Jim Prado, owner of Optimum Steel, approached Corporate Investment about 3 years ago because he was considering listing his business for sale. One of the services we provide at no charge for a business owner is a value analysis as first step in the process. The value analysis gives the owner feedback about how the “market” will view the business. We don’t make the market, but after selling hundreds of businesses over the last 24 years, with values from $300,000 to almost $50,000,000, our firm understands the market for small and mid-size businesses.

Prado had built a solid business, but our valuation feedback was less than what the owner needed to accomplish his exit goals, so we counseled him over the next 24 months about the steps he could take to improve profitability. We also advised Jim on the value of keeping accurate, current financials and records, so that the due diligence phase would proceed smoothly and without surprises. Other issues that a buyer would also consider a “value detractor” were addressed, and the company was offered for sale in June, 2007. After spending approximately 30 days preparing the information memorandum on the business, Corporate Investment began contacting both financial and strategic buyers in early August.

In September, a buyer emerged that was an excellent fit. The buyer met the owner, visited the operation and began discussions toward a business sale transaction. The buyer presented a Letter of Intent in early October; negotiations were completed and the LOI was signed in early November. The buyer was financing the purchase through the SBA. Corporate Investment has worked with many lenders in the past, and provided guidance as to which lenders might be the best fit for this transaction.

The sale of the company was closed and funded in early January, 2008, with the holidays slowing the process down minimally. The seller was extremely pleased with the outcome, as the transaction required only six months from listing to close and the sale price was very close to asking price. Keys steps to closing this transaction sucessfully were a) the seller had prepared the business for market, b) the seller listened to his advisors, c) the seller anticipated the questions buyers would likely ask, and d) the seller had reasonable expectations related to the value of his business.

The speed of this transaction was welcomed on all sides, but often the sale of middle market businesses takes longer than six months. But no matter what the eventual timeline, taking the proper steps to prepare a business for sale, and having reasonable value expectations are extremely important to a successful outcome.