Aberdeen Advisors Frequently Asked Questions

A: These terms are not interchangeable. As M&A advisors, we understand the nuances that may arise out of a complex sales process. We conduct a comprehensive financial analysis, design a marketing strategy to attract sophisticated buyers, and partner with your CPA and transaction attorney to structure a sale that maximizes market value, minimizes tax implications, and mitigates your liability. A business broker is generally more transactional and most often focuses on main street businesses versus businesses in the lower middle market.

A: While M&A advisors work with businesses in the lower middle market with annual revenues between $10-100+ million, investment bankers provide advisory services to companies more than $50 million in annual revenue. Investment bankers often require a substantial retainer up front and an ongoing monthly fee, and the overall costs are usually significantly higher due to overhead, legal and auditing requirements, and the size of the deal team.

A: Industry surveys show that sellers requiring all-cash receive — on average — only 70% of their asking price. Compare that to companies sold with purchase price terms that may include cash, a seller note, or an earn-out, that receives an average of 86% of their asking price. The key to higher average purchase prices and more favorable terms and conditions always comes back to finding the right buyer, which is why Aberdeen’s proprietary process is essential to superior results.

A: Whether you’re considering selling your business or not, you should still know the answer to this question. We suggest conducting a business valuation, which is an attempt to figure out your company’s current value. A valuation considers your assets, the likelihood of future cash flow, and other deciding factors. Business valuations include three approaches: the asset-based, earning value, and overall market value approach. Formal valuations are very comprehensive and are conducted by industry valuation experts. Without a certified valuation, Aberdeen Advisors may help you determine a range of value for your business by providing you with an estimate of value after analyzing your Company’s key data.

A: Most buyers will require a debt-free transaction which means you will have to pay off any debt. Other buyers may require you pay off designated debt while they assume some debt components. While it may not be necessary to pay off all of your debt before selling your business, your debt will impact the purchase price, valuation, and net proceeds you will receive at closing. By paying down as much debt as possible, you can maximize your profits at closing.

A: As the name states, a stock sale means the buyer purchases a company’s stock, acquiring at the same time the seller’s assets and liabilities. Meanwhile, an asset sale includes a company’s brand, intellectual property, physical assets, client list, and any contracts that are assignable, as well as anything else that may be of value for the company.

A: If you have any contracts with clients, vendors, or contractors that are either highly profitable or give you a competitive advantage, they are part of your business’ assets. A well-informed buyer is going to want to review each individual contract to verify whether they would continue to reap their benefits as a new owner. This will be included in your business valuation.

A: As with most components of a business sale, this can be negotiated between the seller and buyer. By partnering with you and with your deal team, to include your transaction attorney, Aberdeen Advisors will work in concert to ensure potential risks are identified, discussed, and minimized.

A: A Letter of Intent (LOI) is a non-binding proposal presented by a buyer which serves as a precursor to the actual, binding purchase agreement. A letter of intent will outline the purchase price a buyer is willing to pay for your company, the terms of the purchase price such as the amount of cash, seller note, or earn-out, the timeline of diligence, and the anticipated closing date. The execution of a letter of intent by a seller will most often require a period of exclusivity wherein the seller’s company is off the market. Although a letter of intent will most always allow for easy termination by either party, the letter of intent is the first step to negotiating the sales transaction itself.