Prepping Your Business For Sale: A Transaction Advisor On Three Mistakes To Avoid | Forbes

JAN 3, 2016 @ 05:00 PM 

Amy Feldman

“There’s plenty of money looking to buy companies,” says Sylvie Gadant a partner at Citrin Cooperman, and head of the firm’s transaction advisory services. “If you’re a business owner looking to sell, it’s a good time, and that’s true for every industry. We’ve seen it in consumer products, apparel and retail. It’s not just tech. Valuation multiples are very generous.”

While others talk of a slowdown, Gadant says she’s not seeing it yet in the middle-market space. She’s advised clients – both private equity firms looking to buy and, increasingly, business owners looking to sell – on more than 200 transactions, valued between $5 million and $300 million.

But just because now is a good time to sell – or to bring in a minority investor – doesn’t mean that business owners don’t make mistakes, and sometimes serious ones. Here are three of the errors that Gadant says she often sees:

Valuing the business at what they need rather than what it’s worth. Business owners are notoriously optimistic about their operations, but there’s another mistake Gadant sees: They’ll base their valuation on what they need for retirement rather than on the operations of the business itself.

Forgetting to take taxes into account. Gadant has worked on a number of transactions where sellers didn’t pay attention to the tax ramifications of the sale – and once they realized what those after-tax proceeds would be, they freaked out. “The day before the close, they sit down with their advisor and say, ‘This is not enough money for me to retire,’ and then they back out,” she says.

Losing focus on operations while the dealmaking process drags on. Even while you’re doing a deal, you’ve still got a business to run. “I’ve seen situations where the owners took their eyes off the business, and either the sales numbers or the overall profitability of the business started declining,” Gadant says. “I’ve seen that happen quit a bit.” In the case of a chocolate factory, for example, after its sales numbers dropped significantly, the deal fell apart. A similar blow-up happened with a group of fitness centers. Don’t let that be you.

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For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com or my personal website at www.BuySellFLbiz.com.