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OIL AND GAS
"I had heard good things about them and
they lived up to their reputation …we set the price, and
I got out of the way. VR Dallas made retiring fast and
easy. " |
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OIL AND GAS
"The VR Dallas team did an excellent job preparing the business for the sale process. Ultimately getting more than what I was expecting." |
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MANUFACTURER
"Once the business was listed with VR Dallas it was only a matter of months before we had a willing and able buyer…and they sold it confidentially" |
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SERVICES
VR Business Brokers sold my business in 3 1/2 months for
30k more that I was originally asking... |
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RETAIL
"VR sold my businesses while maintaining Strict confidentially!" |
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RESTAURANT
"...I didn't know I would have so many choices. I
met with your office owner to discuss a restaurant opportunity
and three months later was operating my own fleet of 4
charter fishing boat." |
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The first step in placing a value on your
business is identifying the "Right Buyer."
The range of values that different Buyers
may be willing to pay is staggering. Buyers
pay for opportunity. The Buyer who perceives
the greatest opportunity is the Buyer willing
to pay the most for your business.
Identifying the "Right Buyer"
requires understanding the four main classifications
of Buyers. |
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These are the very best Buyers. They almost always
pay cash and buy at a premium. Typically public
or very large private companies, their decision
to buy usually revolves around considerations of
economies of scale, new channels of distribution,
new technologies or other integration considerations.
To be attractive to a Strategic Acquirer, your company
should fit most, if not all, of the following criteria:
Sales in excess of $7 million
Proprietary product or process
Unique market presence or share
Synergistic fit with the acquirer
Suitable management willing to stay
Sometimes a business that does not meet these criteria
can be the target of a "strategic acquirer."
A good example might be a small business that an
acquirer believes could be franchised or expanded
into a chain of similar locations. At VR we look
for every reason that may make your business attractive
to a strategic Buyer.
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This group of Buyers emerged as a force when the
"merger mania" of the late '80s ended
and Buyers began to recognize the opportunities
in the private sector. Lower interest rates have
also spurred the growth of these Buyers by encouraging
the formation of investment groups whose purchases
are made using a "schooled" approach.
There are two distinct types of Sophisticated Acquirers
and the acquisition criteria they use are as follows:
Private Equity Group
Revenues from $5 million upwards to $100 million
Earnings of $1 million for platform acquisitions
Earnings of $250k minimum for add on acquisitions
Investment of considerable cash or equity
Willing to pay 3 to 6 times earnings - more in rare
situations
High Net Worth Individuals
Revenues from $2 million upwards to $20 million
Looking for a business can expand exponentially
Expect 6 figure future earnings
Expect to leverage a part of the purchase
Expect the Seller to finance part of the buy
Pay 3 to 5 times earnings
Sophisticated Buyers sometimes buy companies smaller
than the outlined criteria. A good example of a
business attractive to the sophisticated Buyer is
a light manufacturing business expandable into multiple
markets through expanded marketing and solid management.
By far the largest group of Buyers, Main Street
Buyers are the most common Buyer for Main Street
and Upper Main Street businesses. These Buyers tend
to focus solely on present and past earnings and
will not typically pay a price based on future earnings.
The Financial Buyer is buying a job, and will consider
a price fair if the transaction meets the following
criteria:
A living wage typically commensurate with the initial
investment
A modest return on the cash investment, willing
to pay 1.5 to 4 times earnings
SBA or Seller financing
A good fit with their skills and the opportunity
to make the business better
Many small businesses are purchased by Financial
Buyers. VR maximizes the amount the Financial Buyer
is willing to pay by finding the right Financial
Buyer for your business.
Unless they are doing a consolidation or roll up
in their industry, this Buyer is almost always the
Buyer of last resort. If you have to sell, the Industry
Buyer is usually the only Buyer you will attract.
The difference between the Industry Buyer and all
others Buyers is the value of goodwill: Most of
the time Industry Buyers won't pay for it. The Industry
Buyer typically will pay:
Liquidation value
Book value
Adjusted book value
All too often business owners who are attempting
to sell their business on their own say, "Why
not? I know everybody in the industry." Unfortunately,
many times, a sale to the industry Buyer means a
deeply discounted sale.
The first step in selling your business is understanding
what it is worth. VR Business Brokers can assist
you with a professional business valuation.
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