Are you thinking about buying or selling a business in the next couple of years? Ken Haffey and Mike Trabert from Skoda Minotti’s Merger & Acquisition Group discuss what goes into buying a business.

1. Key Considerations When
Buying a Business
May 13, 2015
Ken Haffey, CPA, CVA, CGMA
Mike Trabert, CPA, CVA, CMAP, CEPA, CM&AA

2. 2
BUYING A BUSINESS
• The tricky part of buying a business is
finding a business to buy
• Major decision and investment
 Money
 Time
 Effort
 Energy
• Nine out of ten people who begin a search
for a business never complete a
transaction

3. 3
BUYING A BUSINESS
• The average buyer gives up after an 18-month search
• 70% of searches are conducted via the Internet
• You will find hundreds of thousand of businesses are
available when you search through Business-for-Sale
websites
• Many individuals don’t identify what types of businesses are
right for them before searching

4. 4
BUYING A BUSINESS
• Buyers should look at their strengths, weaknesses, likes and
dislikes honestly before beginning the process
• Most people don’t know what is right for them
• Finances are next
 Produce a personal financial statement
 Assess borrowing capacity/sources
 Determine amount of money you have at risk

5. 5
BUYING A BUSINESS
• Don’t bother looking at businesses
that are unaffordable
• 80% of small businesses involve
seller financing; could be 30% -
50% of purchase price
• Evaluate Small Business
Association loan program

6. 6
IDENTIFYING A GOOD ADVISOR
• Walk you through the valuation process
• Provide you with comparable business valuations
• Keep the deal moving along when you encounter obstacles
• Be the bearer of bad news to the seller when necessary
• Ensure all pertinent documents are assembled for the closing

7. 7
SIX STEPS TO SUCCESS
1. Commit to a deadline for buying a business
2. Set aside time every day to work on project
3. Organize your finances
4. Determine what type of business will thrive from your
strengths and not suffer from your weaknesses
5. Seek advice from a qualified accountant and attorney
6. Educate yourself about the process

8. 8
GROWTH BY ACQUISITION
STATUS QUO VS.
Status Quo
Growth Through
Acquisition
Benefits • Perceived low risk strategy
• No significant additional resources to execute
• Minimal impact on current management,
employees and community
• Maintain current ownership levels and
operational control
• Could result in enhanced shareholder value
over time if forecasts are met or exceeded
• Build overall critical mass / increase market
position
• Capitalize on potential operating synergies
• Enter market/product niches and new
geographies
• Improve returns to equity holders
• More sharply define strategic
direction/position Company for a future
sale/liquidity event
Issues • Does not significantly mitigate fundamental
strategic, financial and market risks or issues
• No growth / acceleration of value
• Could erode shareholder value over time
• Competitors may gain market share through
acquisition
• Exposed to execution and post-deal
integration risk
• Additional leverage could restrict organic
growth
• Impact on key constituents - management,
employees and community

9. 9
SUCCESSFUL ACQUISITION
CHARACTERISTICS OF
• Assess a large number of opportunities –
What targets exist and at what prices?
• Approach targets directly with a consistent message,
getting a seller to the table may take time
 Do not wait for an investment banker to send a book as
part of an auction
• It is more advantageous to sell the non-financial
benefits first and address the price once there is
momentum
 But, balance that with avoiding sellers with unrealistic price
expectations
• Manage conversations with multiple potential targets
 Shift the balance of power between the acquirer and the
target
 The best acquisition campaigns ensure that the deal
pipeline is always full
Exhaustive
research
Go direct
(Buy wholesale
not retail)
Don’t focus on
price too early
Cultivate
alternatives

10. 10
& CONTACTING TARGETS
TARGET COMPANY LIST
• Develop acquisition strategy and criteria and establish
research parameters
 Identify market segments with greatest opportunity and create detailed
acquisition criteria to focus and prioritize target research
 Determine which company specific research is necessary to evaluate
each target
• Develop target universe using research to identify targets that
meet the targeted criteria
 Qualify selected targets and conduct more in-depth research on all
qualified targets within the universe
 Further prioritize and select a focused list of companies for approach

11. 11
& CONTACTING TARGETS
TARGET COMPANY LIST
• Communicate directly with target decision-makers
 Highlight your company’s strengths, strategy, reasons for interest and
plans for the target
 Include target company research in the message to communicate
understanding of their business
• Continue to pursue and communicate with senior people at
the target in a confidential manner
 Regularly share the successes your company (new customer wins, joint
ventures, recent expansions, etc.)

12. 12
ACQUISITION PROCESS
Pre-
Acquisition
Due
Diligence
Deal
Negotiation
Acquisition
Post-
Acquisition
Anatomy of an Acquisition

13. 13
PRE-ACQUSITION
ACQUISITION PROCESS
• Assess acquisition strategy and alternative expansion options
 Evaluate acquisition capacity
 Corporate capabilities
• Industry / market monitoring
• Industrial / market segmentation analysis
• Competition analysis
• Assisting with debt and/or equity channels

14. 14
DUE DILIGENCE
ACQUISITION PROCESS
• Quality of earnings
• Review of accounting
policies
• Unrecorded liabilities
• Working capital trends
• Financial reporting review
• Tax diligence
• IT controls review
• ERISA compliance
review
• HR regulatory review
• Develop preliminary
valuation model
 Pro-forma earnings and
cash flow model
 Valuation and pricing
 Preliminary purchase price
allocation

15. 15
DEAL NEGOTIATION
ACQUISITION PROCESS
• Assist with negotiation
• Review and consult on documentation
• Purchase price adjustments
• Financial and tax structuring

16. 16
ACQUISITION
ACQUISITION PROCESS
• Purchase price allocation /
purchase accounting
• Intangible asset valuation

17. 17
POST-ACQUISITION
ACQUISITION PROCESS
• Conduct final purchase price review
• Provide full post-merger integration support
• Integration plan management
• Organization and operational structure design
• Compensation structuring
• Benefit plan audit
• Technology planning

18. 18
KEY TAKE-AWAY
Be Prepared

19. SERVICES TEAM
-19-
Ken Haffey
CPA, CVA, CGMA
Partner
Mike Trabert
CPA, CVA, CMAP,
CEPA, CM&AA
Partner
Mike Milazzo, CPA
Partner
Jim Forbes, CPA
Partner
TRANSACTION ADVISORY

20. SERVICES TEAM
-20-
Rick Cruickshank, CPA
Principal
Ted Ginsburg, CPA, JD
Principal
Pat Mullin, CPA
Principal
Christopher Coyle, CPA
Senior Staff
Mike Ella, CPA
Manager
Colin Smith, CPA
Senior Staff
TRANSACTION ADVISORY

21. 21
CONTACT US
Ken Haffey
CPA, CVA, CGMA
khaffey@skodaminotti.com
Mike Trabert
CPA, CVA, CMAP, CEPA, CM&AA
mtrabert@skodaminotti.com

22. - 22 -
Skoda Minotti CPAs,
Business & Financial Advisors
skodaminotti.com
THANK YOU
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