Selling a business and walking away can be very difficult. But in many cases, there’s a transition (“training” and/or “consulting”) period dependent on the size of the company and the role of the owner. Transitions may be as short as a month or two or as long as a year. In most situations, the buyer wants the seller to remain on board to shorten the learning curve and help with the smooth transfer of key relationships.

In the typical business sale, a transition period of four to eight weeks is included, and sometimes a “telephone consulting period” is added (e.g., 6 months of telephone consulting not to exceed 5 hours per month). Also, the seller may additionally be retained as a consultant at a negotiated rate. In some instances, a long-term employment contract is negotiated and the seller maintains daily involvement for a much longer period of time.

For the owner who wants to sell the company and leave quickly, the focus should be on the development of a strong management team. Be sure to introduce key employees/managers to your major customers and vendors and look at ways to delegate responsibilities. The more the customers think they are interacting with “the company” versus the “owner” the easier the transition.

If you’ve established a good management team, less time will be required for the transition to the new owner. In addition, a well developed team usually adds value to the sale.

Occasionally there are owners who want to sell but just aren’t ready to quit working. They may be looking to sell early to get a premium price while the market is in their favor or to get away from unwanted or overwhelming administrative and management duties.

Either way, long-term employment contracts can be included in the sale agreement. The seller can stay on board and work with the business a few more years while still drawing an income and benefits.

If you’re selling your business, in most cases you won’t be able to walk away the day after the sale and in most cases you probably don’t want to. Talk to your business intermediary about the true timeline of the sale and transition. If you want to sell while the price is right, but you’re not quite ready to leave immediately, consider the options available to sell now and maintain a role with the company.

The International Business Brokers Association® is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

©2007 International Business Brokers Association® (IBBA®) all rights reserved

Permission to reuse any or all of this material should be directed to the IBBA at 888-686-4442 and is restricted to IBBA members.

A recent survey of members of the International Business Brokers Association (IBBA)

1. - Seller Financing - Increasingly, buyers and lenders are looking to the seller for

2. - SBA Loans - In sales of a business, conventional loans usually aren’t available, so a

3. - Earnouts - Earnout financing involves a certain dollar amount agreed on by the

4. - Mezzanine Financing - In mergers and acquisitions, mezzanine financing is another

5. - Funding Scenario - In a million dollar transaction, the buyer would be expected to

As a business owner considers placing his or her company on the market, ascertaining the proper value for the company is critical. Too often the owner assigns an unrealistic and unachievable arbitrary value then proceeds into the sale process only to be disappointed with the market’s response. As a result, the asking price is reduced several times. During this unfortunate period buyer prospects and valuable time is lost.

In truth, a company’s value is determined by a compilation of factors such as the company’s sales, earnings, performance, market outlook, personnel, net book value and fair market replacement value of equivalent operating assets. But it can also be influenced by intangible assets like the company’s image, reputation and goodwill.

There are several approaches to valuing your business.

Balance Sheet Value

There are several balance sheet valuation methods, including adjusted book value, book value and liquidation value. The adjusted book value is determined by revising the asset’s book value to reflect the cost it would take to replace the assets in their current condition. This method requires the total values to be offset against the sum of the liabilities.

The book value considers the figures from the company’s financial records, as depreciated at the time of the sale. The book value can pose some difficulties for sellers, particularly if the seller has depreciated the assets too much to gain prior tax advantages.

The liquidation value is the amount that could be realized if all assets – equipment, furnishings and inventory – were sold separately. This value is typically much lower since it doesn’t consider a company’s intrinsic value.

Income Approach

The income approach takes into consideration the company’s level of earnings using a capitalization rate, discount rate or multiplier. Several income approach methods are frequently used. Each method requires a level of earnings and a conversion factor to translate the earnings into a company value. Selecting the proper level of earnings – after-tax, pretax, discretionary or cash flow – and matching it with the proper conversion factor – discount rate, cap rate or a multiplier – is critical to calculating a reasonable value.

Market Approach

The market approach sets a value based on the values of other businesses that have been sold. Setting the market value involves researching the sale prices for similar businesses in a geographic area. In some cases, however, finding a company that is similar in many ways to your company may be difficult.

Whatever your goal, you want a good advisor to help you assess the value of your company. Question your advisor on the effects of deal structure and how multiples are used. A business owner should never accept a computer-generated valuation or a one-size-fits-all approach when selling the business. And don't be impressed by the person who presents the highest value – you may only be setting yourself up for failure during the sale process.

The International Business Brokers Association ^® is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions. IBBA ^® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.

©2008 International Business Brokers Association^® (IBBA^®) all rights reserved

Permission to reuse any or all of this material should be directed to the IBBA at 888-686-4442 and is restricted to IBBA members.

Many factors can bog down the sale of a business. In fact, more than purchase price or structure, time is the most likely reason that a business sale may fail.

Time can breed frustration and fatigue. As a potential sale drags on, the owner is left in an uncomfortable state of flux. The buyer may also become frustrated as fees mount. The deal can reach the point when one party declares…“It just wasn’t meant to be.”

National figures indicate that the average business sells in nine to 12 months from start to close. Once a letter of intent (LOI) has been signed, the final due diligence and closing process usually takes 30 to 90 days.

So how do you keep the sales process moving forward?

Attentive Intermediaries

Your business intermediary should be able to give you the time, attention, energy and resources necessary to focus on your deal.

Be sure to ask your business broker or intermediary about his or her organization’s work on closing details. You want to be sure that you are working with someone who can cover minute details, looking weeks and months ahead in the sale process.

Obtaining appraisals, ordering environmental investigations, transferring licenses, title work and many other details need to be handled properly and in a timely fashion to be able to close a transaction. For the best possible results, you want to work with someone who knows the proper sequence of events so there aren’t any unnecessary delays. There’s a lot to coordinate and missing just one detail can cause a delay in closing the deal.

Transition Specialists

From your business broker or intermediary to your attorney and accountant, you want to consider hiring specialists in business transitions.

Inexperienced advisors tend to be overly conservative to protect their liability. That can drag out the negotiation process and may cause frustration for the parties involved. If you are serious about selling your business, you really don't have the time or money to pay to educate your advisors on the mergers & acquisitions process.

Comprehensive Overviews

Your advisor should spend the time packaging the business up front. A comprehensive business review can be developed that answers 80 to 90 percent of the standard questions a potential buyer will have.

The Association for Corporate Growth, in association with Thompson Reuters has released its latest survey on middle-market merger and acquisition environment. It has cause for some optimism. Here is a summary of the report.

NEW YORK, July 22, 2008 – The latest twice yearly survey of middle market merger professionals by the Association for Corporate Growth (ACG) and Thomson Reuters reveals frustration with the current M&A environment, but cautious optimism for the next six months.

According to the ACG-Thomson Reuters Mid-Year 2008 DealMakers Survey, the percent of middle market mergers and acquisitions professionals who say the current M&A environment is good or excellent has dropped precipitously to 43% from 93% 12 months ago. The figure was 72% in December 2007.

The more than 500 investment bankers, private equity professionals, corporate development executives, lawyers, accountants and business consultants polled say the greatest obstacle to M&A activity is the weak economy (45%).

According to Thomson Reuters, the volume of all worldwide mergers and acquisitions totaled $1.6 trillion in announced deals during the first half of 2008, a decrease of 36% over the record-breaking first half of 2007. Of this total, M&A deals in the mid-market, defined by Thomson Reuters as transactions under $500 million, fared better. Less reliant on the global credit markets, they declined only 18.2%, with a total value of $368.9 billion.

Despite the decline, 32% of survey respondents say the number of M&A transactions will increase in the second half of 2008, up from only 25% six months ago, perhaps signaling a market bottom. Twenty-eight percent say merger volume will decrease, while 39% say it will remain the same.

“The middle market dealmaking environment has slowed, but good deals continue to get done, and some merger pros are expressing optimism that the pace of dealmaking may have hit bottom and could be flat to up a little over the second half of the year,” said Harris Smith, ACG Chairman and Managing Partner of Strategic Relationships at Grant Thornton. “The middle market has always been less reliant on debt to fund deals, and many private equity firms and strategic buyers have a lot of equity to draw on for minority or majority investments.”

A notable finding of the survey is the emergence of a buyer’s market. Respondents indicated that the balance of power between buyers and sellers of businesses was upended over the last year, with 68% saying it is now a buyer’s market, 11% calling it a seller’s market, and 21% saying they are unsure. In June 2007, 75% said it was a seller’s market, 13% a buyer’s market, and 12% were unsure. The shift was evident in December 2007, when 39% said it was a buyer’s market, 33% said it was a seller’s market, and 28% were not sure.

"It has taken a long time for the pendulum to swing, but market conditions clearly favor the buyer, and this is one of the most significant changes we've seen,” said Jim Beecher, Publisher of Buyouts Magazine, a Reuters Media publication. "It can take a while to realize profits, but private equity performance can thrive in an environment such as this. For the right acquisitions made at a more reasonable price, there will be big gains to be made once the economy rebounds.”

Other points of optimism revealed in the survey include an increase in the last year to 76% from 52% of M&A professionals who say the debt markets will improve in the next six months. Also, dealmakers point to distressed deals (29%), good multiples for acquirers (25%), and large capital reserves of some acquirers (21%) as facilitators of M&A.

“We have seen a multiple contraction of between a turn and a turn and a half in the middle market,” said Michael Gibbons, Senior Managing Director & Principal, Brown Gibbons Lang & Company. “Seller price expectations are slowly adjusting to the new market climate. However, there is still plenty of money for, and interest in, good businesses in the middle market. The dry powder in the hands of private equity ensures at least a reasonable level of activity in this difficult market.”

Private Equity Firms’ Greatest Threats, Best Strategies

The survey is particularly focused on private equity, and among private equity respondents, over the next six months, most expect the deal pace to stay the same (43%), with 30% expecting more deals, and 27% expecting less.

Private equity professionals say today’s greatest threats to their business are: the credit crunch (54%), overall economy (50%), competition with other private equity firms (29%), possible tax changes on carried interest (26%), and regulatory scrutiny (22%).

The aspects of their jobs that are the most difficult now are: securing debt for transactions (45%), winning and closing good deals (41%), identifying good investments (38%), fund raising (25%), and exiting investments (24%).

“As it relates to new platform company acquisitions, private equity groups are being more selective, doing more due diligence and working harder to secure attractive financing,” said Mark Jones, 2008 ACG InterGrowth Chair and Partner, River Associates Investments, LLC. “That said, the private equity industry continues to have substantial cash reserves that need to be invested. Even in a slower growth economy with choppy debt markets, seasoned private equity investors continue to aggressively pursue high quality companies with the knowledge that smart buys can be made in any economic environment.”

Nearly one-third (32%) of private equity professionals expect to deploy their latest fund less quickly than they originally planned, while 55% expect to be on pace, and 13% anticipate a faster deployment of capital.

Nearly one-third (28%) are adjusting their investment strategy, while 72% are not. The best strategy for success in the current environment, according to private equity pros, is: stick to their original strategy (55%), focus on their portfolio companies (44%), cut costs at their portfolio companies (22%), diversify geographically (19%), diversify by industry ( 17%), sit it out and wait for a better investment climate (11%), cut costs at their firm (8%), and focus on their Limited Partners (6%).

According to survey respondents, geographically, the best investment opportunities are in the United States (48%), China (12%), Latin America (8%), India (7%) and Eastern Europe (6%). The most attractive industries for investments are manufacturing and distribution (23%), healthcare/life sciences (19%), and business services (13%).

“To an ever-increasing degree buyers and sellers are looking beyond the water's edge for opportunities,” commented Dennis J. White, ACG Vice Chairman and Partner, McDermott, Will & Emery LLP. “The U.S. downturn and depressed dollar make everything from New York condos to U.S. companies seem like bargains to foreign buyers. Conversely, U.S. buyers are drawn to the attractive upside opportunities and less competitive investment environment that prevails in many markets overseas. As a result, "cross-border" has become a permanent part of everyone's deal vocabulary.”

Survey Methodology

The bi-annual survey, conducted in June 2008, was completed by 542 ACG members and Thomson Reuters customers. Respondents were comprised of private equity, venture capital and buyout firm members (21%); investment bankers, intermediaries, brokers (28%); lenders, finance providers (10%); corporate professionals, entrepreneurs (15%); and service providers, such as lawyers, workout specialists, accountants and consultants (26%). The majority of respondents were from the United States (453), where 39 states were represented. Internationally, executives from 21 countries completed the survey.

Founded in 1954, the Association for Corporate Growth (ACG) is a global association for professionals involved in corporate growth, corporate development, and mergers and acquisitions. Today ACG stands at more than 12,000 members from corporations, private equity, finance, and professional service firms representing Fortune 1000, FTSE 100, and mid-market companies in 53 chapters in North America and Europe. For more information, please visit www.ACG.org .

About Thomson Reuters
Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. Thomson Reuterscombines industry expertise with innovative technology to deliver critical information to leading decision makers in the financial, legal, tax and accounting, scientific, healthcare and media markets, powered by the world's most trusted news organization. With headquarters in New York and major operations in London and Eagan, Minnesota, Thomson Reuters employs more than 50,000 people in 93 countries. Thomson Reuters shares are listed on the New York Stock Exchange (NYSE: TRI); Toronto Stock Exchange (TSX: TRI); London Stock Exchange (LSE: TRIL); and Nasdaq (NASDAQ: TRIN). For more information, go to www.thomsonreuters.com .

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Contact:

Phil Nunes Jen Dowd

BackBay Communications BackBay Communications

617-536-0366 617-536-0255

Phil.Nunes@BackBayCommunications.com Jen.Dowd@BackBayCommunications.com