What Makes a Deal Close?
For every reason that a pending sale of a business collapses, there is a positive reason why the sale closed successfully. What does it take for the sale of a business to close successfully? Certainly there are reasons that a sale might not close that are beyond anyone’s control. A fire, for example, the death of a principal, or a natural disaster such as a hurricane or tornado. There might be an environmental problem that the seller was unaware of when he or she decided to sell. Aside from these unplanned catastrophic events, deals abort because of the people involved. Here are a few examples of how a sale closes successfully.
The Buyer and Seller Are in Agreement From the Beginning
In too many cases, the buyer and seller really weren’t in agreement, or didn’t understand the terms of the sale. If an offer to purchase is too vague, or has too many loose ends, the sale can unravel somewhere along the line. However, if prior to the offer to purchase the loose ends are taken care of and the agreement specifically spells out the details of the sale, it has a much better chance to close. This means that a lot of answers and information are supplied prior to the offer and that many of the buyer’s questions are answered before the offer is made. The seller may also have some questions about the buyer’s financial qualifications or his or her ability to operate the business. Again, these concerns should be addressed prior to the offer or, at least, if they are part of it, both sides should understand exactly what needs to be done and when. The key ingredient of the offer to purchase is that both sides completely understand the terms and are comfortable with them. Too many sales fall apart because of a misunderstanding on one side or the other.
The Buyer and Seller Don’t Lose Their Patience
Both sides need to understand that the closing process takes time. There is a myriad of details that must take place for the sale to close successfully, or to close at all. If the parties are using outside advisors, they should make sure that they are deal-oriented. In other words, unless the deal is illegal or unethical, the parties should insist that the deal works. The buyer and seller should understand that the outside advisors work for them and that most decisions concerning the sale are business related and should be decided by the buyer and seller themselves. The buyer and seller should also insist that the outside advisors keep to the scheduled closing date, unless they, not the outside advisors, delay the timing. Prior to engaging the outside advisors, the buyer and seller should make sure that their advisors can work within the schedule. However, the buyer and seller have to also understand that nothing can be done overnight and the closing process does take some time.
No One Likes Surprises
The seller has to be up front about his or her business. Nothing is perfect and buyers understand this. The minuses should be revealed at the outset because sooner or later they will be exposed. For example, the seller should consult with his or her accountant about any tax implications prior to going to market. The same is true for the buyer. If financing is an issue it should be mentioned at the beginning. If all of the concerns and problems are dealt with initially, the closing will be just a technicality.
The Buyer and Seller Must Both Feel Like They Got a Good Deal
If they do, the closing should be a simple matter. If the chemistry works, and everyone understands and accepts the terms of the agreement, and feels that the sale is a win-win, the closing is a mere formality.
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Buying a Distressed Business
It is safe to state that Howard Brownstein, President of The Brownstein Corporation, is a true expert in providing turnaround management and advisory services to companies, as well as their stakeholders. Brownstein serves as an independent corporate board member for both publicly held as well as privately-owned companies and nonprofits. During his career, he has been named a Board Leadership Fellow by the National Association of Corporate Directors (NACD) and served as Board Chair and President of its Philadelphia Chapter. He also serves as Vice Chair of the ABA Corporate Governance Committee and has been named a Fellow of the American Bar Foundation. He has been a speaker at many of the world’s top universities including Harvard Business School and Wharton. Brownstein received his J.D. and M.B.A. degrees from the University of Pennsylvania.
Mr. Brownstein is considered to be one of the world’s top experts in distressed businesses. He believes it is essential to remember that not all distressed businesses are, in fact, the same. There is simply no way to know how bad things are for a given distressed business until one begins to “look under the hood,” and get a full view of what problems may lurk underneath.
Brownstein firmly believes that distressed businesses can represent a real and often overlooked opportunity for buyers. The recent economic downturn brought about by COVID-19 means that there will likely be a great deal more distressed businesses on the market in the coming months or even in the next couple of years.
Why is a Given Business Distressed?
Before you consider purchasing a distressed business, you absolutely must understand the core reasons for the distresses. Without a proper and detailed understanding of why the business entered a state of distress in the first place, it is impossible to clearly articulate why the business will potentially be valuable in the future. It is essential to be able to convey “what went wrong” and how the problems can be fixed.
Brownstein points out that while there are many reasons for a business to enter distress, two symptoms top the list. The first is cash flow issues and the second issue relates to management. Often it turns out that the management was simply not rigorous enough. He also notes that companies will tend to gravitate to external issues as a way to explain away their failure.
Of course, no two distressed businesses are failing from 100% identical causes. Brownstein suggests a series of questions that you need to ask when you begin exploring a distressed business.
- What is the business’ potential value?
- Is there something of value under the problems?
- Under better or different circumstances, could the business be viable?
These are all questions that your business broker or M&A advisor can assist with. It’s important to gain a clear understanding of the business’ past, present and future.
Copyright: Business Brokerage Press, Inc.
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Considering Generational Strategies
When you are buying or selling a business, you might very well end up making a deal with someone from another generation. Therefore, it only makes sense to take the time to understand that individual’s background and how that might cause behavioral differences. It is important to understand and reflect upon where many of them are coming from and the collective experiences and trends that shaped their identities and perspectives. At the same time, you can identify your own biases, strengths and weaknesses that may be caused by your own upbringing.
The strategies in this article originated from Chuck Underwood who is considered a leading expert in the diversity of communication styles between generations. He is the author of a major book on the subject as well as host of the long-running “America’s Generations with Chuck Underwood” on PBS.
Generational Sensitivity
Underwood’s perspective is that people of each generation were molded by their unique formative years. The decisions that buyers and sellers make will be impacted by their generation. Mostly likely, the buyers or sellers you will be coming into contact with will be either Baby Boomers, Generation Xers and Millennials.
Working with Baby Boomers
Baby Boomers (those born between 1946 and 1964) are a major force in the business world. While they often possess a patriotic passion to improve the country, they were also witness to a time of great change via many movements including the civil rights and women’s movement.
When you’re dealing with Baby Boomers, it is important to remember that they will want to build relationships and get to know you. Common courtesy is very important to Baby Boomers. That means they’ll expect you to show up on time and turn your phone off during meetings.
You’ll want to keep in mind that older Baby Boomers may be experiencing hearing and eyesight loss. As a result, you’ll want to keep your type and font size larger, and make text easy to read.
When you’re working with your clients, it only makes sense to pay attention to the generation during which they were raised and adapt your approach accordingly. Understanding generational differences will help you get a leg up on the competition while at the same time helping your clients achieve their goals.
What is Generation X?
Generation X (or Gen X) had a wildly different formative experience than the Baby Boomers. Generation X is generally defined as being born from 1965 to 1980. This generation spent its formative years from the 1970’s through the 1990’s. In stark contrast the relatively more pleasant and optimistic childhoods of the Baby Boomers, Gen X had a rougher ride.
America became more mobile during the time period during which Generation Xers grew up. As a result, many children were uprooted and separated from their friends, family and hometown roots. Growing up, these individuals witnessed a variety of scandals ranging from political and religious figures to sports figures. Gen Xers witnessed the systematic dismantling of the American middle class and with it a general lowering of quality of life, opportunities and confidence in corporations. In the end, Gen X was quite literally left home alone and lived as “latch key kids.” It is no wonder that this neglected generation has some issues.
Individuals growing up during this time learned early on that they had to be ready to fend for themselves. Since Gen Xers have been met with consistent and systematic disappointment and even wide scale institutional betrayal, this generation, on average, is more distrustful of organizations.
Gen Xers are self-reliant and independent and one of their core values is survival of the fittest. In his view, Gen Xers are self-focused, individualistic and want everyone to skip the nonsense and get to the point. They have no real interest in getting to know you or playing a round of golf.
Working with Millennials
Millennials spent their formative years in the 1980s and early 90s. They are a very optimistic and tech savvy generation. They are also the most classroom educated generation in history.
It is also very important to note that Millennials are the most adult supervised generation in history. So-called “helicopter parents” who work to protect their children from setbacks are the norm. Employers find that Millennials are entering adulthood, but are still relying upon their parents to help them make decisions and even career choices.
Where Gen Xers are distrustful of the “wisdom of their elders,” Millennials actively seek out such advice. Likewise, Millennials tend to volunteer a good deal and look for ways to solve the world’s largest problems.
You will find that Millennials will enjoy building a relationship with you. Keep in mind these individuals tend to be quite socially conscious and they may very well expect you to agree with their views. Additionally, there is a chance that they will have their parents involved in their business dealings.
Keep in mind that the de facto tech addiction, or at the very least acute overreliance on technology, has led to issues with Millennials’ soft skills. They can often lack the ability to read another person’s body language and adjust accordingly.
In the end, regardless of what generation you are working with, it is important that you continually adapt. This will greatly increase the odds of cementing a successful deal.
Copyright: Business Brokerage Press, Inc.
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<div>Essential Meeting Tips for Buyers & Sellers</div>
The buyer-seller meeting is quite often a “make or break” meeting. Your business broker or M&A Advisor will do everything possible to ensure that this meeting goes as well as possible.
It is vitally important to realize that rarely is there an offer before buyers and sellers actually meet. The all-important offer usually comes directly after this all-important meeting. As a result, you want to ensure that meetings are as positive and productive as possible.
Buyers need to understand how the process of selling a business works and what is expected of them from the process. Buyers also need to understand that following their broker’s advice will increase the chances of a successful outcome.
Sellers should be ready to be honest and forthcoming during the meeting. They also want to be sure to not say or do anything that could come across as a strong-armed sales tactic.
Asking the Right Questions
If you are a buyer preparing to meet a business owner for the first time, you’ll want to make sure any questions you ask are appropriate and logical. It is important for buyers to place themselves in the shoes of the other party.
Buyers also shouldn’t show up to the buyer-seller meeting without having done their homework. So be sure to do a little planning ahead so that you are ready to go with good questions that show you understand the business.
Building a Positive Relationship
Buyers should, of course, plan to be polite and respectful. They should also be prepared to avoid discussing politics and religion, which often can be flashpoints for confrontation. When sellers don’t like prospective buyers, then the odds are good that they will also not place trust in them.
For most sellers, their business is a legacy. It quite often represents years, or even decades, of hard work. Needless to say, sellers value their businesses. Many will feel as though it reflects them personally, at least in some fashion. Buyers should keep these facts in mind when dealing with sellers. A failure to follow these guidelines could lead to ill will between buyers and sellers and negatively impact the chances of success.
Sellers Should Be Truthful
Sellers also have a significant role in the process. While it is true that sellers are trying to sell their business, they don’t want to come across as a salesperson. Instead, sellers should try to be as real and honest as possible.
Every business has some level of competition. With this in mind, sellers should not pretend that there is zero competition. A savvy buyer will be more than a little skeptical.
The key to a successful outcome is for business brokers and M&A Advisors to work with their buyers and sellers well in advance and make sure that they understand what is expected and how best to approach the buyer-seller meeting. With the right preparation, the odds of success will skyrocket.
Copyright: Business Brokerage Press, Inc.
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Improving Your Telework Habits
In her recent April 20th, 2020 Forbes article, “Three Keys to Engaged, Productive Telework Teams,” author Rajshree Agarwal, who is a professor of Strategy and Entrepreneurship, explored how to get the most out of telework. This highly timely article covers some very important territory for many companies dealing with the COVID-19 pandemic. Let’s explore Agarwal’s key points so that you can help your team get the most out of telework.
Agarwal notes that people may tend to shy away from sharing personal information and feelings while in the office. But via video conferencing, the story can be different. For this and other reasons, it is necessary for employers to keep in mind that the dynamic between you and your employees may be different when you use video conferencing. This will also often be the case when your employees speak with one another.
She prudently cautions business owners from taking a “business-as-usual” approach to the COVID-19 situation, as it can make them look both unnecessarily cold and out of touch with reality. On the flip side, however, it is also important to not dwell on the negative aspects of the pandemic. Offering some sense of normalcy during the COVID-19 pandemic is a smart move as well.
How you use telework and video conferencing is, in part, about developing the correct balance. On one hand, you’ll want to acknowledge that the situation is serious and must be addressed. But on the other hand, you don’t want to dwell on the pandemic. After all, not effectively handling the work at hand could undermine your business and cause other problems for both you and your employees.
It is in everyone’s best interest to be smart, safe, and acknowledge the bizarreness of the current situation while striving to achieve business goals. The keyword here is “balance.” Agarwal states that “The combination of empathy and purpose unifies individuals, allowing team members to channel their efforts towards shared objectives and values. This is the best antidote for anxiety.”
From Agarwal’s perspective, there are three keys to making telework effective: communication, socialization, and flexibility. First, there has to be good communication. For example, people can’t simply ignore one another’s emails because they are working virtually. She points out that real-time meetings via Zoom or Skype can eliminate some communication issues, but not all.
The second factor to consider is socialization. As Agarwal points out “Engaged, productive teams also take time to socialize.” Working from home alters the typical modes and methods of socialization, but virtual interactions can be used to help people form and develop their social networks.
In short, socialization doesn’t have to end once telework begins. Used judiciously, socializing, and the bonds it creates between co-workers can still continue.
Agarwal’s third key is flexibility. Flexibility is critical, as all team members must adjust to what, for some, may be a fairly radical restructuring of their day-to-day work experience. Those who haven’t worked virtually before may find adjusting to be quite a challenge. Management should strive to be more flexible during telework caused by the COVID-19 pandemic. Trying to maintain the same top-down approach could prove to be problematic.
It goes without saying that telework presents challenges. However, the challenges it represents are not insurmountable. There are benefits to teleworking, and teams can use it to generate solutions that they might have not reached in the typical work environment.
Copyright: Business Brokerage Press
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