WINNING STRATEGIES
Selling Owner Wants to Stay
This can be very tricky, especially if
they want to be in sales and be paid commissions. The buyer cannot pay a full
commission plus pay the selling owner
for the accounts. You can overcome this
obstacle by paying a small commission
on their existing clients and a much
higher one on new business or on growth
of those accounts.
Financing the Deal
Sellers want cash at closing, which is
extremely rare except in highly distressed
situations when the cash is very little, or
when a very large printer buys a small
printer. Sellers need to be in a position
to hold a note or to be paid royalties or
commissions on retained business. Today,
buyers hold the upper hand as there are
many more companies hoping to sell
that companies looking to buy. One way
to overcome this obstacle is to guarantee
a minimum amount on the royalties or
commissions. That guarantee may be
based on how much of the sales both par-
ties feel will safely move over to the buyer.
My experience has shown that retained
sales are between 50 and 125 percent of
the previous 12 months' sales. (Yes, a few
deals had sales increases.) On average,
I would estimate that 80 percent of the
sales remain in the deals that I have seen.
Transaction Costs
Usually, the seller and buyer pay their
own transaction costs for the deal. The
costs are for professionals such as attorneys, accountants, consultants, and brokers. If the seller is distressed or has little
cash, the buyer may offer to pay all the
transaction costs as they need to be paid
by or at closing. The buyer will only
do this if they are getting concessions
on the entire deal, and will incorporate
those costs into their total cost of the
acquisition.
Egos
Sellers are proud people and many built
their business from scratch many years
ago, or perhaps are second or third gen-
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w w w. M y P R I N T R e s o u r c e . c o m
eration print owners. Buyers have to be
aware that they have to be sensitive to
the selling owner's need to exit the business gracefully.
I am sure there are many other obstacles that our readers have experienced
and I would love to hear about your
experiences in M&A.; Any obstacle can
be overcome and I recommend using
professionals who have the experience to
make the deal work.
One tip though, is to never fall in love
with the deal. Always be prepared, even
at the last minute, to back away. Don't
overlook red flags that come up, especially during the due diligence period.
Acquisition is a wonderful way to grow
your business, especially in today's environment. Just do it smartly and slowly. ◗◗
Mitch Evans is VP and senior consultant for NAPL, concentrating on working
with quick and small commercial printers
(MyPRINTResource.com/10006811). Contact him at 561-351-6950 or mevans@
napl.org.
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January 2014 / QUICK PRINTING
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