• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Nevada Business Magazine

The Decision Maker's Magazine

Subscribe Now!

  • Subscriptions
    • Print
    • Mobile App
    • Email
    • Nevada News & PR Wire
  • Features
    • New This Month
    • View Issues
    • Cover Stories
    • Feature Stories
    • Industry Focus
    • Building Nevada
    • Special Reports
    • Meet the Decision Maker
    • Press Release Wire
    • Nevada Industries
  • Departments
    • A Matter of Opinion
    • Around the State
    • Business Indicators
    • Commentary
    • Commercial RE Report
    • Crossfire
    • Expert Advice
    • Face to Face
    • Free Market Watch
    • Inside Politics
    • Power of Attorney
    • Profit & Loss
    • Speaking for Nevada
    • Tech.knowledge.me
    • The Last Word
    • Vital Signs
  • Planning Calendar
  • Advertising
    • Advertising Info
    • Advertising Staff
    • Submission Requirements
    • Online Advertising
  • Events
    • NBM Events
  • About
    • About the Magazine
    • Contact the Staff
  • Connect
    • Business Directory
    • Press Release Wire
    • Business Calendar
    • Submit Listing
    • Post Press Release
    • Add Your Event
    • Sign Up
    • Log In
You are here: Home / Departments / Business First / Buying and Selling a Business

Buying and Selling a Business

May 1, 2015 By Tarah Richardson Leave a Comment

A complicated topic with a myriad of details to consider, buying and selling a business will affect nearly all business owners at some point.A complicated topic with a myriad of details to consider, buying and selling a business will affect nearly all business owners at some point. With so many issues to be aware of, it’s important that executives have the information necessary in order to successfully navigate the process. A panel of experts recently gathered for a breakfast seminar and responded to a host of questions related to buying and selling a business.

The panel discussion, held in April, was moderated by Connie Brennan, publisher and CEO of Nevada Business Magazine. The breakfast was hosted by the magazine along with sponsors, Holland & Hart, LP Insurance Services and Stewart Archibald & Barney. Panelists included Gian Brown, of counsel for Holland & Hart; Leland Pace, a senior partner with Stewart Archibald & Barney; Katrina Loftin-Winkel, managing director at BTI Group Mergers & Acquisitions and Joe Wyatt, chief operating officer for LP Insurance Services.

Each panelist has a unique and vital viewpoint for business owners and represents an industry that should be involved in any buying or selling transaction. Event attendees were provided an abundance of information on best practices for buying and selling a business.

Early Bird …

For some business owners, the thought of ever selling their business may be years down the road and, because of that, those owners may think they have time to wait, adopting an, “I’ll get to that later” attitude. However, the experts say that can be detrimental for a company.

“Typically, the start of a process is when an executive decides they want to go out and buy another company or the company owner decides to sell,” explains Brown. “[However], it should start far earlier than that when folks are thinking about how they’re growing their business. That exit strategy isn’t tomorrow and it isn’t next year, it’s really 10 years from now or, at a minimum five years out.”

Pace added that, “in order to maximize value and make it as profitable and as successful as possible, it takes several years. You want to be structured in a way that is going to be a smooth transition for employees, the purchaser and yourself. A Price Waterhouse study done four or five years ago said that 75 percent of business owners who sell their businesses, within one year, are very unhappy they made that decision. You’ve got to prepare.”

Loftin Winkel agreed explaining that, “it takes, on average, eight to 10 months to sell a business from listing to close. The key is really, truly to plan.” She added that a lot of issues people encounter when looking to sell their business has to do with planning. If business owners are dealing with either an expected sale or an unexpected event causes the sale, planning is an important part of dealing with each eventuality.

“If you’re a business owner, even if you’re not thinking of selling, you should be planning,” she added.
If this is an issue that all business owners will likely face at some point, what leads to a business decision to sell a company?

“More than half of the businesses are going to be transitioned because of the four “D’s” – death, disability, divorce and disaster,” explained Pace. “Preparing your business for sale and maximizing value cannot start too soon.”

“The other thing that is important is picking that future partner,” said Wyatt. “That can take quite a bit of time as well.”

Speak or Hold Your Peace

When going through a sale transition there are several considerations that must be addressed. One important issue for many sellers is the business’ employees. With, on average, one-third of their time spent at work, employees become invested in their jobs. The workplace is an important part of people’s lives. With so much investment on both sides of the employer-employee relationship, when should employees be informed of an impending sale?

“Not until the very end [of a transaction] if at all possible,” said Loftin Winkel. “Employees tend to get very nervous. I can tell you tons of horror stories of people that said, ‘Oh no, they’re like family to me. I’m going to go ahead and let them know.’ Then [the employee] started looking for another job. They start thinking about other people owning the business and what it’s going to be like to work for that person. I really advise people, as much as you think they’re like family, just hold off. Don’t tell them until the deal is done.”

However, when waiting until the last minute isn’t realistic, Brown recommends having an announcement strategy in place.

“Although you try to wait until the end or the best time, you should be thinking about how to react if you get asked or if they find out,” said Brown. “I think about messaging strategies and how to make sure you have a consistent core message. You want to make sure you’re never saying something at odds or inconsistent. Everyone is going to be comparing notes. These types of things pop up because people are scrambling as opposed to being thoughtful about a process.”

Dream Team

While deciding and planning to buy or sell a business is certainly the first step, the next step should be putting into place those professionals that will assist in the process. No business is an island and it’s important the team that will assist with the transition is optimum for that particular company. So, who is on that team?

“Two teams, I think we’re talking about,” said Pace. “The first team should be your transition team. Business owners should have an advisory board for their succession, people that have either been through it or people that have knowledge about it. And then, there’s the group that you’re going to consult with during the transaction. The broker, the insurance guy, the CPA, the attorney.”

In addition to those four, Wyatt also suggest two other important transitional team players to have in place; the HR representative to handle the employee side and the IT expert to handle the necessary technology transitions. The experts also suggest that, as planning is such an important aspect to buying or selling a business, those professionals be engaged as early as possible.

“You want to get them on board,” said Loftin Winkel. “You don’t want to list your business and then all of sudden tell your attorney and your accountant you’re going to sell.”

Pace added that, “You should have someone who is familiar with the process, someone who is not just preparing your tax return, but has been down that road once or twice as far as selling a business. Having someone who knows business, the sale side of it, is critical. There are some specialized things that need to be addressed. Having that specialty will be a valuable tool.”

For some, engaging a slew of professionals brings with it the worry of fees and expenses. However, Brown says, there’s more to consider in regards to the transition team than just the fees that go along with them.

“One of the ways to engage is to start forming relationships. You form relationships with the folks in your team already, your CPA, attorney. But, also start getting from them, and from others, ideas about who would be the right types of professionals to be involved in terms of brokers and bankers that may or may not be appropriate in any given situation. There are plenty of ways to start cultivating relationships with people ahead of time. The notion of forming relationships as a step towards engagement is something that is free and easy to do,” he said.

Sale Types

A business owner has started planning, began looking at their transitional team and now has to decide what type of sale to consider. The two primary types are asset purchase sales and stock purchase sales.

Wyatt explained that, “if it’s an asset sale, the buyer is buying the assets of the company and there are different tax treatments for that versus a stock sale. There is also a different liability attached. If it’s a stock sale, you’re actually buying that entity so you have the liability for that entity.”

To simplify a somewhat complex issue, in a stock sale, a buyer assumes liabilities and in an asset sale, just the asset is purchased. In most cases, then, a buyer would prefer an asset sale while a seller, looking to transfer liabilities, would prefer a stock sale.

“Depending on which of those are chosen, that’s going to affect the price. The buyer is going to be willing to pay a higher price for an asset purchase and a lower price for a stock purchase because he’s assuming those liabilities,” added Wyatt.

Pace said that it also, “depends on the type of entity being sold. If you’re selling the stock of the corporation, the buyer has to assume all of the internal assets at the same basis the seller held them at. So, if you’re selling stock, the buyer gets no additional deductions for the value of the assets. If you buy the assets and the assets are worth, say, a million dollars, now you get to reset depreciation. You can re-depreciate those assets and that’s a pretty big tax write off. From a buyer’s perspective, he wants that deduction. From a seller’s perspective, it’s a negative tax impact. That’s why the seller wants to sell stock; it’s all long-term capital gain.”

“Another consideration too, in addition to tax, is that sometimes there is a particular set of licenses that a company may have for its business or certain types of contracts or related relationships that are held by the legal entity,” explained Brown. “If you’re just buying assets, you may need to get permission from the other party to transfer those licenses.”

Brown also suggested that employees are an important consideration when it comes to determining the type of sale of a business.

He said, “When you do an asset sale, you can have tremendous complications with respect to employee benefits because, conceptually, what’s happening is your employees are working with the seller one day, are literally terminated and hired by a new employer the next day. There’s a decent amount of complexity when you start selling assets as opposed to just buying an entity.”

One type of sale with another, separate set of considerations is a management buyout. These types of sales are quite different from external sales.

“A lot of businesses do an internal transition,” said Pace. “The internal transitions are divided into two pieces. Either they are a management buyout or, sometimes, it’s a true family succession.”

Pace explained that both are similiar in structure, but are often handled in vastly different ways. The special considerations for each have to do with how much the business will sell for, the types of tax impacts involved for both the buyer and seller as well as the consideration of where that money will come from or financing. When it comes to these types of sales preparation is, again, key.

“The biggest mistake I see is not preparing the successor generation,” said Pace.

Dollars and Cents

While many business owners, especially those that founded their companies, consider their business to be priceless, that unfortunately isn’t the case. So, how much is a business worth?

“Most brokers will give you the market value of your business at no charge,” said Loftin WInkel. “This all sounds expensive but most brokers will sit down and tell you the market value at any time.”

Pace explains that a good rule of thumb is five times E.B.I.T.D.A., which stands for, earnings before interest, taxes, depreciation and amortization. “If you can look at your financial statements and add back depreciation, interest and taxes, you get to that cash flow before debt service. If you multiply that times five, it’s the general rule of thumb. It’s not applicable to all businesses but it’s standard across the board.”

Another consideration are business appraisals. The panel suggested those be considered on a case-by-case basis.

“They are pretty expensive,” said Loftin Winkel of appraisals. “If you’re just looking for the market value of your business, it may actually be different than what you’re getting on an appraisal. You want to make sure, for your business, you’re at the right price.” She added that, for the buyer, an appraisal can help make a business’ price more palatable.

Curb Appeal

Planning, a consistent team, the sale types and pricing models are all worthless if a business has no curb appeal. In order to make a business desirable for a buyer, many things should be considered from consistent profits, accurate financials and key employees.

“The people component is something that is very important,” said Wyatt. “The culture of a business, is it compatible? If you’re acquiring employees, what types of benefits do they have and are they compatible? I think those are pretty important.”

“One deal killer for me is hiding drama,” added Brown. “Every company has drama, there’s always an embarrassing moment or two. The easier deals to get done are the ones that are really clear and transparent.”

Another issue to consider is the length of the transaction explains Loftin WInkel. “Buyers get buyer’s remorse. You want to keep things moving; keep the transaction flowing as quickly and smoothly as possible. Time is your enemy.”

According to the experts the most successful transactions are those in which both parties have trust, preparations have been done and the teams involved know the nuts and bolts of the deal.

“It’s a relationship type of transaction,” said Wyatt. “Seldom do you have a buyer and seller who don’t like each other. You’re looking for someone that you can trust on both sides of the transaction.”

Filed Under: Business First Tagged With: BTI Group Mergers & Acquisitions, Connie Brennan, Gian Brown, Holland & Hart, Joe Wyatt, Katrina Loftin-Winkel, L/P Insurance Services, Las Vegas business, Leland Pace, Loftin Winkel, Nevada business, Nevada Business Magazine, Price Waterhouse, Stewart Archibald & Barney

Paul Krakovitz: Intermountain Healthcare

Edward Vance: EV&A Architects

Scott Arkills: Silver State Schools Credit Union

Terry Shirey: Nevada State Bank

Online Advertorials

Online Advertorials

SNWA’s Infrastructure InvestmentsHelp Secure Access to Water Supply

Bank of NevadaFunding Will Provide Nevada Students With Financial Literacy Education

Infrastructure InvestmentsAssure Our Community’s Water Future

Roseman’s College of MedicineAddressing the Physician Workforce Shortage

Advertise With Us

Advertise With Us. more details ►

Primary Sidebar

Get important updates from Nevada Business Magazine, directly to your inbox.
Subscribe

Wild at HeartEconomic Development in Rural Nevada

Industry FocusBankers

Residential NevadaMarket Shifts

Southern Nevada CCIMPassing the Torch to the Next Generation of Professionals

Nevada News & PR Wire

  • Registration for AngelNV Entrepreneur Bootcamp Opens Sept. 1

  • Renewable Diesel Plant Set to Launch Operations in Northern Nevada with Potential to Save 880 Million Pounds of Carbon Emissions Per Year

  • Hope Means Nevada and Silversummit Healthplan Launch Campaign to Connect Youth at Risk for Suicide to Mental Health Resources

  • Aha! Inaugurates New Nonstop Service Between Idaho Falls and Reno-Tahoe with Free Tickets for the First 100 Passengers

  • Food Hall Vendors Announced at Reno Public Market

  • NSB’s Private Bank Report Explores Trends in Wealth Growth

  • Nugget Casino Resort Earns Top Safety Designation from the Nevada Safety Consultation and Training Section

  • NVO Construction Hires Industry Veteran Aaron West as Chief Strategy Officer

  • TheOfficeSquad Opens Henderson Location, Now Serves Businesses in Southeast Las Vegas Valley

  • Downtown Reno Partnership Names New Executive Director

  • Northcap Commercial Arranges Sale of Nevso Cove Apartments for $16,280,000

  • Free Social Events, Wellness Workshops and Fitness Classes at Optum Community Centers

  • Don’t Miss Kamer Zucker Abbott’s Next Webinar!

  • Nawbo Southern Nevada Now Accepting 2022 Women of Distinction Awards Nominations

  • CAMCO Nevada Promotes Bree McRae to Regional Director of its Portfolio Division

  • CSN Launches Six New Programs

  • Las Vegas Area Home Prices Dip for Second Straight Month

  • Faith Lutheran Begins 2022-23 Academic Year with New Principal

  • Grand Sierra Resort and Casino Honors a Selfless Medical Assistant as the Most Recent “Grand Hero”

  • Downtown Reno Partnership Announces New Marketing Manager and Office Manager

  • Kamer Zucker Abbott Elevates Kaitlin Paxton to Partner

  • KPS3 Hires Chelsea Bosco as Designer

  • Lipson Neilson’s Joseph Garin and Megan Thongkham Named 2022 Mountain States Super Lawyers

  • Open Enrollment for Upcoming Miss Silver State Pageant

  • Move 4 Less Recognizes Dream Home Art Contest Youth Winners with Party and Prizes

  • LumiZen Wellness Debuts Premier CBD Products for People and Pets Alike

  • Celebrate International Coworking Day at The Coop and Test Drive the Coworking Experience for Free!

  • aha! Reports Exceptional Operating Performance for July 2022

  • ioneer Signs Binding Lithium Offtake Agreement with Prime Planet Energy & Solutions

  • The Problem Solver Show to Interview Man Who Discovered Third Body in Lake Mead

  • Aug. 18 NAIOP Southern Nevada Breakfast Presents “The Future of the Las Vegas Strip Is Here”

  • Pilots Revealed for 2022 STIHL National Championship Air Races

  • Preparing for End of Life Workshop

  • Las Vegas Attorney Offers Free Workshop on Protecting Children’s Inheritance and More

  • CVMC Welcomes Lisa McKinney, APRN to Ironwood Primary Care

  • Realtor Nate Strager Releases Weekly Market Update as Part of His Information Campaign

  • Entertainment and Supper Club Summer Schedule at the Stirling Club Continues to Sizzle

  • Community Leader Don Snyder Elected Chairman of the United Way of Southern Nevada Board

  • Lexicon Bank Sponsors Scleroderma Sprint Event, Fueling Efforts For A Cure

  • Optum Care Cancer Care Adds a New Physician

  • Southwest Medical Adds Three New Healthcare Providers

  • International Celebrity Vocal Coach Romeo Johnson Offers Vocal Lessons To Clark County Residents

  • Team From The Problem Solver Show to Sponsor Free Ice Cream and T Shirt Give Away For Kids

  • Las Vegas Orthopedic Surgeon Offers New Treatment For Limb Lengthening

  • TSK Celebrates O’Brien Middle School Redesign Ribbon Cutting in Partnership With Cumming Group

  • Godspeed Capital-backed Huckabee Architects Invests in TSK Architects

  • Dunkin’ Presents $4,000 to Cure 4 The Kids Foundation From Funds Raised on Iced Coffee Day

  • Nevada Bankers Association Announces 2022-23 Board of Directors

  • Annie Wagner of KPS3 Earns Certificate in Principles of Public Relations

  • NAR Tabs Nevada REALTORS®­ Leaders to Serve in National Leadership Roles

  • Kamer Zucker Abbott Attorneys Selected to the 2022 Mountain States Super Lawyers® List

  • Kamer Zucker Abbott’s Next Webinar: Balancing Employee vs. Employer Rights in Divisive Times

  • Henderson Chamber of Commerce Announces 2022 Board of Directors Additions

  • De Castroverde Law Group and Findlay Subaru of Las Vegas Award $10,000 College Scholarship to Allison Hill

  • Karma and Luck Supports Ukraine Through Donation to Doctors Without Borders

  • Support Local Students and Teachers During the Greater Schools Supplies Drive

  • KPS3 Welcomes Lauren Davis to Team

  • Las Vegas-Based Neteffect Named a Top Firm by Clutch

  • Bank of Nevada Welcomes Michael Pizzi as Managing Director of Commercial Banking

  • Following Nevada Osha’s Adoption of Heat Guidelines, There Are Free Resources for Employers to Protect Employees From Heat-Related Illness and Injuries

  • aha! Launches 50% Off End of Summer Super Sale – Book Now!

  • Evolution of Healthcare with RESET IV

  • Mark Wiley Group Announces Buck Hujabre as New President of Commercial Division

  • Jim Seebock Announces Run for Henderson City Council Seat Ward One

  • WestCor Announces New Director of Marketing and Business Development

  • Home At Last™ by Nevada Rural Housing Launches New 4% Advantage Down Payment Assistance Option

  • Tilt-up construction is complete at Mountain West Industrial Park

  • Grow with Google Provides Nevada Small Businesses With Tools to Reach Customers in Changing Economy

  • Facebook Launches New “Feeds” Tab Connecting Users More Than Ever

  • Trosper Public Relations Announces New Hire in Northern Nevada

  • Emerald Island and Rainbow Club Casinos Partner With Local Woman-Owned Spirits Company to Offer ‘Super Premium Well’ Vodka

  • Greater Nevada Mortgage Provides Down Payment Assistance for Eligible First-Time Homebuyers

  • Education Non-Profit CORE Names Jordan Ashley Berkowitz as Development Director

  • ioneer Signs Binding Lithium Offtake Agreement with Ford

  • Two attorneys from De Castroverde Law Group honored as 2022 Mountain States Super Lawyers Rising Stars®

  • Grow With Google Provides Nevada Small Businesses With Tools to Reach Customers in Changing Economy

  • The NCJFCJ Recognizes the Honorable Linda Marie Bell As the 2022 Impact of the Year Recipient at Annual Justice Innovation Awards

  • Broadbent & Associates, Inc. Donates to Local Youth Hockey Team

  • Goodwill® of Southern Nevada Spreads Mid-Year Cheer with Second Annual ‘Christmas in July’ Event

  • CALVPresenting Sept. 21 Educational Symposium for Real Estate Pros Featuring Cyber Security Expert Frank Abagnale of “Catch Me if You Can” Fame

  • Goodwill® of Southern Nevada Promotes from Within

  • STIHL National Championship Air Races Participating in “A Community Thrives” Fundraising Initiative

  • Northcap Commercial Arranges Sale of Mark & Daisy Apartments for $3,800,000

  • MDX Labs Expands Operations to Include Saturdays, in Response to Clark County’s Elevated Level of COVID-19

  • Downtown Reno Partnership Announces Key Performance Indicators for Fiscal Year 2021-2022

  • Meruelo Family Scholarship Awards $12,500 to Children of Grand Sierra Resort Team Members

  • aha! Inaugurates Nonstop Flights From Reno-Tahoe to Santa Rosa

  • Helix Electric Raises Over $24,000 to Benefit Reno Charities

  • 20 Recent CCSD Grads Offered Apprenticeships at Tesla

  • REMSA Health announces promotion of four leaders within the organization

  • TEDx Speaker at NCET Biz Bite Luncheon in Reno

  • The National Council of Juvenile and Family Court Judges 85th Annual Conference Brings Participants to Northern Nevada From Across the Nation

  • Northcap Commercial Arranges Sale of 239 W. New York Ave Apartments for $1,015,000

  • LVR Announces Newly Elected Officers and Board Members for 2023

  • JA Worldwide Nominated for 2022 Nobel Peace Prize — Junior Achievement of Southern Nevada Celebrates Prestigious Honor —

  • aha! announces additional flying from Ontario, California to Reno-Tahoe for “Burners”

  • Optum Care Anesthesia adds two new health care providers

  • American Bar Association Appoints Lipson Neilson Shareholder Sandra D. Glazier as a Member of the Commission on Law and Aging

  • CALV President Angelina Scarcelli earns NAR leadership appointment

  • Pacific West Injury Law’s Attorney Visits Children At Sunrise Hospital As Mascot Blue Bear



 
Submit Your News & PR | Subscribe
Submit Your News & PR

Business Connection

Business Connection Portal

Log In Sign Up

Business Connection Portal

Log In Sign Up

Nevada Business Calendar

  • Kamer Zucker Abbott Webinar on Crossing the Line? Balancing Employee vs. Employer Rights in Divisive Times
    August 18, 2022 10:00 am

    More details...
  • Special Olympics Nevada Bowl for the Gold
    August 20, 2022 11:00 am

    Location: 1301 W Sunset Rd, Henderson, NV 89014, USA

    More details...
View Full Calendar ►

Nevada Business Directory

Featured Businesses
Find a Nevada-Based Business Submit Your Business Subscribe to the Nevada News & PR Wire

Nevada Industries

Architects & Engineers
Arts & Culture
Banking
Commercial Real Estate
Construction
Credit Unions
Economic Development
Education
Financial Management
Healthcare
Human Resources
Insurance
Law
Manufacturing
Marketing
Media
Mining
Philanthropy
Residential Real Estate
Rural Nevada
Sports
Tax Planning and Accounting
Technology
Telecom
Tourism
Transportation
Utilities

Footer

Subscriptions

  • Print Subscription
  • Mobile App
  • E-mail Subscription

Editorial

  • Features
  • Departments
  • Events

Advertising

  • Advertise
  • Submission Requirements

Connect

  • Contact
  • LinkedIn
  • Facebook
  • Twitter

Copyright © 2022, Business Link LLC dba Nevada Business Magazine and Nevada Business Journal. Privacy Policy | Terms & Conditions
Nevada Web Design services by Nevada Central Media using Genesis Framework by StudioPress

    *Your Name

    *Your Email

    Phone Number

    Company

    *Subject

    *Your Message

      *Your Name

      *Your Email

      Phone Number

      Company

      *Subject

      *Your Message

        *Your Name

        *Your Email

        Phone Number

        Company

        *Subject

        *Your Message

          *Your Name

          *Your Email

          Phone Number

          Company

          *Subject

          *Your Message

            *Your Name

            *Your Email

            Phone Number

            Company

            *Subject

            *Your Message

              *Your Name

              *Your Email

              Phone Number

              Company

              *Subject

              *Your Message

                *Your Name

                *Your Email

                Phone Number

                Company

                *Subject

                *Your Message

                  *Your Name

                  *Your Email

                  Phone Number

                  Company

                  *Subject

                  *Your Message

                    *Your Name

                    *Your Email

                    Phone Number

                    Company

                    *Subject

                    *Your Message