"Acquisitions that Work"

Power Point Presentation

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Presented by

Rand Hollon

November 2,  2006

CPCO of Georgia

 3rd Annual Business Management Summit

CPCO Advantage, April 2007 Issue

and

Florida Pest Pro, Pest Identification Guide, May 2007

"When Selling Your Business – Loose Lips Sink Ships"

By Rand Hollon, PCO, Licensed Broker

Preferred Business Brokers

All negotiations were complete.  Lawyers were putting the final touches on the contract.  The buyer, satisfied with the due diligence results, was in full swing preparing for the transition and integration of a new acquisition.  The seller was busy preparing their exit strategy.  Over the last 15 years the seller had built a strong business and had close to 20 employees.  The buyer, knowing the employees would be critical to the transition, hoped to bring everyone on board.

And then, nine days prior to closing, it all began to unravel.  Four employees tendered their resignation, carrying with them valuable pieces of business to local competitors.  The rest of the employees; angry, confused, and fearing for their future, wanted answers.

What happened?

The confidentiality of the deal had been compromised.  The seller had recently told his best friend (who wasn’t even in the industry) of his plans to sell.  He told his friend, who told his friend, who told…you get the picture.

It’s a small world.

The deal, though not lost, was severely damaged.  I worked hard with both parties to renegotiate and amend several contract provisions in order to reestablish confidence.  It wasn’t easy.

CONFIDENTIALITY.  It’s that important.

Over the last 30 in the pest control industry I have learned that in the arena of acquisitions, confidentiality reduces risk and protects value for the buyer and the seller. Risk and value are both money drivers that nobody wants to jeopardize.

Your biggest assets are your customers and your employees.  In the eyes of the intelligent buyer, a seller’s employees bring an abundance of what I call “Village Knowledge”-the established employee wisdom regarding your customer base.  “Village Knowledge” reduces the effort a buyer needs to fully transition a newly acquired business.  Used effectively, this helps shorten the buyer’s timeline between investment and return.  It enhances value!

Competitors will sometimes use industry gossip, true or not, to entice employees and customers away from you. Even the rumor of a sale will cause employees, otherwise happy and content, will start worrying about job security. Employees that are not so content but are held by a regular paycheck will start looking for another job.  More often than not, employees assume that a paycheck is no longer guaranteed when they think a future sale is in the offing.

Customers think the same way. Customers are generally as loyal to you, the owner, as they are to the services you provide. Your business dealings have been conducted with mutual respect and integrity.  A breach in confidentiality can cause your customer to start looking at options that may not include you.

CONFIDENTIALITY.  It’s that important.

High on the list of DON’T’s when selling your business is: “Don’t sell your business yourself.”  Without a broker to deal with prospective buyers, maintaining confidentiality (and finding the right buyer) will be next to impossible.  You don’t need to explain to your employees why someone called saying “I heard that your business is for sale!”.  The broker’s considerate use of confidentiality agreements is key to the prevention of inept interviews, premature disclosures and unauthorized use of your business information.

A broker acts as a buffer giving you the space you need to keep your business performing at its best.  A well run business is a hot commodity in any market. While speaking at the recent CPCO Business Management Summit in Perry, I pointed out part of a successful seller’s strategy is to appeal to the greatest number of qualified buyers.  I also discussed that buyer success is made or lost in the transition and integration phase after the closing.

Confidentiality should be enforced in an adaptation of the military’s classic “need-to-know” principle and be professionally managed to form a cornerstone of a successful deal for both buyer and seller.

Confidentiality and the managed release of information allows the seller to sell something that’s worth selling - a pest control business with customers serviced by trained employees.

Confidentiality allows the buyer to buy something worth buying - a pest control business with customers serviced by trained employees.

Remember:  Loose Lips Sink Ships.

Florida Pest Pro

Pest Identification Guide

May 2007

CPCO Advantage

April 2007