Andrew Usher, Director at Catand Advisory, offers advice on how to get the best deal for your pest control business by working with the right people.
Each professional can play an important role in the process of the sale of your business. Each individual or firm will bring with them specific expertise that you need to ensure you get the right deal, and a successful transaction, which is commercially beneficial to both you and the potential acquirer. So do you need a lawyer, an accountant or a broker? Let’s answer that by looking at what each professional brings to the party.
A lawyer or solicitor is there to advise and protect you. Their role is to ensure, at the end of the day, that a deal is achieved and any risk borne by you in a sale contract is minimised to the best of their ability. Will they know what your business is worth, or much about the pest industry? Highly unlikely. But they do know the ins and outs of the complicated ‘legal stuff’.
I personally always request that my clients discuss any offers or sale contracts with their lawyer, whilst collectively providing my professional and commercial input. Through this process, it is easy to get bogged down in trying to protect yourself against risks that may never occur. This can cause a stalemate between the acquirer’s lawyer and yours, so it is imperative that a commercially minded lawyer is used and that they understand you want to get a deal done. There are often times when a deal has reached a stalemate in legal jargon, and a good, commercially minded lawyer can cut through this by simply picking up the phone and having a discussion with their counterpart and finding a mutually beneficial solution.
For me, a lawyer is definitely an important person in the sale process, but maybe not one to provide you with the best viewpoint on the value of your business as they are not in the pest industry.
An accountant is just as important to the process as they tend to know your personal situation, sometimes better than you do, from a tax or financial perspective. Nobody wants to sell their valuable asset and hand over most of the money to the tax man, so proper and diligent financial planning is a key step in any sale process.
Typically a sale process is GST free, but capital gains tax would be a key factor in terms of taxes to pay. There’s also the structure of the company/trust to consider, and working out the management of the fund – not just for the short term but also long term. Always remember that in a normal situation there is likely an earn out period, so your tax implications may roll over multiple tax years, which can be to your advantage too.
Your accountant may have some expertise in mergers and acquisitions, and you may be asking them what your business is worth. To answer your question, they tend to run multiple variations of calculations including net asset values, present value of future cash flows, or even Googling similar businesses for sale. They may value your business based on what they think the market will pay, but do they know the pest control industry? The answer is most likely no!
So then we have the business broker, or from my perspective, the advisor. Would you try selling your house without going to a real estate agent? Of course not. So why try selling your business without talking to a broker? A broker should be someone who knows the industry, knows the key players, and understands how to model and present your business to prospective acquirers. An advisor knows how to value your business and of course knows how to honestly tell you whether any offers you may have received are based on a fair valuation or whether you should walk away from the deal. Unless they are specialists within the pest industry, lawyers and accountants are not well placed to advise clients on the valuation of their businesses – it takes someone who knows the industry well. After all, the pest industry isn’t their business, so how can they know what your pest operation is worth?
Take a look on social media and you’ll see many selfproclaimed experts advising people how to calculate the value of their businesses. However, it is never as simple as calculating a dollar for dollar of revenue or anything like that. It may be perfect timing to sell your business to one of the big pest firms or maybe not. You likely have a successful and profitable business but it simply may not fit into their scope at that particular time. Without professional advice, you may walk away leaving a lot of money on the table without even knowing. You may be taken advantage of because you don’t know what your business is really worth – and believe me, this happens!
At the end of the day, a good broker should pay for themselves. So set yourself up for success and talk to a professional before selling your prized asset. Engage a broker AND ensure you have a good lawyer and accountant with you in the process.
Andrew Usher, Director, Catand Advisory