DON'T TRUST EVERY ADVISOR

After working on the buy-side for several years, I grew tired of the games that some buyers would play to acquire a business. Even more alarming, was how most sellers were not being properly protected and represented during the process.

Pinnacle Exit Solutions was created to revolutionize the selling experience for restoration business owners. We were created to make the playing field equal for both buyer and seller - Period!

Unfortunately, what's taking place in the market – sellers are being taken advantage of by the very advisors that are supposed to protect and represent them.

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Before I discuss how sellers are being taken advantage of, let’s discuss the two types of advisors typically representing a seller:

?Sell-Side Advisors: The Sell-Side Advisor offers their services to the seller, typically for an hourly rate and percentage of the overall purchase price. These fees vary, but often it’s somewhere between 5-10% of the overall purchase price.

As an example: If a company is sold for $10M, the seller would pay their Sell-Side Advisor between $500,000 - $1M. This expense is deducted from the seller’s sales proceeds – resulting in a smaller nest-egg.

NOTE: Most Sell-Side Advisors are great and can offer expert advice, consulting, and overall guidance to get a deal done. Of course, the only drawback, is the high-cost to the seller for their services.?

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So, what does a seller pay a Sell-Side Advisor to do?

-?????? Deep dive into the business (evaluating the financials, competitive market analysis, employee data, and ultimately providing a valuation analysis).

-?????? Additionally, the Sell-Side Advisor creates what’s called a Confidential Information Memorandum (CIM). This 10-50 page document will tell a story about the business, ownership, financial health, and other data-points a buyer will need in order to determine whether or not to pursue a potential acquisition.

-?????? Once the CIM is ready, the Sell-Side Advisor will mass market this opportunity to buyers across the country and sometimes the globe. The thought process here; is to attract as many potential buyers as possible – which will allow the seller (in theory) to retrieve the best purchase price/terms for their business.

-?????? At this point, hopefully the Sell-Side Advisor has attracted several potential buyers that are interested in providing what’s known as an Indication of Interest (IOI). Within this document, a seller will generally see a purchase price range, along with high-level deal-term details that a potential buyer is willing to pay for said business. The Sell-Side Advisor will then collaborate with the seller to determine which IOI best matches the expectation/goals of the seller.

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-?????? Once the best IOI/buyer has been identified, both buyer and seller will sign a Letter of Intent (LOI) - which outlines the terms, purchase price, and various other specifications surrounding the deal.

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-?????? Once an LOI is signed, there is a daunting process ahead – Quality of Earnings, Operations, Legal, and a host of other complexities that your advisor is CRITICAL for being a part of. During this phase, your advisor is working with the seller/buyer to keep the deal progressing - ensuring all timelines are met and potential pitfalls are avoided. This process is lengthy and takes anywhere from 45-120 days to complete.

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-?????? Once all the above is complete – hopefully the deal crosses the finish line and both buyer and seller are extremely satisfied with the deal.

It’s important to note: Not all deals cross that finish line. So, what happens then? What happens if your Sell-Side Advisor fails to attract buyers, or if in the end a seller experiences what’s known as a “Failed Transaction”.

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Answer: In most cases, if a seller hires a Sell-Side Advisor and a deal does not cross the finish line, two things are almost guaranteed: (1) Seller will pay that advisor a fee - generally an hourly rate for (likely) hundreds of hours of work, and (2) if a seller decides to use another advisor to sell their business, there is a fee to get out of the 18-24 month lock the original Sell-Side Advisor generally has for exclusive rights to sell your business.

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Again, I know many great Sell-Side Advisors in the industry. I believe them to do a good job for their clients (in most cases). The only drawback is the high cost to sellers for their service.

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Now let’s talk about Buy-Side Advisors: Buy-Side Advisors are beginning to come out of the woodwork and are generally “matchmakers” and nothing more. These advisors tend to be keyboard warriors, searching for names and phone numbers to mass market to potential buyers. So, what does a Buy-Side Advisor do for the seller?

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-?????? A Buy-Side Advisor generally shares an email or call with a potential seller. During this email or call, the Buy-Side Advisor will tell a potential seller that they have a Private Equity Group itching to buy their company. This can get the seller excited, and the seller agrees to allow the Buy-Side Advisor to share the seller’s name, email address, phone number, top line revenue number, Estimated EBITDA, geographic location, and service mix to potential buyers. (PROBLEM 1)? ?

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-?????? In nearly every case, Buy-Side Advisors do not provide a buyer with any in-depth financial analysis of the business, an estimated valuation, details about ownership, or CIM. These Buy-Side Advisors, simply provide contact information to a buyer, in hopes that a deal will result from the introduction. (PROBLEM 2)

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-?????? When a potential buyer uses the contact information provided by the Buy-Side Advisor, the restoration business owner is now locked in with having to use this worthless Buy-Side Advisor for generally up to 24 months! ?This is where sellers are being taken advantage of. These Buy-Side advisors offer no guidance, no representation, or consultative benefit to the sellers. These Buy-Side Advisors simply mass market a seller’s contact information and hope that buyers reach out to you. Unfortunately, this scandalous approach, prevents sellers from going out and getting a Real Advisor to assist and protect a seller throughout the process. (PROBLEM 3)

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BEFORE YOU TALK TO A BUY-SIDE ADVISOR: Know that a buyer can only pay one Buy-Side Advisor. It’s imperative that a seller hire an Advisor that is not only going to act on their behalf, but also be a benefit during and after the transaction.

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Now enter Pinnacle Exit Solutions. We are the only Buy-Side Advisor in the country (perhaps in the world with this business model).

What we offer:?

-?????? We offer everything that a Sell-Side Advisor offers (without any costs to the seller).

-?????? We have access to the top 18 buyers of restoration companies in the world.

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-?????? We act as a full-time employee for the seller (working with the business owner(s) and administrative staff - to collect all documents and guidance throughout the entire process).

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-?????? During a 90-day typical sale: There are approximately 900+ emails, 400+ calls, 300+ documents to collect, and 1-2 hour long weekly meetings that take place. Pinnacle Exit Solutions is answering ALL emails (from both buyer and seller), taking ALL calls (from both buyer and seller), and participating in EVERY meeting.

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-?????? Pinnacle Exit Solutions goes to great lengths to understand the business, its owners, the legacy, and future for current employees post acquisition. We take the time to visit our client’s facility and truly get an understanding of the culture and overall business. Our number one goal is to cultivate not only trust, but a successful partnership along the way.

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-?????? Additionally, Pinnacle Exit Solutions has a team of CPAs, Financial Advisors, and Transaction Attorney’s to ensure you are protected and properly planned for throughout the entire process.

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-?????? What happens if Pinnacle Exit Solutions fails to get a deal across the finish line? We are not paid! We are paid exclusively by the buyer if/when a deal is complete. That said, it’s our goal to get every deal across the finish line and that takes expert preparation and knowing how to find the best buyers for each company!

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If you are an owner of a restoration company and have taken the time to read this article – please take 10 additional minutes out of your day to schedule a time to chat with me. The 10 minutes you take could save you millions of dollars down the road. There are no hidden tactics here - simply here to advise and educate! Pinnacle Exit Solutions was created to revolutionize the selling experience and that starts by making sure that every potential seller is armed with accurate information.

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