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Proper Timing

To everything there is a season, and a time to every purpose under heaven: A time to be born, and a time to die; a time to plant, and a time to pluck up that which is planted; a time to kill, and a time to heal; a time to break down, and a time to build up; a time to weep, and a time to laugh; a time to mourn, and a time to dance. - Ecclesiastes 3:1-4

Proper timing is important. Too often, a company is made available for sale when the company itself, its products, or some other aspect of its business or industry is in a downturn. Potential buyers justify paying a high price for a company based on the anticipation of increased earnings. If the company forecast is bleak, the buyer will price the company accordingly. Obviously, the best time to sell is when the company is operating smoothly and its outlook is positive, either positioned for comfortable stability or poised for growth. Should the company have problems, you may decide to hold off selling until you have fixed the problems in order to get a higher price. However, problems such as legal or EPA issues are not obstacles to doing an InHouse Recap. While these impairments may postpone or prevent a sale, they do no affect the ability to do a Recap. Proper timing invariably makes it much easier to maximize a company's value.

Analysis & Valuation

Once an owner has made the decision to make a change, Valufinder thoroughly examines the company. We perform both an internal and external analysis. During this fact-finding stage, both Valufinder and the owner gain a greater understanding of the company's strengths and any possible weaknesses.

First, we examine the company's characteristics - the special combination of elements that makes the company unique. We look at the management, personnel, products, markets, procedures, relationships, and financial results over the past several years. We review the major facets of the business, including its operations, production, marketing, distribution, current financial condition, and future prospects.

Since the company exists in an ever-changing environment, we then analyze it within the context of the industry, as well as the current business and economic climate. We also consider its commonalities with other companies and review it in terms of comparable companies and recent sales transactions.

We also determine the extent to which company operations have been managed to minimize taxes. Although minimizing taxes is certainly a legal and proper business approach, it can have a considerable impact on the company's financial statements. The financials often need to be restated to reflect the earnings that a new owner could expect, without regard to the previous owner's tax considerations. Prospective buyers will only pay for assets and earnings they can verify, and for growth potential they can justify.

Accuracy

Every man has a right to his opinion, but no man has a right to be wrong in his facts. - Bernard M. Baruch

Valufinder helps to protect the owner's integrity. For example, we work closely with the owner to prevent the owner from unwittingly stating information that might be inaccurate or detrimental. This can happen in complete innocence or as a result of excessive zeal in attempting to complete a sale. Inexperienced sellers do not realize that, between the handshake (or signing of the Letter of Intent) on the terms of the sale with the buyer and the closing, the buyer performs, with the assistance of experts, an exhaustive examination process, called 'Due Diligence', where they verify everything they have been told and seek to uncover everything that they should have been told. A material discrepancy could possibly re-open negotiations, severely jeopardize the sale, or even lead to a post-closing lawsuit. It is not unusual for a buyer to terminate a sale at the first serious sign of bad faith. Valufinder assists the owner in guarding against this.

Identifying Problems & Solutions

Valufinder understands and appreciates that an owner often has a positive bias about their company, the expectation that its future will be bright. However, a realistic assessment may reveal that a number of strategic restructuring measures need to be taken to make that bright future possible.

From our analysis, we identify, with the owner, obvious potential problems that buyers might take into consideration in determining their interest level and price. With the owner, we determine what the solutions are and possible courses of action. The owner determines whether to fix them and wait for the results of the efforts to be reflected in the earnings, or we can identify the obvious problem(s) in the offering memorandum, offer possible solutions and possibly adjust the price expectations to allow for the buyer's efforts and increased risk. Nevertheless, the decision is the owner's.

Think not those faithful who praise all the words and actions, but those who kindly reprove thy faults. - Socrates

Valufinder has worked successfully with a number of companies that were in need of profit improvement or turnaround, or involved in bankruptcy. In these situations, the owners had been unwilling or unable to effect the changes necessary to improve the company's prospects and decided to sell. Although the timing was not opportune, Valufinder was able, in each instance, to demonstrate to the buyer, justifications for acquiring the company at a fair price. By utilizing a comprehensive approach in evaluating the company's strengths, and by speaking candidly about its problems and prospects, we were able to successfully complete the transactions.

Determining a Price Range

Upon completion of this in-depth analysis, Valufinder utilizes a number of evaluation procedures and analytical techniques to determine a range of values that we realistically believe can be expected from both synergistic industry buyers and other potential acquirers. The range of prices will vary according to a number of factors, including, but not limited to, the owner's size, margins, internal growth and its market position. In addition, the current economic cycle of the industry, the regional or national economy, the structure of the offer (whether it is all cash, cash and notes, stock, etc.), and the strength of the buyer's desire to acquire the company are also relevant.

Education is the ability to listen to almost anything without losing your temper or your self-confidence - Robert Frost

On occasion, we encounter an owner who determines his or her company's price more on an emotional issue or point of pride, rather than on a realistic evaluation of current markets, economics, and risk. A seller who insists on a price that is unrealistically high most assuredly dooms any possible sale. We strongly advise sellers to avoid such unrealistic expectations. It is crucial to recognize that a failed attempt to sell a company because it was overpriced can disrupt the business, depress employee morale, create confusion in business relationships, and even taint the company in the eyes of future buyers as "damaged or shopped goods".

It is important to understand that valuation is not an exact science, but an educated judgment. Ultimately, the value of a company is in the eye of the potential buyer. If you are interested in learning what your company might be worth in today's market please go to the Owner Valuation Section.

The Presentation

Unquestionably, there is a direct correlation between the quality of the presentation of the company to potential buyers and the price the owner will receive upon sale. Since Valufinder has made many presentations to buyers of companies, we know what types of information a buyer requires and precisely what to include in a presentation to ensure that even preliminary discussions are meaningful and productive. Further, the presentation enables a prospective buyer to make a preliminary offer without the need for visiting or otherwise disrupting an owner's schedule and the company's employees and operations. The owner then selects from the highest offers, the buyers with whom he wants to have further conversations.

Facts mean nothing unless they are rightly understood, rightly related and rightly interpreted. - R.L. Long

Offering Memorandum

A primary service that Valufinder provides to a seller is presenting the company's strengths and characteristics to the buyer in such a way that the buyer becomes enthusiastic about the opportunity the acquisition may offer. We present our description and analysis of the company in a prepared format, commonly referred to as an offering memorandum.

The offering memorandum summarizes the vast amount of information we have compiled about the company. It describes the business, its organization, and its products and services. It discusses the company's production, marketing and distribution. It details the company's assets, sales and earnings history. Most important, the offering memorandum demonstrates to the buyer the value of the company and the reasons for paying a price that reflects that value, both in terms of the company's current profitability and its future earnings and growth potential.

Creative thinking will improve as we relate the new fact to the old and all the facts to each other. - John Dewey

It is noteworthy that the offering memorandum does not include the range of values Valufinder presents to the owner. A buyer who is given a range of values at the outset tends to focus attention on the price, and not on the true value of the particular company, its position in the marketplace and the many other elements that ultimately determine its actual value and price. We let buyers determine their own prices, which in certain cases can be higher than what we initially anticipated.

To facilitate the preparation of the offering memorandum and to manage the bidding process, we use sophisticated and specialized financial software, which enables us to assess bids from prospective buyers. We also create a presentation that reflects the seriousness of the owner's commitment to sell and enhances the professional image of the company.