Blog

From the category archives: Certified Business Brokers News

Mergers & acquisitions are one of our favorite business broker topics. These deals can be structured in very creative ways, from financing to ownership. Learn how exciting M&As can be!

Initial Common Questions Buyers Ask Sellers When Looking For A Business To Acquire

When looking for a business to purchase, most prospective buyers have an initial list of qualifying questions they ask an owner of a business they are interested in. In addition to this baseline information, buyers may use the first couple of meetings or calls to get a clearer understanding of the business and to assess its risks and upside aspects.

Read the rest of entry »

Is Lending for Business Acquisitions Back to Normal?

This is the question I get more than any other and my answer is YES, Absolutely Yes!! My answer may surprise you, and some may even want to argue, but if you have been in the lending or business brokerage industry for more than 6 or 7 years I think you will agree. When I look back to the 1990's and early 2000's when I was asked, "What does it take to get a business acquisition loan?" I would tell them a borrower must be able to CONVINCE the lender of the following: The ability and willingness to pay all of their obligations on time. The specific experience needed to own and run the business. They had enough cash to make a substantial investment into the business. They had some tangible assets to back the loan should things go bad. Today when I am asked "What does it take to get a business acquisition loan?" I tell buyers and brokers exactly what I did 10 and 15 years ago. The trouble with many individuals today is they are sitting around waiting for things to get back ...

Read the rest of entry »

Buying a Business - Make Your Acquisition A Good Investment

Future profit potential, and how much you can impact that future, is the most important intel you can have when purchasing a business. Future growth will ultimately be the measurement of the merits of the investment and is key to your achieving a good return.   One the most serious shortcomings when evaluating an enterprise is to focus only on historical performance without considering what the business might be capable of under new management. While its history provides some insight, it is what will happen to the company in the future that is key.   In any conventional evaluation process, the buyer will pay for what has been achieved but will buy for upside potential. Successful acquisitions are all about generating a premium on the investment. The major "determinator" in considering an acquisition should be how a new owner can improve the business. Probing for underlying growth opportunities that are ripe for exploitation will help achieve that goal.   Some factors to consider in ...

Read the rest of entry »

Earnouts - How and Why are They Used in a Business Acquisition?

An earnout is a type of payment agreement which is sometimes used in a business acquisition. Under an earnout agreement, the seller receives part of the purchase price up front, and additional funds over time. The terms of the earnout are written into the sales contract. An earnout can be used for different reasons: To tie the acquisition payout to future performance An earnout, in a business acquisition context, is an arrangement in which the buyer doesn't pay the entire purchase price up front but agrees to pay a certain amount now and more later depending on how well the business performs in the future. To bridge the pricing gap If there is a valuation gap between the buyer and seller, and there always is, it is a way to bridge the gap. The seller may be placing a heavier emphasis on the company's projections, and the buyer placing most of the company's value on its present and past performance. An earnout agreement is a useful tool to get the deal done. In an uncertain economic climate, the ...

Read the rest of entry »

Private Equity Groups are Hunting for Business Acquisitions

Private Equity Groups have excess capital to invest and are looking for business acquisitions. One of the major market shifts for the acquisition of privately-held companies has been the growth in the number of Private Equity Groups (PEGs) over the last decade, they number in the thousands. PEGs have become key players in business acquisitions. They offer flexibility as a liquidity source, giving entrepreneurs the ability to take some cash off the table, recapitalize their company or simply sell and move on. Private equity refers to buyout groups that seek to acquire ongoing, profitable businesses that demonstrate growth potential. The private equity market had traditionally been restricted to acquiring larger companies. But increased competition for those larger operations, the greater growth potential of smaller firms, and an easier path to exiting the investment of smaller firms in the future have played a role in attracting PEGs to smaller companies. PEGs are typically organized as limit ...

Read the rest of entry »

Credit Crunch and SBA Lending for Small Business Acquisitions

Despite the current credit crunch, well capitalized community banks still have money to lend for business acquisitions. The SBA 7(a) loan program is an excellent way for both bank and borrower to tread through this troubled business environment. While many large financial institutions are licking their wounds from the mortgage mess and the credit market contraction, community banks who are well capitalized and who traditionally don’t participate in these arenas are still a viable source of funds for small business acquisitions. Because SBA loans have features that reduce risk for banks, they are a valued tool for banks in this environment. And because they offer lower down payments and longer terms, the resulting lower monthly payments are attractive to borrowers. The US Small Business Administration (SBA) enables private lenders to make loans that they ordinarily would not be able to make by guaranteeing that a portion of the loan proceeds will be repaid to the lender in the event of a default ...

Read the rest of entry »