The decision to move forward with successful business acquisitions is a big decision, as well as a substantial investment of time, money, and effort.
There’s a big upside to this decision, such as the ability to build critical mass, improve market position and brand awareness, and tap into opportunities in new markets and product offerings. In addition, economies of scale can help your company expand into new territory and take advantage of operating synergies and administration.
The acquisition process typically is broken down into four stages:
- Pre-acquisition,
- due diligence,
- deal negotiation,
- and post-acquisition.
Independent Business Valuation For Successful Business Acquisitions
An integral component of the pre-acquisition and due diligence stages of the acquisition process is conducting an independent valuation by a business professional specializing in the valuation of companies for mergers and acquisitions.
This professional valuation should be your yardstick for managing your expectations about your company’s market value. As the person most closely ingrained with the operation, the business owner’s opinion may be subjective; business owners tend to have somewhat unrealistic ideas of their business value.
That’s the rationale for an independent valuation. It will give you a more accurate idea of the worth of the business you want to buy and keep you from overpaying. A professional will examine not only your prospective business acquisition, but also the competition, the Sacramento area economy and business climate, and past business transactions similar to your situation.
Stick with what they tell you. If you have a preconceived and unrealistic idea of the value of the business purchase, you set the stage for an unsuccessful and difficult sale. The process becomes frustrating, tedious, and stale.
Your business advisor will prepare you for a successful business acquisition with the least amount of stress and with the best outcome
Your business advisor, who will be experienced in M&As, will eliminate much of the time and effort of the sales process so that you can focus on preparing for the new business operations. A business broker will play a key part in the negotiation stage of the acquisition process, including:
- Communicating with decision-makers at the target company, including your understanding of their business and sharing your target company research;
- “Selling” or promoting your company’s strengths, upside, and plans for the company targeted for acquisition; and
- Routinely relaying your company’s strategic wins and successes;
The acquisition process is frequently very emotional. It requires a deft and experienced hand at the helm. While it’s your money and your potential business growth, you need to give an expert some leeway to help you to a successful result.
Think of the caption of the ocean liner. Even the most highly-regarded captain welcomes aboard a local professional pilot to take the ship through dangerous waters and to complete the berthing operation in port. That’s what Andrew Rogerson will do for your business opportunity. He has been in the Sacramento business community for many years, helping to close business sales, acquisitions, and mergers.
The acquisition process generally will take anywhere from five to 10 months. Your business broker knows that anything longer than that may signal untold obstacles or issues. This is the time to determine what those issues are and how and whether to continue with the acquisition process.
As you can see, there’s quite a bit of information to keep straight when acquiring a business. Working with a qualified and experienced business broker will pay dividends. Your business valuation consultant will help you through the process and make a wise decision that will build your business for the future.
When Selling or Acquiring Your Business with Real Estate
There is simply no “one size fits all” approach whether selling or acquiring a business with real estate. Here are some other factors to consider.
- Some California business owners that also own the Real Estate, simply prefer to keep the Real Estate and offer a lease to the buyer of the business. If a decision has been made to sell the business, before a final decision is made about whether to also offer the commercial property for sale or not, the following are important items to consider.
- How critical is the Real Estate to the operation of the business? For example, if the business is a gas station or a car wash built on the Real Estate the business operates from, it may be hard to sell just the business and offer a lease to a buyer. This is because the business cannot easily and readily be moved
- Is the Real Estate just land or does it include buildings or structures on the Real Estate? If it includes buildings or structures, are they in good condition or do they need repairs and maintenance? If repairs and maintenance are required, is the seller willing to pay those costs so the buildings and structures are brought up to date and the latest building code?
- The buyer will probably want a lease for the Real Estate. If the buyer wanted a three- or five-year lease with options but only stayed for the initial lease and then left, would the Real Estate owner easily find a replacement tenant? If the buyer is getting an SBA loan, they will require a lease to match the length of the loan which is typically 10 years.
- Has the owner or seller of the business been allocating an amount for rent and is this amount a market rate or the amount the owner of the Real Estate is willing to accept as rent? If there is no rent allocation or the rent is below the market rate and the buyer has to pay a higher rent, it will lower the value of the business as expenses are higher.
- This also applies if the owner of the business has not been paying the property taxes, building insurance, or maintenance of the Real Estate and now expects the buyer of the business and Real Estate to cover these costs.
- Are there any environmental issues on, or near the real state? If so, this may lower the value of the Real Estate and the business.
- When was the last time that local zoning ordinances were checked so if the Real Estate is put on the market, it is ‘smooth sailing’ to close the sale?
- Related to local zoning ordinances are local Use requirements typically defined at the municipality level.
- Is the Real Estate part of a flood zone?
- Sample report of California Commercial Real Estate with basic property overview, environment, building, value, and more.
- Sample report of California Commercial Real Estate with climate check including flood, fire, storm, heat, and more.
- Sample report of California Commercial Real Estate property of the environment with regulatory summary and neighborhood.
- Sample report of California Commercial Real Estate flood certificate.
- Sample report of California Commercial Real Estate with property condition report, site summary, building summary, hazard risks, and more.
- Sample report of California Commercial Real Estate estimate of value.
How to Sell a Commercial Property Fast with a Business in California?
Are you looking to sell your commercial property and business in California?
A crucial first step is to get an accurate business valuation.
This is not only important for you as the seller, but also for potential buyers and lenders if the buyer needs financing.
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Other Commercial Real Estate topics to consider.
Commercial Real Estate Valuation
Commercial Real Estate Due Diligence
