FAQs
- Seller Representation (See Also FAQs - Financing)
We understand that you have many questions when it comes to selling all or part of your business. Here are some of the common questions business owners have. To get answers to your specific questions, contact us on line or call us at (818) 789-6020.
1. Am I under any obligation when
I have initial discussions or meetings with LVI? No. You will not be obligated for the cost
of any services or expenses unless we have a prior discussion with you and you
authorize payment for our services.
2. Why do I need an investment
banker, like Larrabee Ventures? Why not just sell it myself? You need an investment banker like LVI for the following reasons:
a. To maintain confidentiality during the sale process
b. To focus the intense
time and attention on the transaction necessary to drive it to a successful conclusion
c. To maximize value by developing all the benefits of an acquisition of the
business and by converting those benefits into enhanced price and better terms
for the seller
d. To survey the field of potential buyers, work concurrently with multiple
potential buyers and to focus on the best prospects
e. To profit from LVI's transaction expertise developed over hundreds of transactions
f. To utilize LVI's skilled transaction team to support all aspects of the
sale
2.a How do I keep my company's
sale confidential until the process is completed?
Confidentiality is, perhaps, the most critical issue for an owner planning
to sell a business. No security business owner wants its employees, customers,
competitors or vendors to know that the business is for sale until the transaction
is closed. LVI is very cognizant of this concern and in every step that we take
we emphasize confidentiality. The best way to keep your plan confidential is
to engage LVI to assist you in planning and executing the transaction.
First, it's a lot easier for LVI to protect the confidentiality of your intent
to sell than it is for you to do so yourself. Since LVI is actively involved
in arranging financing and performing operational consulting assignments in the
industry, it is common for business-owner clients to introduce us to employees
as "the consultants who are helping us arrange an expanded bank loan" or
as "the consultants who are advising the company on how to improve its operations,
marketing or sales". Second, LVI can meet with other security company executives,
even your competitors, without attracting attention to your plans to sell. Third,
when LVI does contact other third parties, the contact is always at the highest
executive or ownership levels and we obtain a binding Non-Disclosure Agreement
("NDA") before revealing your company's identity.
2.b How much of Management's time will have to be spent on the sale of the
business? A sale process is time consuming, if done
correctly to obtain maximum value and favorable terms. With LVI involved, most
of the management team's time will continue to be available to build the business.
Members of the management team will be needed to brief LVI on the activities
of the business, for presentations to prospective buyers and to answer questions.
LVI will develop the Information Memorandum, coordinate the preparation of due
diligence materials, contact multiple potential buyers, develop buyer interest,
coordinate buyer visits, negotiate on behalf of the owners, answer buyer questions,
coordinate the transaction team, lead negotiations and drive the process forward
to the close. LVI will organize the communication between the management team
and the prospective investors to minimize the management team's distraction from
its main job: building the business.
2.c How much is my company worth? In the context of a sale, a business is
only worth what a willing buyer will pay for it. Nothing more, nothing less.
How much a buyer will pay depends on the buyer and the buyer's perception of
the benefits the buyer will obtain by acquiring the business. Benefits include
future profits, future revenues and positive cash flows, access to customers
and customer lists, the organization and its employees and other relationships
and the strategic opportunity associated with the acquisition. Typically, a buyer
will assess all the potential benefits and then make an offer. LVI can help you
by assessing the value of the business prior to showing it to a buyer. LVI can
help by assisting you to enhance the value of the business by making improvements
and by preparing a complete description of the benefits (the Information Memorandum).
LVI can help by showing the buyer how each benefit will be valuable to the buyer.
LVI can help by presenting the business to multiple buyers. Often one buyer sees
much more value than another.
2.d What is the best way to work
with buyers and how many buyers need to be approached for a successful sale? Initially, it is almost always better to
work with multiple prospective buyers than it is with only one or two. LVI's
preferred method is to identify 10 or even 20 likely prospects and then to discuss,
in general, the benefits of the proposed acquisition and the characteristics
of the transaction. From these discussions, our client is usually able to focus
on a few as the best prospects for the first round. The next step is to obtain
NDAs from each prospect and provide the prospect with an Executive Summary of
the Information Memorandum and then with the Information Memorandum itself. After
reviewing any questions and being further qualified, the prospective buyer is
then introduced to you, our client. This gives the buyer a chance to become acquainted
and ask further questions. Finally, seriously-interested parties are given due
diligence materials to review or provided access to a data room with a timeline
to complete a Letter of Intent shortly thereafter. You then select from among
the Letters of Intent to choose a buyer for further negotiations leading to a
transaction.
2.e How does LVI's transaction
expertise help me? LVI's principals have extensive transaction
experience, hundreds of transactions of many different types. This experience
helps you by providing guidance as to the best and most fruitful avenues to pursue
to accomplish your goals. Often, LVI can negotiate with potential buyers in ways
an owner cannot. We are active in the field. We know what, currently, is "standard
practice" in other transactions. We can often represent you more effectively
than you can represent yourself. You are always the final decision maker, while
we can always renegotiate any tentative understandings we have with the buyer.
2.f What is LVI's transaction team
and how can it help me? On many transactions, LVI has worked
closely with a number of attorneys, accountants, recruiters, data room providers
and other professionals. They have extensive experience in transactions such
as the sale of a security business or its assets. These individuals and firms
have the common characteristic that they know how to get transactions completed
promptly and successfully. They are available to assist, as ndeeed. Their engagement,
fees and terms can be arranged directly with them, as desired.
3. What about the fees the investment
banks charge? Since LVI, as the investment banker, adds
value to your transaction, the higher price and better terms we will help you
obtain will usually more than offset the fees charged. In addition, the speed
with which LVI can execute the entire selling process translates into a higher
sale price in a number of ways. First, the sale will take less of your time,
leaving you more time to run your business. Second, timing is often critical,
not just in the time value of sale proceeds, but also in the opportunity to take
advantage of market, business conditions or tax regulations before they might
change unfavorably.
4. What are the most common reasons
a deal doesn't close? The number one reason a transaction is not completed is weakening financial
performance. If the financial performance of a seller is off materially from
the original forecast, the business loses value. For example, if attrition of
customers increases or gross margins decrease, the business loses value. Therefore,
we always emphasize to sellers the critical importance of maintaining the business
and continuing to actively grow it as if they'll continue to own it for at least
another couple of years.
The number two reason deals fall apart is due to surprises popping up during
due diligence. That is why LVI works closely with you to prepare for due diligence
prior to showing the Information Memorandum to any prospective buyer. We want
to find any problems before the prospective buyer does, to be prepared to fix
the problems and to be comfortable the problems will not become opportunities
for the buyer to renegotiate price or terms. We work with both parties during
a transaction to ensure all relevant business issues are disclosed up front.
Surprises lead to lack of trust, and lack of trust kills deals.
5. My accountant has always helped
me to minimize my taxes. We expense everything possible and my tax returns aren't
really reflective of the value of the business. Is that a problem? It is normal for a privately-owned company
to structure financial statements and tax returns to minimize taxes. During LVI's
initial review of the company, we develop, with you and your accountant, an adjusted
income statement that reflects how the business would have performed if it were
managed for the benefit of non-executive owners. We then provide the prospective
buyer with the adjusted statement showing the true profitability of the business.
6. I already know two or three
good prospects. Shouldn't I work on those first, before engaging LVI? Most buyers that approach you and offer
to buy your business have years of experience buying businesses and a definite
goal of getting a good deal. This is a process they engage in multiple times,
but for you this may be your first and last time selling your business. You may
seriously handicap yourself by undertaking the sale of your business without
an investment banker. LVI provides an experienced team to help level the playing
field. Our involvement can save you aggravation and position you to maximize
the value of your company. Even with the buyer who has already contacted you,
LVI can add substantial value by assisting in preparing the company for sale
and by making it clear to the prospective buyer that you have engaged professionals
and are preparing to talk to additional prospects. Most importantly, being represented
by LVI brings instant credibility to the process and flushes out "non-qualified" buyers.
LVI has the extensive resources and sophistication that only an investment banking
firm can provide to market your security business most effectively to attract
several "premium" buyers.
7. How long does it take to complete
a sale? Once the Information Memorandum n are complete
and the company is prepared to meet prospective buyers, it should take LVI between
three and six months to complete the transaction. While this may sound like a
long time, all of the facets of selling a business, including listing the business,
finding buyers, interviewing buyers, writing contracts, due diligence and, finally,
the closing process, are each time consuming. The exact timing will depend on
how exciting the opportunity appears, how organized the Company is to proceed
with the transaction, how accessible the financial markets are to the buyers
and the speed with which documentation can be completed. LVI and a motivated
seller can substantially reduce the time required to complete the steps.
FAQs
- Financing
The need for additional capital for growth and the development of your business has never been more challenging then it is today. Here are some of the common questions business owners have had in the past but to get answers to your specific questions contact us on line or call us at 818 789 6020.
1. Am I under any obligation when I have an initial discussion or meeting
with LVI? No. There is never any obligation for initial conversations or meetings with
LVI. You will not be obligated for the cost of any services or expenses unless
we have a prior discussion with you and you authorize payment for our services.
2. What are the first steps in
getting started? If you are interested in raising additional capital for your company, the
first step should be to call LVI. We can help you review the specifics of your
company's situation and give you valuable information regarding the state of
the market and the likely cost of the new capital. We can discuss the prospects
for your capital-raising project and we will give you tips and advice concerning
the best execution of the project. In the first meeting we would like to get
acquainted with the key people, discuss the Company and its goals and capital
raising plans and familiarize you with LVI and our services.
3. Will my conversations with LVI
be kept confidential? Yes. Any conversation with LVI and any confidential information you provide
to LVI will be kept confidential by LVI. If you would like us to provide you
with a mutual Non-Disclosure Agreement ("NDA") we will be happy to
do so.
4. Do I need to know how much money
I need? No. If you do know, great; you are a step ahead. If not, LVI can help you
think through the important factors that determine the amount of new investment
capital that you will need.
5. Do I need to finish other major
company projects that are currently underway, such as integrating an acquisition,
improving IT systems or revising financial procedures? No. The best time to start discussing when and how to raise long-term capital
is when you first realize you will need to raise new money from an outside source.
While management is often distracted by other major company changes, waiting
to start raising capital can create enormous pressure and stress. By involving
LVI earlier, management can use LVI to get the financing project moving forward,
while the management team focuses on completing the other major projects.
6. Do I need to have my business
plan and company presentation fully prepared No. A business plan can help our discussions, but the first order of business
is for us to get acquainted with the key people, discuss company goals, review
the current investor climate, discuss overall strategy and lay out the action
steps for developing the appropriate business plan for raising the necessary
capital.
7. We can approach the banks ourselves.
Why should we hire an investment banker, like LVI? This is probably the question that is most frequently asked by privately held
businesses. You may seriously handicap yourself by undertaking a major financial
restructuring without an investment banker, like LVI, particularly if you are
seeking expansion or acquisition capital. LVI brings years of mergers, acquisitions,
and capital raising experience and contacts to focus specifically on the needs
of your company. Moreover, we have the extensive resources and sophistication
that only a financial intermediary can provide to structure a transaction(s)
that is cost effective in time and money and to market your security companies
value most effectively to qualified investors and/or lenders. The process of
raising millions of dollars in new financing requires relationships with the
financial community, expertise at modeling, valuing and marketing business plans,
extensive computerized lender, investor and industry data bases, detailed knowledge
of prudent, value-added financing structures, and careful consideration of tax,
legal, accounting and regulatory issues. We also provide the objective feedback
that only outside advisors can ascertain.
8. Our senior managers are good
negotiators. We're not convinced that an investment banker can fashion a better
deal. The financial community is highly sophisticated, especially today's private
equity funds which invest in electronic security companies. They are skilled
in the process of evaluating companies and negotiating financial structures.
They require exhaustive business plans and rigid analyses of pro-formas and projections.
No matter how sophisticated you are in the arts of forecasting and negotiation,
do you possess experience in the specific modeling, structuring and bargaining
disciplines of the corporate financing process? Without them you may put you
and your company at a severe disadvantage. Most importantly, being represented
by a professional firm brings instant credibility to the process, flushes out "non-qualified" investors,
and facilitates the actual funding.
9. How does LVI help me? LVI is a firm whose business is helping its clients to raise capital. We work
at it every day and we have been doing it for the last 20 years. Depending on
your needs, LVI can assist you at every step to navigate the process from the
beginning all the way through to the closing of the transaction. We help determine
the capital requirements, assemble and coordinate the transaction team, analyze
the business, organize and develop information needed by investors, prepare the
Confidential Business Plan and investor presentation materials, identify and
target the most relevant investors. We conduct valuation analyses, arrange investor
meetings and site visits, manage investor due diligence information requests,
negotiate with investors, advisors and due diligence consultants and we structure
and work with you right through the close of the transaction. We manage the day-to-day
process efficiently and confidentially, so you and the management team can continue
to manage the business while maintaining full control of the capital-raising
process.
10. How long does it take to obtain
new financing? Once the Business Plan is complete and the Company is prepared to meet new
investors it should take LVI between two and six months. While this may sound
like a long time all of the facets of obtaining financing for your business,
including, helping you establish your financing needs, preparing the package,
finding the investors, interviewing investors, obtaining an offer, negotiating
terms and finally the closing process are all time consuming. The exact timing
will depend on how exciting the opportunity appears, how organized the Company
is to accept new investment and the speed with which documentation can be completed.
Many factors influence the timing of a capital-raising project, including the
following:
- Quality of the business plan
- Markets served
- Type of product or service provided
- Quality of the management team
- Quality of the Company's financial information and reporting systems
- Number and type of prospective investors
- State of the private capital markets
- Familiarity of prospective investors with the company's markets and strategy
- Age and history of the Company
- Focus and management of the capital-raising project
11. What about the fees that investment
bankers charge? Because LVI adds value to your transaction, the better price and terms that
we as professionals will be able to obtain will more than make up for the fees
charged. In addition, the speed with which we can execute the entire capital
raising process translates into a higher ultimate value in a number of ways.
First, the process will take less of your personal time, leaving you more time
to run your company. Second, timing can be critical not only in the time value
of capital proceeds ultimately received, but in the opportunity loss should market
or business conditions move against you.
|
