A Mergers, Acquisitions and Financial Advisory Services Firm
FREQUENTLY ASKED QUESTIONS
When and why would the seller or buyer of an automobile dealership hire a firm to provide Financial Advisory Services related to buying or selling a company?
This is a great, two-part question. In fact, most buyers and sellers would not even know to ask the question, or, are even aware that this is considered a standard practice for larger corporations. Operators of businesses are not experienced in valuing, marketing and executing the sale or acquisition of companies. In fact the, largest financial mistake a privately held business owner makes is when they go to the market without a clear understanding of the value of the company or acquisition target-today-and not understanding the process of selling or buying. Using a properly experience and credentialed Financial Advisory Firm is as important as using a lawyer for legal matters, a CPA for accounting issues and a doctor for health issues. The financial advisory firm is brought in as early as possible. Sellers and buyers rely on us to provide the most current values, trends and technology related to the process of succession or acquisition. Thats right. There is no difference between succession and a sale. A partial sale, future sale or gift, all require the same expertise. The entire process is very detailed and often takes a couple of years, sometimes longer. No company is ready to go to the market or divest of a portion of the company "today". It takes planning and a great deal of knowledge and effort.
This is a great, two-part question. In fact, most buyers and sellers would not even know to ask the question, or, are even aware that this is considered a standard practice for larger corporations. Operators of businesses are not experienced in valuing, marketing and executing the sale or acquisition of companies. In fact the, largest financial mistake a privately held business owner makes is when they go to the market without a clear understanding of the value of the company or acquisition target-today-and not understanding the process of selling or buying. Using a properly experience and credentialed Financial Advisory Firm is as important as using a lawyer for legal matters, a CPA for accounting issues and a doctor for health issues. The financial advisory firm is brought in as early as possible. Sellers and buyers rely on us to provide the most current values, trends and technology related to the process of succession or acquisition. Thats right. There is no difference between succession and a sale. A partial sale, future sale or gift, all require the same expertise. The entire process is very detailed and often takes a couple of years, sometimes longer. No company is ready to go to the market or divest of a portion of the company "today". It takes planning and a great deal of knowledge and effort.
What services do we provide?
As a financial advisory firm, most officer are not aware of the type of services they will need, therefore they do not know what type of services to contract for. Essentially, they are hiring someone to do a job they dont understand. We provide you with "our job description" so you understand what duties we owe you as part of the engagement. Our Standard advisory engagement is based around the following services, but may include a number of supplemental duties, as the issues are discovered.
Services to be rendered under Exclusive Engagement Agreement
EXHIBIT "A" TO EXCLUSIVE ENGAGEMENT AGREEMENT
As a financial advisory firm, most officer are not aware of the type of services they will need, therefore they do not know what type of services to contract for. Essentially, they are hiring someone to do a job they dont understand. We provide you with "our job description" so you understand what duties we owe you as part of the engagement. Our Standard advisory engagement is based around the following services, but may include a number of supplemental duties, as the issues are discovered.
Services to be rendered under Exclusive Engagement Agreement
EXHIBIT "A" TO EXCLUSIVE ENGAGEMENT AGREEMENT
- Consult with dealer principal concerning the goals the dealer is looking to accomplish in relation to divestiture of the asset. This will include discussions about asset sales, stock sales, earn outs and buy in/buyout options, etc.
- Review dealership financial statements, asset lists and management reports and develop an earnings recast of related items to determine the EBITDA+OC. (Earnings before Income Tax, Depreciation and Amortizations plus Owners Compensation.) This will include a pro forma work up of normalized rent and expenses related to the real estate or leases.
- Develop an opinion of value and present this opinion to client
- Develop a buyers pro forma based on the proposed selling price and counsel seller client on the funds necessary to close the proposed transaction, as the sellers representative.
- Develop the closing strategy and timing with client.
- Interact with buyer and sellers tax and legal counsel for the purposes of discussing the entity set up, timing for any tax-free exchanges, inventorying the stock certificates and addressing ownership/transfer issues.
- Compile the included and excluded asset list. Extract leased equipment and leasehold improvements from the fixed asset list. Arrange for the replacement of essential excluded assets.
- Digitally photograph all fixed (included and excluded) assets. Produce a CD of assets for buyer and sellers records and to be available to settle any disputes.
- Compile all financial/due diligence materials, land information and sales history (Factory Composite/Comparison Reports) and further accumulate any information the client may need to close.
- Assemble 3 years of sales history, service satisfaction and sales satisfaction information from the manufacturer(s) represented by client, which will be included in the Memorandum of Sale document, and which will be included in the buyers application package.
- Manage all communications, both written and oral, between buyers and sellers parties and all financing institutions and manufacturers, and provide client a copy of all such communication on a weekly basis, or as requested. Archive all communications. Produce CD of all communications for clients records in the event of litigation.
- In conjunction with Sellers Counsel, prepare, negotiate and execute all letters of intent to enter into a definitive purchase agreement.
- Provide experience of negotiating and executing numerous buy sell agreements in the creation of the deal points and contract terms and incorporate these key deal points into the first draft of the buy sell, with Sellers Counsel.
- Along with counsel, negotiate the buy sell agreement and obtain the sellers signature and further assist in the execution of the buy sell agreement.
- Assist and monitor buyers progress in the preparation of the franchise application and pro forma and further assist in the buyers approval process to insure sale is completed without delay and on schedule. Provide all necessary assistance to buyer in the application process, as the sellers exclusive representative
- Monitor the application packages progress with the respective manufacturers Market Representation Manager. Provide copies of all correspondence and notes of phone conversations with factory personnel, to seller and sellers counsel.
- Review and assist in the production of the Buyers Operating Plan, CSI Plan and Facilities Plan, and all other documents necessary to expedite factory approval. Monitor to insure completion and a timely submission of the application. Thoroughly review all application materials prior to submission.
- If applicable, monitor/review for compliance, the buyers partnership/LLC agreement prior to submission to the manufacturer.
- Make introductions to lenders on behalf of buyers to insure financing issues are set aside early on in the transaction.
- Review buyers liquidity schedule as it pertains to closing to insure buyers funds are available at closing. Monitor the cash required to close.
- Coordinate and manage the environmental audits. (Phase one; phase two if necessary.)
- Schedule, monitor and expedite any remediation should it become necessary after the environmental audits. Schedule and acquire all closure certificates.
- Schedule and monitor the buyers facilities engineering study should they choose to do so. Insure client obtains copies of the report and negotiate any issues relating to the facility.
- Schedule and monitor the buyers zoning and permit study to ensure a timely completion. Ensure seller client obtains copies of the reports and negotiate any issues, including outstanding COs.
- Schedule and monitor the property survey should the buyer elect to survey the real estate. Obtain copy for seller client.
- Schedule and monitor the completion of the additional computer log on for the buyer and an adequate firewall for the seller.
- Compile and negotiate the assumption of the vendor/lease obligations (assumed contracts schedule). (Computer, telephone, copier, long distance etc.) Follow up vendors concerning estoppel certificate and the assignments of any deposits.
- Coordinate, manage and expedite the financial due diligence. Work with computer system vendor and seller to obtain a log on to sellers computer for the purpose of executing the financial due diligence.
- Coordinate, manage and expedite the Human Resources Audit, along with buyer and sellers comptroller or office manager.
- Obtain the due diligence releases as the phases of the due diligence progress, to insure contract compliance by buyer and seller parties. Monitor notices of all dates to perform under the contract.
- Coordinate, manage and expedite the real estate appraisals. Assist with obtaining surveys and work with buyer and seller on title exceptions should they occur. If leased, negotiate the lease terms with the buyer. Provide term sheet to counsel. Work with leasor in obtaining any consents or assignments.
- Assist in cataloging and monitoring the fixed assets inspection at closing, and obtain the necessary releases as it relates to fixed assets.
- Schedule and monitor the essential tools audit.
- Coordinate, manage and expedite the parts physical inventory. Counsel parts employees, seller and buyer on the disposition of obsolescence and counsel parts employees on any packaging issues. Negotiate the obsolescence and accessories purchases should it be necessary. Obtaining definitions relating to the resignation return and the assignment of the resignation return, if applicable.
- Coordinate and manage the purchase of the used cars. Ensure all inventory is ready and available for the physical inspection and sale. Negotiate the acquisition of the inventory with buyer's representative.
- Coordinate and manage the purchase of the new vehicle inventory. This will include the interaction with the lenders in relation to reconciling the floor plan with the buyers and the seller's comptrollers.
- Prepare and negotiate the damage schedule to the new vehicle inventory.
- Negotiate the missing items schedule to the new vehicle inventory (keys, manuals, remotes etc.)
- Prepare the new vehicle schedule, used vehicle schedule, demonstrator schedule, service loaner schedule, new vehicle damage schedule, missing items schedule, parts inventory schedule, used vehicle schedule and the final closing schedules.
- Produce and review the closing documents and provide necessary assistance to the comptroller in the production of the closing documents schedules from the seller's books and records.
- Interact with the manufacturer for the purpose of obtaining the most favorable franchise agreement available to ensure a smooth approval. Minimize CAP EX issues, which could delay closing.
- Coordinate the closing process between the sellers and the buyer's parties. Attend the closing and further be available to negotiate any last minute issues, which normally occur on closing day.
- Ensure that funding instructions for the real property, floor plan and blue sky and fixed assets are correct and that funds are placed as requested by seller, along with sellers counsel.
- Coordinate on client's behalf, and negotiate any post closing items after the sale that may occur and need to be settled.
- Further, be available to the seller for any other items or issues related to the sale, for a period of two years, post closing.
All of this being said, the question always is "What will this cost me"?
We don't accept any "up front" payment from our clients. We invest our firm's time, staff and financial resources, right along with the client's, in making the process a success. Our clients show us tremendous trust and confidence when they hire us; we show them the same trust and confidence when we go to work for them. It is as simple as that.
Here is a simple math test that illustrates our value to the client. We base our fees for advisory services on a sliding scale related to the value of the assets and the time it takes to perform the services our client asks us to perform. One scenario was a client who wanted two million dollars for their business and we sold it for four million. The client invested two hundred thousand dollars in our services and netted 1.8 million dollars extra. Another example is the sale of business for eleven million dollars that the client valued at 8 million dollars. On average, our clients net between five and fifteen times the amount of the advisory fees. I'm not positive, but I think that is a giant ROI for the client.
The great part is it is our standard practice when engaging our client is for them to contact our clients and the lawyers we work with, so they can hear right from the source. They never really need to ask us "why". They can ask our other clients.
We don't accept any "up front" payment from our clients. We invest our firm's time, staff and financial resources, right along with the client's, in making the process a success. Our clients show us tremendous trust and confidence when they hire us; we show them the same trust and confidence when we go to work for them. It is as simple as that.
Here is a simple math test that illustrates our value to the client. We base our fees for advisory services on a sliding scale related to the value of the assets and the time it takes to perform the services our client asks us to perform. One scenario was a client who wanted two million dollars for their business and we sold it for four million. The client invested two hundred thousand dollars in our services and netted 1.8 million dollars extra. Another example is the sale of business for eleven million dollars that the client valued at 8 million dollars. On average, our clients net between five and fifteen times the amount of the advisory fees. I'm not positive, but I think that is a giant ROI for the client.
The great part is it is our standard practice when engaging our client is for them to contact our clients and the lawyers we work with, so they can hear right from the source. They never really need to ask us "why". They can ask our other clients.
What is your success or "closing" ratio?
It's not bad. Actually, it is 100%. This means that every client who we provided Financial Advisory Services in entering into a definitive purchase agreement has either sold or acquired the asset they hired us to advise on. It's not magic, just experience. We understand closing risks and we make sure that our clients are successful in the acquisition or sale one hundred percent of the time. Our website www.mdjohnsoninc.com has a listing of some of press releases for your reading. For us, it is our work ethic and pride in a job well done. It is also very satisfying to know that because of our efforts, the individuals and companies who trusted us have been rewarded with tens of millions of dollars in additional sales proceeds, they never expected.
It's not bad. Actually, it is 100%. This means that every client who we provided Financial Advisory Services in entering into a definitive purchase agreement has either sold or acquired the asset they hired us to advise on. It's not magic, just experience. We understand closing risks and we make sure that our clients are successful in the acquisition or sale one hundred percent of the time. Our website www.mdjohnsoninc.com has a listing of some of press releases for your reading. For us, it is our work ethic and pride in a job well done. It is also very satisfying to know that because of our efforts, the individuals and companies who trusted us have been rewarded with tens of millions of dollars in additional sales proceeds, they never expected.