You know the market is hot and may be wondering what you might get for selling your business these days. And naturally, you’ll want to know what to expect and how to get top dollar for your logistics company when you are ready. Understanding the selling process helps prepare you for a successful merger or acquisition. In this post, we’ll discuss just what is the process for selling a logistics company.
Step One: Business Analysis
Buyers will be interested in your financial, operational, customer, and sales data, so the first step involves compiling this information. Thinking about key performance indicators (“KPIs”) of operations, you will be compared with your competitors to identify strengths and areas for improvement. Here are some areas that will affect
- Finances. Buyers want to know what their maximum profitability will be, so make note of items that will “add back” to cash flow upon sale. These may include one-time non-recurring expenses, excessive benefits, club memberships, company vehicles.
- Operations. How is your business running? Do you have documented systems and processes? Do you have a clean legal record? Do you have high-value employees? All of these can be very attractive to buyers.
- Customers. Who are they, how are new ones obtained, and what is the breakdown of each channel? What’s their revenue, cost, and margin?
- Sales. Are there new areas where growth is sustainable? Do you have recurring revenue? Long-term contracts? These can increase value.
The BBTC™ process during this phase will provide you with an eight-tab workbook containing 24-month rolling graphics, distribution charts, histograms, descriptive statistics, conditional ranking, correlation analysis, Fourier Analysis, GRC Nonlinear, Simplex LP, and Evolutionary Solver, compiled by VB.net and VBA code.
Step Two: Financial Analysis
A deeper dive in your financial history and projections helps narrow in on a more accurate value for your logistics company. During this step, you’ll be looking at financial performance trends and projections. Looking back a few years and also anticipating changes that will affect your company’s finances including:
- Return on Investment. Net profit before taxes divided by total assets indicates how well your company is using resources to increase profit.
- Operating Ratio. This measure of profitability is generally expressed as a decimal, any number below 1.0 indicates profitability, and any number above 1.0 indicates a loss.
- Leverage Ratio. Taking the total debt divided by total assets will show the extent to which your company has borrowed money to finance investments.
- EBITDA. An acronym for earnings before interest expense, taxes, depreciation, and amortization, your EBITDA calculations will be multiplied by a market variable to help create your company’s valuation.
The BBTC™ process during this phase will provide you with analysis of your business through proprietary technology—Acquisitions Powered by Code©. More specifically, you will see reports detailing:
- Quality of Earnings – the high-level quality of earnings analysis compares 24-month shipment detail with financial records to initially determine any significant variances
- TTM (trailing 12 months) Consolidation– consolidates the line-item detail of 12 Income Statement files into one with TTM and current fiscal year calculations with graphics
- Proforma Model – generates a combination of line-item detail for 3-yrs. of annual Income Statements with TTM, TTM non-recurring adjustments, EBITDA calculations, and Forecasting with graphics
- LOI Deal Analysis – customized scenarios and graphics reflecting the total deal value and ROI Financial Analysis.
Step Three: Business Preparation
Mergers and acquisitions are not overnight deals. To maximize the success of the deal, you need to know what to expect within the process so that you can proactively plan and set a timeline of stages for the process and specific events. Namely, you should do the following:
- Resolve any legal issues
- Get authorizations and certifications in order
- Get rid of underutilized assets and/or resources, including underperforming employees
- Incentivize high-performance employees
- Document processes and invest in technology
- Maximize EBITDA
- Refresh your marketing, especially your web presence
The BBTC™ process during this phase will provide you with a plan and give you a timeline for each stage of the process, so you can remain focused on running your business smoothly.
Step Four: Market Overview & Strategic Summary
It’s important to give a comprehensive overview of your business and standing in the marketplace to get top dollar. Your market overview and strategic summary should be presented in an easily digestible format and include information that demonstrates your company’s strengths and possibilities. For example:
- An Executive Summary
- Key Investment Considerations
- Your Business Overview
- An Overview of the Industry
- Financial Data and Analysis
The BBTC™ market overview and strategic summary include all the previous elements and put your business in the best possible light.
Step Five: Due Diligence
Due diligence is the step when both buyers and sellers are looking deeper into the data. As a seller, you will often negotiate based on the analysis of key risk areas. Finding and reconciling potential strengths and weaknesses that may affect the company’s value is crucial at this stage. You should also be prepared to defend the quality of your data.
Unlike many business brokers, the BBTC™ process goes above and beyond as we remain intimately involved all the way through the process from the initial analysis and communication, deal valuation and structure through the due diligence process to post-acquisition integration.
Step Six: Post-Acquisition Integration
While the goal of a merger or acquisition is for both companies to complement each other, many factors, including inadequate training, poor technology integration, and improper integration of employees, cause companies to fail in this stage. For best results, plan ahead for post-acquisition integration, including the following:
- Hiring. What will your short-term and long-term needs be?
- Process. What processes and procedures will you follow, and how will you communicate the changes and get buy-in?
- Benefits/compensation. What pay and benefits will work best for business continuity?
- Overlap/redundancies. If there are overlapping jobs, who will you keep, and how will you secure them?
- Employee performance. How will you measure and elevate performance and retain employees?
- Technology. Will you merge systems? If so, what are your plans for integrating the new technology?
During this step of the BBTC™ process, we provide guidance and offer formal integration plans to make sure business continuity exists after the closing.
Knowing how the process works will bring you confidence that you are getting the best offers possible. Working with experts in your industry brings comfort that all your needs are understood and addressed. To find out more about what selling your logistics company would entail, contact Mike Monson for a free consultation.