The Art of the Deal
Jamie Marshall explains how he sizes up a deal, why he trusts his own instincts, and why he’s never bought from a business broker.
“We’ve acquired five companies and we have looked at many others. The process is very different for every potential acquisition.
You find that 80% of people believe their company is worth far more than it really is. Professional business sellers, accountants and other professionals band figures about like three to seven times profits plus assets or all sorts of other complicated multiples and sums.
But the only sum that matters is what is that business worth to you the buyer? What are you prepared to pay and how are you funding it?
There are not many buyers out there who are prepared to stump up the cash. I believe fully that if my gut feel is right, the numbers add up and I like the person selling then I will fund it.
There are two big points here. I must generally like, trust, or respect the person I am dealing with. I am still on very friendly terms with all the business owners I have bought from and this helps immensely with the whole process. Secondly, in our industry there are many poachers who want to acquire companies but want guarantees and earnouts, but basically there are no guarantees. You get a database, some goodwill, and sometimes staff.
Your job is to determine to the best of your ability whether you can make the right amount from the deal in the right timescale.
Be warned. There are not many bargains and like everything in life you have to work at it and it’s not away to transform your business.
I would suggest anyone who is considering acquiring a business firstly looks at their own business carefully and checks they have everything in order and working correctly, because if you haven’t you will just add more problems to the ones you haven’t yet solved.
For people looking to sell their business, consider what you actually want for it and consider what is it worth it to the buyer.
On both sides, seek advice. Yes, ask your accountant, but look for people who have bought and sold businesses. Ask your contacts for referrals and get as much info as possible. Accountants look at things in black and white, but buying a business isn’t black and white. I have never purchased from a professional business seller as they over value everything. Also, accountants can wreck the deal.
There are many different deals to be done, so be creative – think what the seller actually wants and whether you can meet it. Ask loads of questions until you find out what would seal the deal.
Most acquisition conversations end on the first phone call. There is a massive gap between the two parties. Trust your instinct. You will know if it excites you.
It’s not for the faint hearted. I have made mistakes, but I have learned from every one and it’s been hard work. Would I do another one? No, but I’d do another 10! We are always interested in talking to companies about potential acquisitions.”
Jamie Marshall is managing director, Premier Print & Promotions