FAQ
How do you charge for your services?
Unlike many other intermediaries, we charge no upfront fee. We are paid based upon a commission upon closing of the sale.
Our commission structure is very simple:
10% for the first $500,000 in selling price
5% on the amount between $500,000 to $3,000,000
2% on the amount between $3,000,000 to $10,000,000
1% on the amount above $10,000,000
Again, there is no fee until and unless we make a deal and bring it to closing.
How much is my business worth?
This of course is not a question we can answer in a FAQ. Before presenting your company for sale, we will evaluate it in terms of value and marketability and discuss our analysis with you. If our valuation range does not correspond with your expectations, there is no obligation on your part to list or sell your company.
There is science and logic to performing a business valuation. However, there are also elements of art and judgment in the process. Past performance in terms of sale and profit trend are usually (not always) integral ingredients in determining the value of a business. In a few industries and a few situations though, sales and profits are only secondary considerations. Projections too play a part, especially if they are projections based on solid and verifiable data.
In essence, a company is valued based upon its expected return on investment to the buyer with its estimated risk taken into account. Therefore it is the seller's job to point out how good the return on investment is while also demonstrating that the risk is low.
An industry buyer (including a private equity buyer that is adding on to a platform company) might be more interested in the growth an acquisition might bring to its platform business than in immediate return on investment. Further, when a company buys another company, it is the buying company's return on its investment that really matters. A company buying another can make 2+2=5 by exploiting economies of scale, increased market share, and related factors.
The bottom line is, of course, that a business is worth what a buyer will pay for it. However, there are ways of estimating a fair price.
I thought private equity groups sought out deals in the 50mm and up range. Can you really sell my company to a PEG?
In general private equity groups do look for larger deals. However there are two exceptions and this is where we concentrate our efforts:
- Smaller PEGs— there are some well established and well financed smaller equity groups that seek out smaller companies, approximately in the 6 or 7mm to 15 mm range.
- PEGs that use the platform/add-on business model will acquire strategically appropriate add-on companies of any size, almost without regard for the size of the platform.
The smaller equity groups and many larger equity groups that aggressively buy add-ons know us as the brokerage company that focuses on this niche.
Are private equity group's the same as venture capitalists?
While venture capital groups and PEG's are related, there are significant differences. Venture capitalists often invest in startups and in early stage companies. Private equity groups look for more established companies and prefer to buy at least a controlling interest in those companies (most often 100% of the equity). There is overlap and there certainly are companies that operate as both VCs and PEGs.
Why should I retain you rather than just call private equity group's myself?
For lots of reasons:
- Any group can declare themselves a private equity group and seek companies to acquire. We know which PEGs are real buyers and which are less likely to bring a deal to fruition
- We know how to package your business to show its full value and its benefits to the target PEG buyer
- The PEGs know that when we call it is with an opportunity worth looking at closely. Many don't have the time or resources to do initial screening. They look to us to do it for them
- They also know that we will be bringing the same deal to several well qualified buyers so they know they need to make an attractive offer if they want the deal
- We have the experience to guide a deal through the inevitable hurdles and bring it to fruition
What geographic areas do you cover?
We cover the entire USA, including US companies with foreign operations. Occasionally we represent well established foreign sellers, but there in these cases our standard fee structure does not apply.
Do you sell to foreign buyers?
Yes. We have sold businesses to a number of private equity groups based outside the USA including Ireland, UK, Canada, and India. We maintain contact with several non-USA based equity groups. We are looking for the best deal for our sellers without regard as to where the buyer is based.
