Guard Company For Sale" - Please Contact the Broker
By Brian T. Dooley, CPP
01/27/2006
There are number of hurdles that sellers face when putting a "FOR SALE" sign up on their security firms. Most commonly they try to sell a company without having a professional on board to steer the course of the transaction and help ensure a successful outcome.
A good broker intervenes to mitigate a number of problems. How do you advertise without letting your competitors know that you are looking to sell? Who conducts the screening process? These tasks involve know-how. Plus someone skilled has to delve into potential buyers to weed out "window shoppers" and those trying to simply gain competitive information.
After potential real suitors are identified, (and this can be an intensive process,) you have to vett them to ensure they have financial capacity to consummate a transaction. Some owners find this out way too late. They spend months with potential buyers only to find that they are not capable of completing the deal. Now a real nightmare can begin.
Sometimes a seller, now angered by the non-deal, finally engages a broker. The broker may recommend removing the company from the market for a specific time in order to regroup. From the broker's perspective, having worked through many deals, he knows that those shopping for companies may consider this particular company "tainted"
at the moment.
Other times the sellers themselves present the real "problem." They have unreal expectations as to the worth of their company. Many sellers believe that since they spent the majority of their adult lives growing and maturing their own company that it is now worth "X" dollars. They may base value on the company's revenue or Earnings Before Income Taxes (EBIT) –and if it is a contract firm, there are a myriad of other considerations as well. For instance, how long into the future are current contracts? What types of clauses are in those contracts concerning dissolution in case of changed ownership/management? Sellers must come to grips with the real value of the company in current market conditions.
The lack of readily available information for buyers can also be a deal breaker. When a buyer is extremely interested, he or she has a list of information they want to see before issuing a Letter Of Intent (LOI). Over the years, I have personally seen a number of buyers walk away from deals when they feel that it is taking too long to get data the seller should have had at the ready. This also sends up a 'red flag' to potential buyers that the seller may be somewhat disorganized or may lack the staff to handle requests. In either case, a qualified broker versed in our industry, will have assembled all pertinent information with ownership, prior to taking the company to market.
At first, the expense of having a broker negotiate the deal may seem problematic. But in many cases a knowledgeable experienced broker keeps ownership out of expensive pitfalls before the process even starts. Some owners, as they get frustrated part-way through selling, still salvage opportunities by choosing a good broker at whatever stage they've reached. Sellers who do their homework and are prepared for the moment are the ones who have the smoothest results.
Brian T. Dooley, CPP has been in the security industry for over thirty years and has run the daily operations for a number of successful New York metro-based companies. He is the founder of Brian T. Dooley & Associates, a New York City based Mergers and Acquisitions firm that specializes in the Security Industry. Brian may be reached at 800-656-9660 or via e-mail brian@briantdooley.com