Frequently Asked Questions

General

Can you help me find a business to buy? No, we do not perform searches for buyers. If you’re looking for someone to represent you in your search process, we recommend looking for a buy-side M&A advisor.

What’s a strategic buyer? A strategic buyer is a company or investor that seeks to acquire companies or assets whose acquisition will add synergistic value to its existing portfolio. Strategic buyers are often in the same industry as the target companies, but not always. For many companies we represent, we focus our efforts on attracting strategic buyers who commonly pay a higher purchase price and offer the seller a shorter transition period.

Financial Statements

Can my accountant value the business? A CPA’s code of ethics precludes them from appraising or valuing a business unless they have substantial M&A experience or hold an appropriate appraisal certification or designation. Anyone tasked to value a business should have real-world experience in M&A, not just theoretical knowledge. If your CPA offers to appraise a business, we suggest asking them what designation they maintain and how many M&A transactions they’ve been involved in.

Can I request to see the business’s tax returns or bank statements? Tax returns, bank statements, and other sensitive documents are only released after a letter of intent is accepted, during the due diligence period.

What is the difference between SDE and EBITDA? SDE includes the owner’s salary, while EBITDA deducts a reasonable salary for a full-time manager. SDE is most commonly used when an individual is buying a business, and EBITDA is most commonly used when a company is the purchaser.

Due Diligence

What is Due Diligence? Due diligence is the systematic process of gathering and analyzing information necessary to help buyers and sellers determine whether to proceed with a business transaction. It includes a review of quantitative information, such as sales and financial data, and qualitative information, such as an assessment of the existing management, internal systems, and licenses.

Can I talk to the seller’s employees? No. Please do not approach any of the business’s employees. Employees and management will likely not be aware of the sale and would fear the loss of their jobs or major changes to their roles.

Transaction Structure

What does the purchase price include? The price generally includes all assets required to operate the business, with the exception of cash, the owner’s personal assets (laptop, phone, vehicle, etc.), and real property.

Is inventory included? Inventory is customarily paid in addition to the purchase price for smaller transactions, though it is sometimes included if it’s a nominal amount. Working capital, which includes inventory as one of its components, is customarily included in larger transactions.

Closing

How long does it take to close? On average, it takes two to four months to close after the letter of intent is accepted. We have closed some transactions in as little as one week, while others have taken more than six months. The process can take longer if third-party financing is involved or if complications arise.

How are equipment leases handled? The seller can either pay these off at closing, or the buyer can assume the leases. Either way, this should be clearly outlined in the purchase agreement.

Will all debt be paid at closing? Yes, the business’s assets should be delivered free and clear at closing. Any debt to be assumed should be identified, including the amount of the debt and the terms of repayment.