CLIENT PROFILE: Western New York wholesale distributor with 45 employees.
BUSINESS SITUATION: For a business owner, selling their company (and the years of effort that went into building it) is one of the most critical moments of their career. It is essential that they have professional advisors that allow them to get fair value for their company.
A Western New York business owner wanted to diversify his assets and sell a portion of his company. An international business operating in the owner's industry was interested in purchasing a portion of the business.
The owner was negotiating a sale price for his business, with the much larger international company, which was working with a prominent national accounting firm. The owner was having difficulty assessing the value of his business and risked losing millions of dollars if he sold for the wrong price. |
The business owner decided to contact Gaines Kriner Elliott (GKE), a CPA and business advisory firm that he had worked with for a number of years. He realized the importance of having a trusted advisor to assist in valuing his business and preparing for the negotiations, and thus engaged GKE to provide business valuation services.
Business valuation is a process used to estimate the economic value or fair market value of an owner's interest in a business. It is commonly utilized in the purchase or sale of a business; or in meeting tax requirements involved with the gifting or transfer of assets. GKE met with the owner to determine both the fair market value of the business and also its value as a strategic purchase for a specific buyer.
A strategic acquisition analysis provided the owner with calculations showing how the buyer could take advantage of strategic synergies by purchasing the business. The purchase would enable the buyer to increase their cash flow while decreasing costs.
The buyer would also have the ability to utilize the new sales force and facilities purchased, to immediately set up and sell to the newly acquired customer base. The purchase would provide the buyer with the ability to increase their profit margins by taking advantage of quantity discounts on inventory for resale. Additionally, the buyer would not have to take on all of the labor costs of the acquired business as they could utilize their current management and administration.
GKE's business valuation provided the business owner with the confidence needed to ask for a price much greater than the fair market value of his business. The buyer was unable to successfully argue against the strategic synergies created. They agreed to purchase 51% of the business for the amount calculated in the strategic acquisition analysis, which was much greater than the fair market value to a buyer not connected with the business.
GKE's consulting services helped the owner prepare for the transfer of ownership. Their analysis assured the owner that the business would succeed with the new ownership and that the future of the employees was in safe hands. Overall, the business valuation provided the seller with the ability to diversify his assets and sell his business with confidence.
Customer Benefits:
- Increased sale price of business, significantly greater than fair market value.
- Trusted professional advisor to assist with the negotiation.
- Dedicated resource to resolve tax issues involved in the transfer of ownership.
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