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V O L . X X I N O. V I I I A P R I L 2 0 , 2 0 1 5 30 B A N K I N G & F I N A N C E F O C U S whatever timetable they have, from 'I'm ready to sell now' to a much lon- ger time-frame," he says. "We're a very collaborative shop. We like to work collaboratively with the clients' other advisers to get the best result." In a recent white paper on " e Optimal Exit Strategy," CFA Chairman and CEO Peter Heydenrych spells out business attributes that will facilitate a successful sale: Businesses which have scaled beyond a total dependence on the owner Proprietary products, services or processes Strong, remaining management Defensible, diff erentiated market position Stable, diverse customer base Recurring revenue business model Business growth (opportunities) Strong operating margins Manageable business risk. Sometimes the owner's expecta- tion of how much wealth will be transferred hits a speed bump after CFA estimates its market valuation, typically by analyzing the business's income, sales of comparable busi- nesses and determining the market value of a company's assets. If the resulting price ends up being lower than the owner would like, Adams says, CFA's Portland team has the expertise to help the owner develop a longer-term exit strategy with the goal of improving the company's mar- ket value for a buyout down the line. A fi rst step often involves taking a closer look at the company's balance sheet and inventory. "Anything that detracts from value can be addressed to have a better outcome at the time of sale," Adams says, citing out-of- date inventory still on the books as a common problem for older businesses. Taking a write-down on that inven- tory and getting those items off the books, he says, improves the compa- ny's value and its potential sale price. Another step to improve the owner's prospects of getting the best price is to make changes that will drive growth in topline revenues — for example, expanding or diversifying the customer base or making process improvements that lower manufacturing costs. " ese businesses are the most important thing fi nancially and emotionally for the business owner. You've got to take the long view. e starting point is one of listening and developing rapport and establishing a relationship," he says. Even when all the variables are optimum, selling a business takes time — with the median time to close being about eight months for lower middle market deals, according to Market Pulse's fourth quarter 2014 report. Once an owner hires CFA to sell his or her business and all the due diligence fi nancial accounting is completed, Adams says, the goal is to schedule a limited private auction with multiple buyers who are willing and able to purchase the company. In an ideal world, the seller ends up with three or more buyers who are willing to pay cash, allowing the seller to pick the best price. But that's rarely the case, Adams says. Some buyers might seek to take out a note with the seller to cover some of the purchase price; others might want to negotiate a "hold back" clause, allowing them to retain some of the purchase price until the com- pany reaches agreed-upon targets. e seller's goals play a big role in deciding the merits of one prospective buyer over another, he says, especially if one of the prospective buyers might simply be planning to eliminate a competitor and close the plant, or buy the equipment and relocate workers to an out-of-state plant. "If employees' well-being is a high priority, the motivations of the buyer are going to be very important," he says. With an improving economic climate and perhaps some pent-up desire among baby boomer owners to sell their companies, Adams says there are lots of opportunities, with broad social implications. " ere are a lot of great compa- nies in Maine," he says. "But we have a demographic problem we have to solve: We have an aging population with a lot of business owners who want to retire, and their kids are not necessarily interested in staying on to run the family business. Let's imagine businesses in towns across Maine that provide an opportunity for the owner to sell and retire, but also continue to provide jobs. If we can fi nd ways to fi nd people to buy these companies and keep these jobs, there's a social good that can work itself out in those mergers and acquisitions — if we do it the right way." J M C , M a i n e b i z s e n i o r w r i t e r , c a n b e r e a c h e d a t @ . www.momentumconvention.com Tuesday, November 10 9:00am–4:00pm | Augusta Civic Center I N T E R E S T E D I N PA R T I C I PAT I N G ? Call Donna Brassard at 207.761.8379 x327 FOLLOW US @MBEVENTS #MOCO15 Be part of Maine's largest business-to-business event and network with customers and prospects. Space is limited, reserve early! Reserve your exhibit space now! PAV IL ION SP ONSOR: TD Bank REMO T E OF F ICE LOUNGE SP ONSOR: Portland International Jetport E XCLUSI V E V ENDOR SP ONSORS: Affordable Exhibit Displays | Broadreach Public Relations Headlight Audio Visual | Time Warner Cable | W.S. Emerson Company M O M EN T U M CO N V EN T I O N 2015 ACADIA SP ONSOR: SEBAGO SP ONSOR: » C O N T I N U E D F RO M P R E V I O U S PA G E

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