What types of businesses does Stonemill Partners represent?
Stonemill Partners only represents firm in the A/E/C industries. We work with architectural, engineering and construction firms nationwide.
What determines a firm’s value and marketability?
The firm’s value is determined by its profitability and related financial measurements. The marketability is determined by the firm’s focus, culture, project types and geography. With our focus, we have many buyers who contact us on a regular basis looking for firms in many different geographies with many different focus areas.
Why should an architectural or engineering firm use Stonemill Partners to assist in the sale of my firm?
Stonemill Partners only provides M&A advisory services for the A/E/C industry and because of that focus, Stonemill Partners can find the right buyer usually quicker than the industry average. In many instances, we know who the right type of buyer is when we engage with a client while using our target marketing approaches and methodology.
Why shouldn’t I sell my firm myself?
A firm should use a M&A advisory firm that focuses on the A/E/C industry like Stonemill Partners because usually firm owners don’t know the best and most accurate value for their firm and many associates selling a business with selling traditional real estate in the housing market. Selling an A/E/C is much different and more involved than a traditional real estate deal. Lastly, the seller usually thinks that they can save the commission when in fact they give up way more than the commission because of selling the firm under market value and/or with undervalued and complicated terms for the firm.
Why should I sell my firm to a third party instead of doing an internal transition?
In an internal transition the firm is usually transferred to a second generation leader who the current partners hope will continue to move the firm forward for the subsequent generation. Internal transition values are usually much lower than values from selling the firm on the open market. Internal transitional values are paid out over a much longer period of time than values received from selling to an outside third party where the complete value of the firm is typically completely paid out over a much shorter time frame.
When should I tell my employees that I am selling my firm?
Stonemill Partners always suggests that you tell your employees when you know for sure that the deal will close. We look for draft purchase documents and agreements that are agreed upon by both the buyer and seller and a commitment letter from the bank if financing is involved.
Who are the most likely buyers to be interested in acquiring my firm?
When deciding who the right, targeted buyer will be, Stonemill Partners looks at the focus and culture of the firm that is being represented for sale. The target buyer will generally be a company with a similar or same focus as well as a matching culture. This leads to a compatible situation for a 1+1=3 synergistic scenario.
Will I need to finance part of the deal when I sell my firm?
Yes. It is rare that a buyer will pay all cash for an acquired firm. More typically (close to 99% of the time) of all firm sales the owner holds a promissory note. We typically see a 3-5 year note, paid back with interest, as part of the sale/deal.
Will I get paid for the “potential” of my firm and how are intangibles valued?
You will not get paid for the potential of your firm. Buyers will review current and historical profit levels to determine an offer price. They will then review backlog to make sure that the firm can sustain its current sales levels. Intangibles like your firm name and reputation will not fetch an additional value. A buyer can’t deposit these things in the bank and they do not increase the ROI of such an investment. Potential and intangibles help the saleability of the firm but not at an increased, premium level.
Is my transaction likely to be a stock sale or an asset sale?
Your transaction is most likely going to be an asset sale. A stock sale presents much greater risks to a buyer, although they are done.
How long will a buyer expect that I remain with the firm in transition?
A buyer is going to expect that the seller will remain with the firm usually, for at least two years. However, most buyers are much more comfortable with a 3 to 5 year transition period. Transitions can be more or less depending on what is negotiated and agreed to between buyer and seller.
How long will it take to sell my firm?
The industry average to sell a firm is about 9 months. We have found the buyer in as little as 1 day and closed the same month, but sometimes it can take a year or more to sell a professional services firm.
What should I look for in a Mergers & Acquisitions advisory firm?
You should look for a firm that focuses in your industry so that they understand the valuation methods, the jargon, the buyers and the markets. We recommend that you never list with a firm that charges a large retainer up front. These firms are concerned that they can’t sell the firm so they survive on retainers. A focused firm will serve your needs better than a generalist.
How do you determine a firm’s value and can Stonemill Partners advise me with valuing my firm?
With our experience in the industry, we have developed three different models that we use to determine a value to list your firm for on the market. We always perform a complete valuation before putting our firms that we represent on the market. There are many components to these models that we can share with you.
What key points are negotiated in addition to the price of my firm?
There are many different points that can be negotiated in any deal and all the way up to closing these may be negotiated. The main items that are always negotiated are the price of the firm, the terms of the price or how is the purchase price going to be paid and the employment agreement for the seller.
How many years of financial information does a buyer typically want to review?
Typically a buyer wants to review 3 years of historical financials along with the current year’s financials.
What is considered a post-closing salary and how is it relevant in determining my firm’s value?
The most important thing to remember when thinking about a post-closing salary is that a former owner doesn’t get a premium salary. You are not the owner anymore. This salary is usually determined by looking at market salaries for a senior level architect or engineer in your marketplace. Remember your ownership job duties will be less or even non-existent after a new owner acquires your firm.
What are the typical terms of a Non-Competition Agreement?
A buyer wants a non-competition agreement signed by the seller to close. A seller will never risk the chance of buying a firm and then the seller becoming his number 1 competition. Typical terms are that you can’t compete within 150 miles from the firm’s location for a period of 3 years from the date your employment ends with the buyer.
Does the buyer or seller draft the closing documents?
It is the buyer’s responsibility to retain counsel to draft all of the purchase documents for the closing. The seller should retain counsel to review the purchase documents before signing them.
How long does it take to secure bank financing in a business acquisition?
A bank will review tax returns and financials of both the buyer and seller, the credit score of the buyer and the buyer’s personal financial statement and issue a proposal letter in as little as a couple of days. The bank will then begin the underwriting process with the goal of issuing a commitment letter. This process usually takes 3 to 4 weeks. A bank is typically ready to close in about 45 days. There are factors, of course that can speed this up or slow it down.