure that you are not walking into a disaster? 

What tools do you use to analyze the opportunities?  Have you really given enough thought to the use of your most precious resource in this manner?

We have helped several dozen clients explore the pricing, financing, and structure of business deals.  We assist with reviewing the documentation to ensure that unanticipated liabilities do not pop up to cause problems after the deal goes through.  Our goal is to help you maximize your investment return.

Yes, many firms help their clients by performing "due dilligence" steps.  But due to our relationship as your Constant Profit Advisor, we do more than just check the boxes on some checklist.  We conduct several indepth analyses to make sure the business is a strong strategic fit and that the terms are an excellent use of your resources.  We look at ways to maximize the positives of buying another busienss and try to imagine all the negatives that might arise so we can minimize their impact.

As your outsourced CFO, we are always looking at your opportunities.  We are constantly having meetings with bankers and other funding sources to ensure that you will have access to funding should the need arise.  Or, as is most often the case, provide other creative financing options since banks are not financing deals like they used to.

We also work closely with your attorney in preparing the right documents for the deal.  Yes, in addition to our ability to speak "bankerese" we also are quite fluent in "legalese".  With our intimate knowledge of your business and its strategy, we can ensure that the deal goes as smoothly as possible.

Congratulations!  You have been approached by a competitor who wants to sell out to you.  They are ready to retire, decided they couldn't compete, financing is gone, you name it and they have the reason.  But, are you really sure that this is the right deal?

Fewer than 10% of all buyout deals like this actually work out.  Most die for lack of financing.  Some deals are stopped because there really is not a good fit for the businesses to work together.  Others, sadly, actually do go through and then cause misery for everyone.

Don't rush the deal.   Have it analyzed for more than just the "net present value". 

Does it really add value to your existing business?

Are the customers really transferable?

Can your current staff handle the new customers?

Is financing available?  Are the terms reasonable?

Be patient, ask lots of questions.  And, even if you are not a client of the Constant Profit Advisors, we are happy to discuss our thoughts on your plan. 

How can you tell if the price you are about to pay is the right price?  For our advisory clients, we run the purchase through the Constraint Improvement Model which shows us if the price is realistic and is the most effective use of the Company's most precious resource.

For those who are not clients, make sure you have your advisor run a cash flow projection based on the Seller's Discretionary Cash Flow.  This projection looks at the amount of money left over each period and compares that to the debt service of the deal.  It must be adjusted for the seasonal nature of the business. 

You should also make sure that your advisor runs a sensitivity analysis so you know the likely cash flow under worst case, best case, and most likely case. 

Now, all this really does is give you a degree of comfort that the current cash flow of the seller pays for the debt used to buy them.  There may be times when the seller is worth a little more of your money and then there are times when you should not put a penny into a deal.  If you want to know more about when and why, give us a call or send us an email to ask us our thoughts on the right price to pay.