What are reps and warranties, and why are they so important? When selling my mid-size business, what do I need to know before signing a purchase agreement containing representations and warranties? Reps (short for “representations”) and warranties are statements of facts regarding a company’s business, assets, liabilities, and operations. They can relate to the past, present or future, and are included as one of several critical clauses in a purchase agreement. A representation is a statement of fact. If a representation is untrue, it is “inaccurate.” For example, a seller may represent that the assets of the business are in good repair, that all inventory is salable, that there are no hazardous substances used in the business, that the business has operated in compliance with all laws, or that the seller has the legal capacity to sign the purchase agreement. A warranty is an assurance. If a warranty is untrue, it is “breached.” For example, a seller may warrant that they will operate the business in a regular and normal manner and will comply with all laws until closing, or that they will pay all payroll taxes that will come due from past operations up to the time of closing....

Fun fact: In 2020, almost half of Amazon’s sales came not from Amazon directly but from third-party sellers. And two-thirds of those independent sellers -- or more than two million retailers worldwide -- used Amazon’s FBA (Fulfillment by Amazon) platform. With FBA, sellers of products are able to tap into Amazon’s order fulfillment and shipping services to distribute their wares. Hence, the FBA mantra: Sellers sell, Amazon ships. This information in this article is for owners of Fulfillment by Amazon businesses or those teaching others how to sell on Amazon. Some of these principles will apply to Amazon Delivery businesses, but delivery businesses tend to operate more like local brick-and-mortar shops (albeit with a heavy dependency on Amazon). If you’re a seller of widgets, FBA might be the service for you. If you’re thinking about selling your widget-selling FBA business, Morgan & Westfield is most definitely the service for you. Check it out ... Table of Contents Minimum Requirements for Selling an Amazon FBA Business Prepare Your Amazon Business for Sale Reduce Dependency Increase Barriers to Entry Maintain Clean Financial Statements Create a Comprehensive Training & Transition Plan Develop a Persuasive Reason for Sale Prepare for Due Diligence Build Infrastructure...

Business Description: B2B Software for the Transportation Industry Let’s take a field trip! Today, we will look at the details and the decision-making process that went into preparing a specific company for sale in the competitive world of software providers. The subject company in this case study is a B2B software provider in the transportation industry that integrates multiple functions for fleets, such as accounting, scheduling, and payroll. The industry is fragmented, with sufficient room for niche products, and is not a winner-take-all market, as is the case with many industries in which software is sold. The majority of the company’s revenue is generated from a recurring quarterly support fee. The owners are retiring after operating the business for three decades. They wish to sell before a competitor introduces a new innovative product that may end up dominating the market, thus rendering their software obsolete and destroying the value of their business. The market is fragmented but ripe for consolidation, possibly by a large competitor who could vertically integrate software in the industry, or by smaller, more agile competitors who could out-innovate the company’s software and their value proposition. Where to start? With the value drivers, of course ... Table...

You don’t have to search too long to find opinions alleging that M&A destroys value. NYU Professor Aswath Damodaran goes as far as to say that asking an investment bank to fairly value an acquisition target is akin to “asking a plastic surgeon to tell you your face is perfect.” When the so-called father of modern valuations is so vehemently against the practice, one might wonder why the volume of M&A transactions continues its upward trajectory. Context is required here. Firstly, most academic studies on M&A use event studies to measure the success of transactions. That is, when news of the transaction is publicly released, we assume the stock market’s response to be a gauge of the success or otherwise of the deal (success, as always with the stock market, being a translation for “future earnings”). There’s at least one major flaw in this, which even academics will admit to -- it assumes that the stock market makes the right call all the time. Secondly, to give some context to Damodaran’s remark, he’s not arguing against the logic of M&A transactions as much as this may appear to be the case. His argument is based on the problem inherent in...

Morgan & Westfield helped sell Imago Dei, a creative art service firm with stable revenue growth, using a combination of bank and seller financing. The company was positioned in the market to target non-industry buyers and corporate executives with management or marketing experience. This allowed Morgan & Westfield to widen its pool of potential buyers. Our marketing strategy generated 106 buyer inquiries, and the business was sold in approximately ten months. Morgan & Westfield’s in-house appraiser increased the sale price by $75,000 by doing an internal review of the business appraisal performed by an independent party on behalf of the bank that financed the transaction. In this case study, we share with you a comprehensive look at how -- and why -- that deal went down. Table of Contents The Seller’s Background The Company The Assignment Seller’s Goals Team Pricing Strategy Key Value Drivers Positioning and Packaging Marketing Methods Process and Results The Deal Conclusions and Lessons Learned Client’s Profile The Seller’s Background Jeremy Wells is a serial entrepreneur and an artist who comes from a family of entrepreneurs. He started Imago Dei in 1999 in Ventura, California. He and his wife, also an artist, moved the business to Houston,...

Did you ever get to the top of the diving board, only to “chicken out”? That feeling of trepidation is not unlike what many buyers of small businesses experience, which often causes deals to fall through at the 11th hour. Sometimes after months and months of information-gathering and other due diligence. In this article, we take a look at wary buyers and other potential deal-killers, along with how to minimize their impact or prevent them altogether. Let’s start with the most common deal-killer of them all... Table of Contents Deal Killer #1: Inaccurate Financial Statements Deal Killer #2: Landlord and/or Lease Deal Killer #3: Buyer Fear What Happens if the Buyer Fails? Why Does any of this Matter? Tips for Managing the Buyer’s Fear Deal Killer #1: Inaccurate Financial Statements The number one deal killer when selling your business is inaccurate financial statements. While inaccuracies in financial statements can stem from hundreds of sources, the antidote is simple. Make sure your financial statements are accurate and up-to-date. And be sure to have the necessary backup material to support your financials (bank statements, receipts, invoices). The best option is to retain a third-party accountant or CPA to review your financial statements....

Day #1 “I have a buyer who contacted me last week and is interested in buying my business. I want to see what happens with this buyer before I do anything.” (Seller talking to us) Day #5 Seller talks to the buyer, and they schedule a meeting for next week. Day #11 Seller and buyer meet, and the meeting goes great. Seller calls us and says, “I think he is going to buy it. I want to hold off before we do anything else.” Day #13 Seller calls the buyer to move the ball forward. No answer. Seller leaves the buyer a voicemail. Day #16 No answer from the buyer. Seller calls buyer again and leaves a message. Day #20 Still no answer from the buyer. Seller calls a third time and leaves a message. Day # 25 No answer from the buyer yet. Seller calls a fourth time and leaves a message. Day #28 The seller calls us, exhausted, and doesn’t know what to do. We hear this story all the time from our clients. What has happened here, and what can be done about it? Why do interested buyers disappear? Buyers are like everyone else -- they’re busy...

Making the decision to sell your business is one of the most important choices that you will have to make as a business owner. Selling prematurely can lead to unexpected surprises in due diligence, lower valuation by prospective buyers, and even an inability to close the sale. Here are eight signs that your business may not be ready to be sold. If you are planning to sell and one or more of these apply to you, dedicate some time to resolving these issues -- it will make all the difference. You May Not be Ready to Sell Your Business if: All of the information necessary to run your business is in your head. Your business should be able to run without you. This involves streamlining, automating, and documenting your processes. Your financial documents are not in order. Inaccuracies in financial statements are a red flag to potential buyers. There can be no cutting of corners when it comes to the business’s financial statements. Get your documents in order well before you ever plan to list your business for sale. Pre-sale due diligence has not been performed. Once you have accepted an offer, the buyer will perform due diligence, which will...

Congratulations on the decision to sell your business. As with any complex multistep process, you should begin at the beginning -- starting with preparation. Preparation makes execution look effortless. Considering that the sale of your business will likely be the largest sale you will ever make in business, it is foolish to neglect preparation. Unfortunately, only a small proportion of business owners plan their exits by giving this major life decision the thought and attention it deserves. Why? Most entrepreneurs have a strong bias toward action. Once they have decided on a course of action, they prefer to dive right in and figure things out later. You must realize, however, that a lack of preparation will extend the time frame of the sale, reduce the cash you put in your pocket, and lower the chances of a successful transaction. Every exit is different, and each exit must be planned. There is no templated process you can follow to prepare your business for sale. The preparation stage involves reviewing a number of steps, prioritizing those steps, and then taking action on those steps. Regardless of your position, be forthright with us regarding how much time you can spend preparing your business...

According to recent studies, the average seller has to talk to 40-plus buyers to sell their business. That’s a time-suck if there ever was one. Moreover, many sellers also quickly get frustrated when buyers do not return phone calls or emails or randomly just disappear during the sale process. Fortunately, there’s a better way. A method that’s efficient and highly effective. It starts with drawing up a fact sheet known as a Confidential Information Memorandum (CIM). A CIM provides pre-screened shoppers with answers to basic questions about your business before they even get a chance to ask. You don’t want your CIM to be an open book, mind you. The idea is to give qualified buyers just enough information to whet their appetites so that they’ll want to know more. CIMs are one of our specialties at Morgan & Westfield. In the article below, we outline the most common questions asked by buyers, along with a suggested table of contents that you can use in drafting your own CIM. Read on for complete overview of the process. Table of Contents Why Can’t Buyers Just Come Look at My Business? What is the Most Efficient Way to Sell My Business? This...