In This Issue
Timelines for Closing
|When we put a business under contract or Letter of Intent (“LOI”), an important consideration is, “when is the optimum closing date?” Although the usual answer is “Yesterday,” there are two lines of consideration that we usually address: 1) When can we realistically get all of the pieces, such as financing and due diligence, completed; and 2) Are there operating and tax considerations that come into play. Below is a brief discussion on both of these considerations.
Financing and Due Diligence – In planning for estimating a realistic timeline for closing, we look at several items, including the size and complexity of the transaction, if the real estate will be involved, how organized the Seller is, how organized is the Buyer is, and whether or not we will need third party consents. Generally, larger, more complex transactions require more time to get closed. If the Seller is reasonably organized, we can usually get a small transaction with an individual Buyer completed in four to six weeks from the time the Seller and Buyer come to a meeting of the minds on the major deal points. If real estate is involved, we usually factor in another two to four weeks to allow for the receipt of appraisals and environmental reports.
If the Buyer is a Private Equity Group (“PEG”), we anticipate that the PEG will be using a large M&A accounting firm for due diligence. This will require a more detailed due diligence, inclusive of a Quality of Earnings Report. Transactions with PEGs typically take three to six months to close. If third party consents, such as Landlords or Franchisors, are required, obtaining those consents can also extend the timeline for closing.
Operating and Tax Considerations – Tax planning can be an important factor in selecting a closing date. As most businesses use a calendar year for tax reporting purposes, it is fairly common to schedule closings to be effective on December 31 or January 1 depending on the circumstances. For example, due to a significant change in the tax law, one year we had three closings on December 31. Other operating considerations that often influence closing dates include payroll cutoffs and billing cycles.
Meeting the timelines established for a closing can be critical and stressful, so it is important to be organized and realistic. Allocating enough resources, including outside third parties such as your accountant and attorney, can assist in the process and allow the business owner to focus on running the business through closing.
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.
Ronald V. Chernak
Inspiring business relationships since 1982!
|When selling a business, be sure to contact an experienced team of Business Intermediaries to guide you through the process and work to keep your sale on track.
Environmental, Erosion Control, and Landscaping Business #1116
Established in 1998, this company offers comprehensive environmental solutions, erosion control, perimeter control, and revegetation solutions for government entities, commercial developers, and the Mining and Oil & Gas industries. It also specializes in storm water management and landscape and irrigation projects and has some on-going maintenance agreements. Most of the company’s work orders come from government agencies in Colorado, but it also has the capability to perform work in New Mexico, Arizona, Wyoming, and Utah. We believe this would make an excellent acquisition candidate for an industry purchaser or a strategic acquisition for a construction-related company.
For more information,
contact Ken Galecki
Niche Installation for Commercial Construction #1816
This profitable Colorado Front Range business specializes in Division 10, the final stage of the construction cycle that provides and installs interior architectural products. No specific licensing is required. The company does a wide range of commercial jobs for military installations, governments (including schools), large retailers, an d much more. The clients are primarily general contractors. The market area is primarily Colorado, but includes other st ates as well. The business enjoys low overhead with solid profit margins. The company is having one of its most profitable years, with January – August 2016 gross revenues at $1,275,000 and Seller’s Discretionary Earnings of approximately $247,000. There is also a backlog of about $1.1 million. A profile buyer would be: 1) an industry acquirer looking to expand; 2) a construction company in a different segment; or 3) an individual experienced in construction.
For more information,
contact Ron Brasch
Relocatable B2B Online Technology Distributor #1616
This business nets steady profits as an online distributor in the storage replication industry. As there are established, long-time accounts with key suppliers, the business can easily be run and scaled by a new owner or integrated as a solid add-on opportunity for a synergistic buyer. The customer base is well diversified with many repeat customers across the US, making the business easily relocatable, if desired. With very little training, this business should provide an immediate cash flow with plenty of room for steady growth.