Should You Consider Using a Broker to Sell Your Accounts?
Your business is your life’s work. You’ve spent years, if not decades, building a profitable alarm company. You have personal goals and business objectives that you want to achieve, and you know that the key to achieving those goals and objectives is maximizing the value of your accounts in a sale – whether you’re selling some or all of your accounts.
Should you use a broker to help sell your accounts?
Only you can answer that question and determine what is best for you and your business. But a broker can play a crucial role in the process from beginning to end.
As much as a 20 percent difference in the money you walk away with, says Ron Davis, President of the Davis Group and a 40-year veteran of the alarm industry.
For most alarm company owners, selling their accounts is an infrequent and unfamiliar occurrence. And for many, the transaction might be a once-in-a-lifetime deal. All of the other participants in the acquisition process, including the buyer, its team and any outside professionals, are probably experienced in account acquisitions. Most sellers aren’t. So, you want an experienced industry professional at the table with you, says Eric Pritchard, an industry lawyer and Managing Director of Ascendant Strategy Partners LLC.
Good brokers understand the process because they have the deep experience doing the acquisitions. They know the market place, says Davis. They are familiar with the range of possible buyers and their programs, and can help identify the right potential matches for the seller. Both Davis and Pritchard also stress that good brokers do much more than simply provide a list of buyers. They know the typical challenges and potential roadblocks in an acquisition, and can spot issues that sellers may not see. Many sellers also aren’t aware of the significant amount of work that it takes to prepare their companies for sale – and the difference it can make in the outcome of a sale, adds Davis. A broker can help a seller position themselves to be most attractive to buyers before the deal process begins.
Are there any acquisitions that don’t need a broker?
“Perhaps,” says Davis, “but I really can’t think of any. Remember the 20 percent. Even if you were selling to your best friend, the most honest and ethical person you know, who would do everything right, you still run the risk of getting less than your accounts are worth.” Every deal can benefit from the expertise of someone knowledgeable about the market, experienced in the acquisition process, and familiar with sellers in the industry, say both Davis and Pritchard.
There is no downside to using the right broker. While it’s true that brokers earn their fees from the deals they help bring to a close, Davis believes that the added monetary value they can help you realize more than offsets their fees. The real risk comes in using the wrong broker for your acquisition.
How do you find the right broker for you and your company?
Not every broker is right for every deal, stresses Davis. You need to do your own investigating and ask questions – not only of the brokers you are considering, but also of others in the industry.
Some critical questions to ask brokers include their experience in the industry, the number and kinds of deals they have been involved in, and their fees and the services they provide for those fees. Ask for references from other sellers – and check those references, advises Davis. In addition to interviewing your potential brokers, seek out information from other dealers in the industry about those brokers. Ask about their reputation in the industry – from other sellers as well as buyers, if you can. And last, but certainly not least, consider whether you like and are comfortable working with your potential brokers. A good working relationship between broker and seller is a critical component of any successful acquisition.
If you have any questions regarding using a broker, please contact ACA, and we will be happy to provide references to industry advisors and brokers.