Those who incurred windfall profits from this past winter may get bitten hard by the tax man, and are looking for ways to accelerate expense spending to avoid paying exorbitant taxes.
These companies are perfectly positioned to grow their business by acquiring someone on the opposite end of the spectrum. They may have ready cash to invest and are feeling quite good about how their “systems” worked this past winter.
Those on the opposite end may consider getting out of the snow business entirely. Knowing there are companies out there with cash to spend can be rewarding to the contractor who wants out.
Rick Sippola (Investment Banker and M&A specialist at John Allin Consulting) tells us “This past winter season has positioned many companies to take advantage of M&A opportunities that have become much more prevalent this summer. Many buyers are making strategic acquisitions to grow market share, expand geographically and realizing synergies such as spreading overhead over a higher sales base,” he says.
So, what can a buyer or seller expect if they enter this arena? Working with a fair and honest broker can make all the difference. This professional will take a few percentage points at the end of the overall transaction as a Success Fee payment for their time and efforts.
They will want some up-front money to cover initial expenses, but this money gets deducted from the Success Fee percentage when the transaction closes. These professionals can guide you through the process of evaluating the business and helping place a fair value on what you have to sell. A good and honest professional will execute a Non-Disclosure Agreement and a document outlining what they will do and what the fees will be.
Preparing a Confidential Offering Memorandum which outlines the company, what is being sold and how the company compares to the marketplace takes considerable time and effort. Keeping all parties at arm’s length so as not to impugn anyone’s integrity is important. The names of the sellers clients remains confidential and are usually not divulged until a Letter of Intent is signed by all parties. The Due Diligence process can be exhausting but is a necessary part of the overall process.
The buyer wants to be certain they know what they are purchasing. The buyer (or their representatives) digs deep to understand all the data, because once the transaction is completed, the buyer has to live with their own due diligence/information gathering – so they will be thorough.
Negotiating a final Agreement is also important. While lawyers will eventually become involved, it is the rare lawyer who understands the parties actually want to do a deal and their job is to facilitate that process rather than engage in deal breaking activities. Negotiating in good faith is the hallmark if deal making in the M&A arena.
A good M&A professional will also assist in the integration process. Cultures from separate companies are rarely “hand-in-glove” compatible and some work is required to ensure a successful integration. However, if the process works as is designed, selling and/or acquiring a business can be a rewarding and mutually profitable experience.
The author is a full-time consultant to the snow industry with over 40 years of experience in snow and ice.