Very few foodservice distributors have the in-house specialized experience necessary to evaluate whether or not to sell their businesses or how to proceed. So they are left with the options of either going it alone or selecting a business transaction advisor. To help in your selection process, we have prepared a specific checklist just for owners of foodservice distribution companies who are contemplating selling their business:
There are several critical functions that advisors must be able to provide you with:
• A process to value your business as it stands today, without making any potential improvements.
• A process to identify ways that your core business can be improved, to help you drive up the valuation that you can expect from a sale – or simply to run a better business from here on out if you decide not to sell your company
• Coaching you during the pre-sale period to help you increase the core value, through a combination of revenue enhancement, controlled investment, and reduction of unnecessary costs.
• The experience to plan and execute the sale of your company, with the many steps that coincide with the sale (Please see our column with more information on this: http://www.ksadvisorsllc.com/fin_report_May.htm)
First and foremost, before you get too far down the road in your plan to sell your company – remember that anyone can sell you on helping you sell your company. You need to find an advisor with excellent references selling foodservice distributors. Experience in selling retail food stores, restaurants, food manufacturers, or other related industries does not replace the expertise of having dealt directly with our industry.
To help gauge whether an advisor is sufficiently experienced in our industry, we’ve prepared the following checklist to help you navigate through the process – these are the questions you should ask any advisor who calls on you (or you call) to sell your business:
• How many transactions have you closed in foodservice distribution in the past 3 years?
• How many of those deals were referrals from satisfied past clients? For example 75% of the deals we are working on today are referrals from past clients – and we’re proud of that.
• How many of them did you represent the buyer and how many did you represent the seller?
• How many of the top 50 distributors have you met with in the past year – more than once?
• How many companies are you representing in a sales transaction now?
• Please explain how foodservice valuation multiples differ from other industries’…and explain your benchmarking process and how my company’s valuation would stack against other premium, average or distressed foodservice distributors you’ve worked with.
• (If applicable to your business), how much experience do you have working with family-owned businesses, and managing expectations of family members with different levels of ownership and day to day involvement?
• After you review where I measure up in benchmarking, will you be able to tell me where I need to reduce operating expenses and improve profitability, improve marketing income, and other financial metrics.
• How much preparation time do I need working with you to improve my valuation to meet my sale expectations?
• In the past 3 years, how many companies have you coached to help improve their valuation and how many did you sell straightaway?
• What is your financial bench strength? Can you navigate our company through a coaching process to improve our valuation for scenarios like: buy vs. build vs. lease, refinancing and restructuring debt, profitability analysis? Who do you know that’s lending money today – how knowledgeable are you about today’s lending environment? Does your team have the experience and credentials to review the income tax implications of a sale?
• Can you send me a step-by-step process and timeline on how I sell my business? A footnote to this question: beware of advisors who have the glossy timeline only, the step by step process is only useful in conjunction with your confidence in the advisor’s answers to all of the above questions.
• Provide me with names of 6 foodservice distributors that you have represented in the past 3 years that I can call to talk about your experience and performance – and tell me what you think I’ll hear in terms of your ability to guide us.
• In your discussions and reference checking, be sure to ask the potential advisor’s clients whether:
o Their advisor understood foodservice distribution and what makes their business unique compared to other distributors,
o They got a fair price for their business, and
o They were completely informed and treated the way they should be throughout the transaction.
Last, as you walk through the questioning process, stand firm to your principles – this could be the most important business relationship you ever forge.
Keiter Stephens Advisors (www.ksadvisorsllc.com) is the foodservice distribution finance and consulting subsidiary of Keiter, Stephens, Hurst, Gary & Shreaves. They have worked with over 50 privately-held distributors across the country. KSA services include:
• Mergers and Acquisitions: guiding the sales and acquisitions of foodservice distributorships and regional sales territories
• Profitability Improvement on both the vendor and customer sides
• Custom Strategic Services, including transition planning for family-owned
distributors and driving management consensus with KSA’s 3-1-1 Planning Process
• Custom Finance Solutions, including finance strategy development,
distribution center expansion analysis, lease or buy decisions on real estate
and equipment, and cost segregation studies.