No deal goes smoothly; lessons from an expert in the industry

Our president and owner Gary Rayberg sits down with Business Exit Stories host Marvin L. Storm and recounts the highs and lows of his long tenured career. For over 20 years, Gary Rayberg and his team of brokers at the ROI Corporation have successfully brokered the sale and acquisition of countless businesses as well as real estate throughout 39 states.

What has gone well? What has gone awry? In Business Exit Stories’ 19th episode, recorded on October 28, 2019, Gary and Marvin dive deep into four tales of industry and impart important lessons through experience and excellence. The highlights are below.

Time can kill any deal. Gary discusses working with a seller off and on over three years and how one can work through seller’s remorse and the often unspoken emotional turmoil that goes into selling your business. Gary emphasizes the importance of understanding the structure of a deal after a private equity groups attempts to use the seller’s own funds to purchase the company. ROI Corporation’s eagle eye prevented a loss of 1.4 million and empowered the seller to walk away.

Seller’s dishonesty discovered after sale. Industries are ruled by margins and even 1% change can greatly impact a business. The savviest of buyers and due diligence on the part of three separate entities couldn’t have predicted this erroneous lapse in accounting practice. The buyer thought they were buying a successful food distribution business with a margin of about 20% but soon after discovered bad business practices had inflated those numbers by half. After months of reviewing the numbers, the owner discovered ultimately, the problem lay on the packing floor. Five months after closing the sale and after speaking to operations manager, “tapping” of products was uncovered.

What do buyers think your business is worth? In a bold and outstanding move, Gary takes a medical related service company and placed it in a controlled informal auction setting. Gary invited eight best possibly interested buyers. This provides just enough competition to generate interest.  Seller approves the buyer package and was available to answer questions via conference calls. The result was three offers, two offers in the two to four million range and the third was an offer of ten million. A good business intermediary will be able to determine when it’s a good time to let the market decide what the business is worth.

Repeat income is king. Not two businesses are alike. In this case comparison, Gary discusses two sales brokered roughly in the same time period of similar industries. Although one of the businesses did about 12 million dollars in sales, they also had the challenge of their customer base being 95% one-time business. The other company did significantly lower business of about 4.7 million in sales; however they built their repeat residual income by including service contracts with 1500 of their clients. As a result, they sold in three months versus the three years with the previous company.

To listen to this episode:  https://businessexitstories.com/2019/10/28

To find out more about Business Exit Stories and Marvin Storm please visit his website: https://businessexitstories.com/

East Branch Delivery Services Inc., Sold to PAF Transportation!

The ROI Business Brokers are pleased to announce another sale – East Branch Trucking
Company! Located in Auburn, Maine, this successful LTL carrier focuses on the transportation
of palletized freight to niche markets. Although the company is incorporated in Maine, it serves
all 6 New England states from 4 well located cross dock locations with a total of 27 doors and a
generous fleet of trucks.

The regional trucking company was sold by longtime owner Thomas Boyd who says he’ll stay
on board for another year before moving to the West Coast to be with family. “Everything went
very well [with Gary and ROI]” says Boyd. He will continue as General Manager assisting new
ownership.

East Branch was acquired by Portland Air Freight and thankfully, over 50 well qualified CDL
drivers, most with Hazmat endorsements, will still have jobs during this acquisition. Another big
plus of this acquisition is that in 2011, PAF made the transition to an Employee Stock
Ownership Plan (ESOP), meaning it is 100% employee owned! This is a huge benefit for the
once East Branch employees to embody the new ownership transition knowing that everyone
working at PAF has a financial stake in the success of the company.

Gary Rayberg, President of ROI Corporation, was the broker in this transaction. On facilitating
the sale of East Branch, Gary commented “I enjoyed working with Tom and Alan. Two great
guys. It was a very friendly transaction. I wish them both the best in their future endeavors.”

ROI is a premier business brokerage and valuation services firm servicing MA, NH, RI, CT and
the southeast from Marietta, GA. If you have any interest in selling or valuing your business, or
are looking to buy a business, contact ROI Business Brokers today! We can be reached by
phone at (781) 682-6209 or via web at www.roibusinessbrokers.com.

 

ROI Corporation brokers sale of R.W. Bruno to GEM Plumbing and Heating

ROCKLAND, MA and LINCOLN, RI, ISSUED August 12, 2019…ROI Corporation  (https://roibusinessbrokers.com), a leading firm for the transfer of ownership of businesses, today announced the completion of the sale of R.W. Bruno, an HVAC mechanical contractor located in Lincoln, RI, to GEM Plumbing & Heating.

Gary Rayberg, principal at ROI Corporation, represented R.W. Bruno in the transaction and worked with owner Glenn Bruno to facilitate a seamless transition of ownership. Founded in 1967, R.W. Bruno has provided commercial air conditioning and ventilation needs in New England. Over the years, the firm has worked with a number of clients including Dick’s Sporting Goods, Citizens Bank, and Rhode Island School of Design. The firm employs approximately 22 people; and owner Glenn Bruno will remain with the new company to help manage the firm’s commercial division.

GEM Plumbing and Heating, the acquiring company, has served Rhode Island, Connecticut and Massachusetts since its founding in 1949. The family business is managed by brothers Larry, Lenny, and Eddy Gemma. Gem has over 250 employees and over 165 trucks, making it one of the larger service companies in the United States. GEM provides installation, maintenance, and repair services across plumbing, HVAC, electrical, drains, and more for homeowners, businesses, and construction customers. The business has locations in Lincoln, RI; and operates Massachusetts locations in Walpole and Wakefield.

Glenn Bruno said, “We were very pleased to work with Gary and his team when we decided to list our business for sale. They were thorough, professional, and very helpful. We’re very pleased to be transitioning our business to GEM and I look forward to being part of this new organization.”

Gary Rayberg said, “It was a pleasure working with Glenn on this transaction. He and his team are great people and they have an excellent business. They will be a great addition to GEM.”

He added, “The HVAC industry is one that is increasingly in demand by people looking to buy businesses as so many businesses are transitioning to new ownership. ROI has worked a great deal in this industry and we are always glad to assist anyone in the purchase or sale of one of these businesses.”

About ROI Corporation

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI and CT with two divisions; a main street division serving smaller businesses as well as their middle market M&A division.  Their Marietta, Georgia, office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. They also have an office in Simsbury, Connecticut.  For more information, please visit www.roimergers.com or call (781) 682-6209.

 

ROI Corporation brokers sale of Anderson Plumbing & Heating

ROCKLAND, and WEYMOUTH, MA, ISSUED AUGUST 12, 2019…ROI Corporation  (https://roibusinessbrokers.com), a leading firm for the transfer of ownership of businesses, today announced the sale of Anderson Plumbing & Heating of Weymouth to Sila Plumbing, a large firm which provides home service solutions for residential and commercial property owners throughout the Northeast, with locations in Rockland, MA and King of Prussia, PA.

Gary Rayberg, principal at ROI Corporation, represented the seller, David Anderson, who will become part of the Sila team. Terms of the sale were not disclosed.

Formerly Vincent Anderson and Sons Inc, Anderson Plumbing & Heating is a 2nd generation, family owned and operated plumbing and heating company with over 60 years of experience. Dave Anderson said, “When we decided to sell our company, we knew that we needed the assistance of a broker with industry experience, someone who would know how to reach out to the best prospective buyers. Gary and his team were very professional to work with and the experience was great.”

Rayberg said, “We congratulate both David and the Sila team on this transaction. We believe this is a good move for both companies. We found David and his group terrific to work with, and we wish them the best of luck.”

He added, “The HVAC industry is one that is increasingly in demand by people looking to buy businesses as so many businesses are transitioning to new ownership. ROI has worked a great deal in this industry and we are always glad to assist anyone in the purchase or sale of one of these businesses.”

About ROI Corporation

ROI Corporation, based in the Boston market, has been involved in the sale of businesses and real estate in over 30 states since 1997. They also assist in the transfer of business ownership between generations and to key employees and management teams. ROI serves all of New England including MA, NH, RI and CT with two divisions; a main street division serving smaller businesses as well as their middle market M&A division.  Their Marietta, Georgia, office, specializing in Service Distribution & Manufacturing Companies, serves the southeast United States. They also have an office in Simsbury, Connecticut.  For more information, please visit www.roimergers.com or call (781) 682-6209.

 

ROI’s Don Buehler earns Prestigious Certified Business Intermediary (CBI) Designation

WOBURN and ROCKLAND, MA : ROI Corporation (https://roibusinessbrokers.com), a business brokerage firm serving all of New England, is pleased to announce that Don Buehler, a resident of Woburn, MA has earned the prestigious Certified Business Intermediary (CBI) designation awarded by the IBBA (International Business Brokers Association).

The CBI, which represents the gold standard in the business brokerage industry, is granted to individuals who complete required course work, pass an extensive competency exam, and agree to uphold the IBBA’s Professional Standards and Code of Ethics. In addition a deal they have completed is reviewed by a committee of peers.

“Earning the CBI takes dedication to the craft of business brokerage and demonstrates a personal commitment to excellence,” stated Jeff Snell, IBBA Credentialing Committee Chair and 2019 IBBA Board Chair-Elect.  “The CBI is a clear indicator of knowledge and experience, and we encourage business sellers, buyers, CPAs and other professionals to look for the CBI designation when selecting a business broker to work with,” added Snell.  Gary Rayberg, president of ROI Corporation, a leading business brokerage firm in New England concurred, “We are proud to have Don on our team for many years now. This designation is well deserved and adds to Don’s extensive experience and his ability to provide excellent service to his clients.”

Buehler’s career started as a store manager with McDonald’s Corporation, where he worked his way up to the ownership of 6 franchises, which he operated for 15 years. He sold these to pursue his own restaurant concept, Krazy Karry’s Backyard Grill, which he operated for 7 years. He has been affiliated with ROI Corporation since 2011.

Gary Rayberg, president of ROI Corporation, said, “We’re very proud of Don’s accomplishment.  He understands the rigors of owning and operating a business. Don brings a wealth of practical, operational and technical knowledge to any deal. He can empathize with business buyers and sellers, and analyze how to best help them achieve their goals.  His engagements over his seven plus year career as a business broker at ROI include working to sell businesses in the areas of manufacturing, service, distribution, retail and hospitality. This wide array of experience affords him the ability to understand and work successfully with many types of businesses whose owners are ready to transition ownership.”

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How to Help Maximize and Protect Your Business in Transition.

Many business owners have an emotional and financial interest in maximizing the value of their business.  Yet, owners don’t often know its market value nor how to safely and profitably exit it.  Not many are able to sell their business for top dollar nor transition out on their own terms.  Unfortunately, many end up being sold in an emergency, or “fire sale”, situation which nets only a fraction of the company’s worth, often due to poor planning or timing.

In the best of economic environments, it is still often necessary for a seller to aid in financing the sale of his business.  By taking a note, the seller helps complete the funding and realize a higher price for the business.  In times of economic uncertainty and credit tightening, seller financing becomes an even more necessary part of the funding source equation. However, there are a number of issues that need to be managed prior to and during the transition process in order to protect the buyer, the seller, and, of course, the business itself.

With seller financing, the seller assumes more risk as he is dependent on the buyer to fulfill his obligations to pay the note.  Sellers must therefore do their due diligence to find buyers whose business acumen is as important as their credit worthiness.  The buyer must be able to successfully run the business in order for the note to get paid without complication.  Assuming the buyer is a good choice to take the reins, then what other issues would put the payments from the buyer or the business at risk?  If the buyer was unable to run the company due to a change in health or premature death, might the seller have to again assume control of the business or litigate to get the balance of the payments?

The buyer has an obligation to pay whether he lives, dies, or becomes disabled.  Should the buyer die, then life insurance could provide the capital to protect both the buyer and seller.  The seller is guaranteed the payments due him and the estate of the deceased buyer is relieved of the debt.  It can also provide additional funds for a planned and more profitable transition of the business.  Term insurance is an inexpensive means to cover this situation for the term of the note.

A more common scenario than a premature death is the inability of the buyer to work for an extended period of time due to illness or injury.  Yet, this situation is often overlooked in most buy/sell and transition agreements.  Should the buyer be unable to work to his full capacity, the company and the note payments would be at risk.  There are ways to mitigate this situation for the benefit of the both the seller and the buyer.

Each company and each sale is unique and requires more than a cookie cutter approach to properly establish and fund transition agreements as mentioned above.  A team, which includes an estate and tax planning attorney, can collectively work through these issues.  They need to understand how to utilize business valuations to properly establish strategies to protect the parties involved.  Should you want to learn more about protecting your business and establishing a transition plan, we’d be happy to walk you through our unique process.

Written for publication in the ROI Newsletter by:

Steve Den Herder, Partner

Commonwealth Financial Group

Steve Den Herder is a partner at Commonwealth Financial Group.  He and his team utilize a unique process for business owners to help them integrate their business plan with their financial and estate plans.

GPS for Business Exit Planning; Navigating to Prepare Your Business for Sale

How did we ever get anywhere before GPS?  Talk about a “killer app”!  Yes, we’ve always had maps but unless you happened to have a street map for every city and town in which you had an appointment, that Rand McNally in your glove compartment only took you part of the way there.  Sure, we could ask for directions.  I often found that people who actually knew their way around couldn’t give good directions because they didn’t know street names in their hometown.  “Turn right where the old schoolhouse used to be.” And then there were all those people who had absolutely no idea where they were going but really, really wanted to help.  Thanks!!!

GPS has changed all that.  It occurred to me that since exiting a business is a journey, complete with the occasional wrong turn, (“…recalculating”…), it might be useful to approach exit planning the way we use GPS.

So how do we use GPS?  First question, “Where are you going?”   In exit planning this translates to, “How much do you need to retire”?  A surprising number of business owners get this first question wrong.  After owning their business for 20 years or more, and believing all along that their business and their retirement plan were the same thing, owners come to the conclusion that their business is worth however much money they need to retire.  “Why do you think your pizza place is worth $2 million?”  “Because my grandchildren live in California and that’s what houses cost there.”  Your retirement goal and your business sale price are two different numbers.  At this point let’s just assume that 1) you have a rough idea of what you’ll need to retire, and 2) there may be a delta between that financial goal and the value of your business.  We’ll get to closing that gap in a minute.

Second question, “What’s your current location?”  Translation: “What’s your business worth today?”  This can’t be a guess.  It’s not a story about a guy you knew who sold a similar business across town, or a rule of thumb that says businesses in your industry typically sell for x% of sales.  This needs to be an objective and justifiable number.  Your best approach is to have a certified business appraiser complete an independent valuation of your business. While valuations are not free, good valuations uncover problems that are undermining your value and suggest strategies to increase value. They pay for themselves.  After all, you have no hope of reaching your destination unless you know your starting point.

If you know where you’re going and where you are, your instincts may suggest that the next best question is “How do I get there?”  It’s not. A better question is, “How long do I have to get there?” Do you want the fastest route?  Least traffic?  Avoid toll roads?  Your planning horizon speaks to that gap between what you need to retire and what your business is worth.  You can get almost anywhere if you have enough time.  The tragedy is that the vast majority of business owners don’t start planning early enough.  They wait until family issues, or health issues, or partner problems, or simple exhaustion requires that they sell in 12 to 24 months.  That’s not much time to close a significant gap between your retirement goal and your business’ value.

Once you know how long you have to get there, you’re in a position to make an informed choice about the right route to your goal.  More time gives you more options.  A few of the longer term options include:

  • ESOPs – Employee Stock Ownership Plans are most commonly used to create a market for the departing owner’s shares of stock and significant tax benefits for the owner.
  •  Acquisitions – Owners can grow their firms by acquiring compatible competitors.  The right acquisition will pay for itself out of the cash flow of the acquired company.
  • PEGs – Private Equity Groups will buy a portion of the owners stock and invest in the company’s growth.  The value of the owners retained stake grows as the company grows and the owner approaches retirement. You get two bites at the apple.

If you need to exit sooner than that you’re still not lost!  A few of your routes to increased value include:

  • Finding a strategic buyer – The right strategic buyer will pay more for your company than a hypothetical financial buyer in order to achieve growth synergies and improve cash flow by wringing out redundant costs.
  •  Reducing inventory – In some cases the sale of excess inventory can significantly increase the owner’s proceeds at sale.
  •  Selling non-operating assets – Much like reductions to excess inventory the sale of assets that are not contributing to earnings can increase effective sale price.
  •  Reporting all income – How do we say this politely?  Some owners, often in retail, describe something we’ll call “unrecognized income”.  The truth is that practice costs you a fortune when it’s time to sell the business.  We can prove it to you.  Stop doing it.
  •  Adjusting the capital structure – Some owners consider it a badge of honor to be able to say they have “zeeero debt”.  While it might feel good to say it, in practice some debt can leverage performance, improve cash flow, and increase selling price.

Let’s switch from “Map” mode to “List” mode to summarize:

  1. Know where you’re going.  What do you need to retire? Your retirement goal and the value of your business are two different numbers.
  2.  Know you current location.  Get a professional valuation done on your business.
  3.  Give yourself enough time to get there.  Five to eight years is a practical planning horizon, particularly if you have a long way to go. Even if you don’t have that far to go a longer planning horizon gives you a little extra time to recover from a bad year or a wrong turn (“..recalculating”..).  And if you have less time than that, start now!
  4. Select your route. You probably have more options than you think you have.  Travel with someone who’s been there before.  ROI can work the GPS while you keep your eyes on the road!

Contact Michael at ROI today for a no cost evaluation of your Exit goals.

 Michael Thames

Michael has been a highly successful Business Intermediary at ROI for three years.  Prior to joining the firm Michael was a VP Business Development for a $6B transportation company where he lead a sales force.  Michael also searched out and evaluated corporate acquisition candidates for entry into new markets for his firm. Michael has managed sales organizations for training and relocation companies. Earlier in his career Michael owned a promotional products company in Massachusetts. His experiences as an entrepreneur and in helping his prior employer acquire the competition are invaluable assets in helping business owners to value and sell their firms. Michael received an MBA from Northeastern University. He and his wife Linda live in St Petersburg FL where he is in the process of opening ROI’s Florida office. He is a member of the Institute of Business Appraisers (IBA) in good standing.

ROI Corporation Provides Business Brokerage, Mergers and Acquisition services, Business Family and Key Employee  Transition Services, Exit Planning Consulting and Business Valuation Services principally in MA, NH, VT, RI, CT, NY, ME and FL as well as nationally. ROI has been involved in assisting clients in the sale of businesses and real estate in 39 states.

How To Buy a Business

Are You a Business Owner Looking to Grow by Acquisition or An Individual Looking to Buy Your First Business?  There is a Better Way that Should Guarantee Success!

One of the less common areas in the business brokerage industry is the idea of growing a business by corporate acquisition, in essence buying a competitor. This same approach also works well for an individual looking to buy a small or mid size business.  Many business owners have thought of this – but few will complete an acquisition.  Why? Often it is the difference between proactive and reactive buyers.  Let’s look at the differences between reactive and proactive approaches to buying a business.

A reactive buyer is one who waits and hopes a good acquisition opportunity will come along at the right time.  The buyer may actively search listings of businesses for sale, yet even this is reactive as they are only looking at businesses who have already decided to sell.  Alternatively, they could approach a business intermediary and say: “If you come across something I might be interested in let me know and I will take a look at it.”   There are good business intermediaries who do keep an ear to the ground for his potential buyer.  Bear in mind that this business intermediary will likely need to have the buyer’s industry as a specialty niche, one who knows the majority of businesses in the appropriate geographic area and understands the industry business parameters.  This is virtually the definition of reactive!  The buyer is waiting for the phone to ring.  Is that the way their sales team brings in new customers?

The odds of acquiring a firm or competitor this way are slim.  When a good buying opportunity surfaces, how likely is it will be a good time for the buyer?  “Something’s come up and I can’t do this now…”  Is it even a good opportunity?  In a typical geographic area there are rarely more than 2 or 3 similar businesses for sale out of what may be hundreds of firms.  That is not much a cross section to measure a business’ strength with regards to the industry.  Does the buyer have the time and wherewithal to concentrate on this effort when the opportunity knocks?  Is there a financing plan in place?  How does this affect the business and pro forma plans? There are likely very few successful businesspeople that would pursue any other goal in this manner.

What does a proactive buyer look like?  A proactive buyer commits him or herself to making an acquisition.  The commitment to acquire should be part of a strategic plan, including parameters that define the acquisition: industry vertical, revenue size, geographic area to mention a few.  Is the buyer expanding geographically or moving into new product/services areas or reaching out to a new customer demographic?  A clearly defined picture of the acquisition raises the chances that an acquisition can be absorbed smoothly into the existing organization.  The buyer also should mentally set aside time and energy to devote to the acquisition effort, say 5% of his time.  There needs to be some thought given as to how the down payment and financing will take place.  In most cases, the financing may be covered in the cash flow of the acquired business.  Strategic acquisitions are more attractive to third party lenders, because the acquirer has industry experience and their own cash flow to add additional strength to the deal.

A program with a plan has a higher chance of success.  But if the buyer has not done this before, it usually makes sense to retain a business intermediary who has this unique experience and track record.  The intermediary  will have a well-defined program to coach the buyer through the entire process, including such items as defining the search parameters, scripting the outreach dialogue, assembling the list of pre-qualified candidates, collecting information to qualify the candidate, and determining if both buyer and seller should move forward.  The business intermediary can initiate a conversation with a potential seller to determine on a macro level if a seller is a good match.  Questions may involve percentages of revenue along product/service lines, staffing, service area, client/customer demographics, etc.  An effective campaign can act as a survey on the local industry revealing local industry ratios, trends and practices, enabling the proactive buyer to effectively evaluate his own firm and others. With the additional information an attractive deal may be quickly identified.  Perhaps more importantly is the issue of maintaining confidentiality.  In fact many times a third party is required to initiate any such sensitive discussions.  After all, can you call up your competitors and say, “Do you mind if I take a quick look at your financials?”

Because you are reaching a much broader audience as opposed to the number of available businesses publically listed, finding a successful match is much more likely.  Contact an ROI intermediary or go to our website, www.roibusinessbrokers.com, to learn more about our unique Proactive Acquisition Search Service (PASS) Our service not only helps firms grow by acquisition but also works for first time buyers targeting their  ideal business.  Let us show you how this strategy can be faster, less risky and less expensive than trying to grow by standard organic sales force methods or starting from scratch.  Such a solution may produce a positive reaction in many a business owner!

By: Paul Corrigan