From time to time, we feature success stories of new buyers/sellers across our offices. The focus is on them, with mention of the individual Sunbelt office that made their purchase/sale possible.
But we’ve never taken you behind the scenes of a sale that didn’t go through. Until now, that is.
Yet to all the parties concerned—the seller, the seller’s family, their accountant, the to-be-buyer, and even to our business brokers—this “dead deal,” too, is a success story.
It’s a mindset that sets our business brokers apart from others selling businesses. And if you’re thinking of selling, the details will give you confidence that our approach will equip you to make a better decision and gain a better return.
While we can’t reveal the name or nature of the company that was for sale, its financials, location or the individuals involved, we can tell you this story unfolded recently in one of Canadian offices. The figures we’ll use are proportional to the actual numbers in the transactions.
It’s a great reflection of the unique process we use across our offices and the value of the co-operative relationships our professionals form with yours. While the office in this story put in some 150 hours or so without the compensation of a sale, we know that our brokers provided great value for all parties concerned and that we have forged relationships that will benefit all in the future.
Behind the scenes of the sale that wasn’t
Company X first met with us in mid-2015. Working closely with another Sunbelt office, we developed a most probable selling price (MPSP) that was in fact some 60% lower than the value the company’s accountant had given the owner. We developed a very good relationship with the accountant, who discovered his error in using a real estate process of valuation with an unrealistic cap rate. The accountant explained his error to the owner, then worked with us to show the owner how Sunbelt’s valuation made sense.
We provided our MPSP of about $555K to the owner in early November 2015 when the company’s sales were still quite strong. Our research on the market had factored a drop of at least 6-8%, but the owner did not agree. Not wanting to “give it away,” the owner listed the business at $700K.
He received a good initial offer of $500K from our existing pool of buyers. Although the price likely would have gone to $600K, the owner countered full price and scared the buyer off.
We received two higher offers early in 2016; although they were still below the owner’s asking price, the owner was receptive as sales were dropping and he was ill. We then worked closely with the seller’s staff and lawyer to gather the required materials and keep everything for the intended buyer on track.
While events that followed derailed the completion of the deal, both sides were impressed with our competence, ethics and the value we place on our client’s best interests.
We share, with permission, the words of our client.
As per our conversation, we have decided that this is not the best time to sell the family business. With the [regional] economy downturn, it will be too difficult to obtain a price that reflects the years of hard work put in by my father, and myself. We will weather 2016 and see gains in the next few years after.
Thank you for all the help, and advice you have given through the process up to now. The Sunbelt team has given us tools to use in the future for business planning, development and growth. It has been a pleasure getting to know you, as a broker, and as a person. In the future, when the numbers are in our favor, we will look to Sunbelt once again.
As a footnote, the to-be buyer—a successful businessman with multiple business experience, a good resource team and involvement in an entrepreneur mentorship—said that he felt that this was the best experience in working with a broker and that we were really digging into who he was and what he was looking for.
- Our business brokers and office owners have the right stuff
We’re fiercely proud of the calibre of our business brokers and office owners. Consistently, they choose to “do the right thing” and, in an age of abundant selfies, when no one is recording it.
Likewise, you won’t find the proceeds of such acts on paper. They’re embedded instead in the hearts and minds of those they’ve helped along their way.
And commonly for our brokers, it factors into why they chose this career in the first place.
- We recognize that most business owners have not prepared to sell their company and the process of transition — company analysis, MPSP, buyer selection, Letter of Intent, negotiation, due diligence and transition — is unfamiliar to them. When they decide to sell they usually gravitate to their preferred professional (accountant or lawyer) to figure out if, when and how to sell their company, and for how much. Most don’t even know what a business broker is.
Business brokers provide professional expertise to inform the decisions you will need to make in selling your business. It’s our job to get the right questions asked and answered. We work closely with the other tax, accounting and estate professionals you may have on your team. Think of us as guides leading you through all the stages and processes, maintaining confidentiality, negotiating offers, managing the due diligence, etc. to bring the deal to a conclusion that works for all parties.
- Our valuation methods help the client to make an informed decision, placing information they can understand in their hands.
We focus on the most probable selling price, which allows the client to really understand what they are likely to receive in a sale.
We look at a broad range of factors (value to buyer, range of actual multiples, market conditions, state of the business ++).
Other methods, details and accuracy aside, can focus on theoretical multiples that do not consider what the market is likely to pay.
- Our process is designed so we can provide provide the best value to the buyer and the seller.
If we can help enough other people to achieve their goals, we will achieve ours. It’s one of our core values.
We often end up suggesting to business owners that this may not be the right time to sell their business and we identify the value drivers and actions they should take prior to entering the market.
And consequently, as in this case, the owner realizes they need to keep the company and build it to secure the value they want.
In all cases we give our clients and their advisers solid information explained in terms they can understand, to equip them with what they need to make their own decisions.
Thinking of buying or selling a business?
Are you thinking of buying or selling a business? Work with ethical and credible brokers who look out for your best interests.
With more than 30 locally owned and operated offices in Canada and the largest number of certified professional brokers in the country, we have more exposure to the market than anyone else. Our brokers also have access to a team with a wealth of business selling experience in valuation and industry specific analysis.
More than half of our office owners are previous Sunbelt Canada clients so impressed by the quality of their experience that they joined the company.