Selling a materials business, which may involve the production, processing, and distribution of raw materials or finished goods, requires careful consideration of several unique factors.

Selling a distribution business involves a unique set of considerations due to the operational complexities, market dynamics, and relationships with suppliers and customers that characterize the industry.

Selling an HVAC business involves unique considerations due to the specialized nature of the industry and the technical expertise required. 

Selling a trucking and logistics business in a merger and acquisition (M&A) context presents unique considerations linked to the industry's operational characteristics, regulatory environment, and market dynamics. 

Selling a manufacturing business in a merger and acquisition (M&A) context involves several unique factors that reflect the specific operational, financial, and market dynamics of the manufacturing sector.

Selling a construction business involves several unique considerations due to the industry’s specific characteristics, such as project-based work, cyclicality, and heavy reliance on skilled labor and client relationships. An M&A advisory firm like Sierra Pacific Partners can help get your transaction to closing.

Strategic buyers like competitors are often great fits, as they are often willing to pay a premium for synergies between the current business and yours and because they perceive less risk in a familiar industry.

As current industry participants, they can have the capital, infrastructure, and experience to fuel post-closing growth, retain your employees, and safeguard your legacy

Representation and Warranty insurance (RWI) insurance is a tool used in M&A transactions to protect the buyer from losses arising from breaches of the seller's representations and warranties in the purchase agreement.

A Quality of Earnings (QoE) report is a comprehensive analysis conducted during an M&A transaction to assess the sustainability and accuracy of a company's earnings. It’s typically apart of the buyer’s overarching financial due diligence.

One thing for sellers to understand is that that they generally will not receive the top-line purchase price at closing.

So, what usually comes off the so-called closing waterfall before the balance is sent to the seller:

Debt, whether assumed or paid off (remember, the purchase price was likely calculated on debt-free basis.

Under generally accepted accounting principles or GAAP, working capital is defined as the difference between a company's current assets and current liabilities.

It represents the short-term liquidity available to a business and is a measure of its ability to cover its short-term obligations.

Most M&A deals are priced on a cash-free, debt-free basis. What does that mean?

That means that the purchase price is determined on the basis that the target company will be delivered without cash or debt on its balance sheet.

Often, when you hear about EBITDA multiples in M&A valuation, what’s really meant is adjusted EBITDA.

So what is adjusted EBITDA? Just like EBITDA itself is intended to give a clearer picture of financial performance by eliminating the effects of capital structure, deprecation policy, and tax, adjusted EBITDA adjusts standard EBITDA for non-recurring, irregular, or discretionary expenses, which are often called add backs, because they’re added back to EBITDA to increase earnings.

It the most prominent valuation methodology is the multiple of earnings method, where earnings is defined as EBITDA.

So what is EBITDA? Earnings Before Interest, Taxes, Depreciation, and Amortization

There are four primary ways middle-market companies are valued:

(1) comparable companies analysis, which uses stock trading prices for public companies discounted for the size of the selling company;

(2) discount cash flow (DCF) analysis based on projections,

(3) asset-based valuation based on book-value, and

(4) precedent transactions for the multiple of earnings method

FINRA-licensed advisors bring a combination of strategic insight and practical experience to the table that enable our clients to navigate the complexities of deals and achieve their strategic and financial objectives.

With an LOI partner chosen, negotiations then take place to finalize the terms of the transaction while buyer diligence continues.

Once terms are agreed upon, the purchase and other definitive transaction documents are signed.

The bid-process instructions provided to buyers will set a deadline for them to submit letters of intent (LOIs)

If overall interest from buyers in a transaction is high, we utilize a two-stage bid process, beginning with a deadline for submitting indications of interest (IOIs).

With the buyer list in hand and cleared by the client, it’s time to go live with the process.

A limited auction targets a group of around 50-100 potential buyers (typically around 50) on a confidential basis, and usually involves controlled bidding involving specific stages and timelines designed to create competition and move the process forward.

In some instances, we work to obtain a pre-arranged financing package for potential buyers.

We use the information gleaned from the company and the market study to prepare marketing materials to position the company, tell its story, and address issues up front where appropriate.

Once engaged, Sierra Pacific Partners conducts a market study using proprietary databases to assess the company’s value, determine active buyers in the industry, and talk to those buyers to uncover how they view and weigh various value drivers.

There are a number of ways to sell a company depending on client goals and circumstances.

At one of the spectrum is the negotiated sale. In a negotiated sale, the seller and its banker negotiate with one suitor. It’s a one-on-one process.

Both prior to and following engagement, we’ll need information from the seller to assist with valuation, marketing, and diligence.

Before embarking on an M&A process, many sellers think an investment banker or M&A advisor’s primary role is to find a buyer.

In fact, post-closing surveys of sellers repeatedly show the opposite-- that sellers view buyer sourcing as the least important part of what advisors do.

The first step in any sell-side M&A engagement is clearly understanding our client’s goals.

What type of transaction is the seller seeking? For example, a sale of the entire business to an unaffiliated third-party, a recapitalization, an intrafamily transfer, or something else?

At Sierra Pacific Partners, we’re focused on one thing: Transformative exits that achieve our client’s M&A goals, which often go beyond price alone. We make deals happen.

Asset deal M&A transactions are more prevalent in the lower middle market for several reasons:

In an asset deal, sellers typically retain certain assets that are not

explicitly included in the transaction, which may vary depending on the specific terms of the deal. Common assets that sellers often keep include:

Some common deal killers include:

• Valuation disagreements:

• Due diligence issues: things like financial discrepancies,

legal problems, operational challenges, or undisclosed liabilities. Significant concerns can cause a buyer to renegotiate the deal terms or walk away altogether

In M&A transactions, one party, typically the seller, agrees to compensate the other party, usually the buyer, for specific losses or liabilities that may arise after the deal closes. These losses may result from breaches of representations and warranties, inaccuracies in the disclosure schedules, or failure to fulfill certain covenants. Indemnification clauses protect the buyer against un

foreseen issues and help allocate risk between the parties

Rollover equity is a financing structure in M&A transactions where the seller retains a portion of their ownership in the target company after the deal is completed. This arrangement aligns the interests of the buyer and seller by allowing the seller to participate in the future upside of the business.

In an earnout, a portion of the purchase price is contingent on the target company's future performance. It helps bridge valuation gaps between the buyer and seller by tying payment to specific financial or operational milestones.

A search fund is a unique investment vehicle used by entrepreneurs to raise capital from investors for the purpose of acquiring and operating an established, profitable business. The search fund model was first developed at Stanford University in the 1980s and has since gained popularity among entrepreneurs and investors.

Selling to a PE firm can be a great decision depending on your circumstances

Industry expertise, while helpful, is not as import as dealmaking expertise, particularly for transactions below around $100M.

The due diligence process in a small M&A transaction involves a thorough investigation and review of the target company's business, financials, operations, legal, and regulatory compliance.

The goal is to identify potential risks, liabilities , and opportunities associated with the transaction. While the process can vary depending on the size and complexity of the deal, it generally consists of several key steps:

Letters of Intent (LOIs) are important in M&A transactions for several reasons:

Assembling a team of experienced professionals will help ensure a smooth and successful sale of your business. The key advisors you may need on your deal team include:

Selling a business can be a complex and time-consuming process. Proper preparation will make your business more attractive to potential buyers and maximize its value. Here are some steps to help you prepare your business for sale

When you begin exploring buying or selling a business, you’ll inevitably come across the term “seller financing.” What exactly is seller financing?

Who is the right type of buyer for your business? You need to know who to target during the marketing phase. After the sale, you want to make sure the buyer is capable of preserving your legacy and providing security for your employees. And if there’s seller financing or an earnout, that the buyer is able to run the business successfully so that you get paid.

As with most things in life, the best time to sell your business is when you don’t have to. Being forced to sell at the wrong time means not realizing the best purchase price, while selling on your own timing can set you up for a retirement enjoying the things you love with the people you love.