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Mergers & Acquisitions - Business Valuations Part 5

So far in our series on how an early business valuation can benefit you, we've covered Evaluations of the Business as it Currently Stands, Precise Future Planning, and Structure and Procedure Changes. This brings us to the final installment of this series, Mergers and Acquisitions (M&A). In the event of a merger or acquisition, business valuations ensure that the process is streamlined as well as ensuring that all parties involved get a fair deal.

Let’s see how things can play out by taking one last look at Mr. & Mrs. Garcia’s storage and distribution warehouse business.

After continuing to run and grow their business effectively, as well as continuing to make process improvements along the way, Mr. & Mrs. Garcia have decided to slow things down and take a step back from the business world. Their grandchildren are young and the Garcias wish to retire and spend time with them as well as travel.

After putting out the word that the Garcias are looking to sell, four 3rd parties have come forward and wish to make an offer on their business. But here’s the question, how do the Garcias know what kind of price range they should even consider, much less what price to accept? This is where a business valuation will really come in handy. Business valuations can give a solid ballpark estimate of the range of offers the Garcias (or you) will seriously consider. This point really rings true in markets enjoying rapid growth such as the biotech industry. Using their business valuation as a guide, Mr. & Mrs. Garcia entertain two offers and eventually decided to sell to a large trucking and transport company called Foster’s Logistics for a higher price that what the facility next store was purchased for. This was due to the Garcias having a more successful business and better processes and procedures supporting the business structure itself.

Mr. & Mrs. Garcia can now retire happily knowing they built a successful business by planning smart and using all of the tools available to them. One of the most important points to remember about business valuations is that they are a great tool for business owners and managers to wield in order to create the most value in their businesses as possible. Valuations should be another tool in the toolkit for business owners and managers when creating a “Whole Business Strategy.” That is to say, an all-encompassing long-term strategy that will extend throughout the life of the business; helmed by you, the owner, and eventually succeeding you and going on to guide the next generation of owners after your exit from the business.

Your exit from your business is a very important step in determining what to do with your business. Even if you’re not planning on exiting for many years, the goal should always be in your mind and you should constantly be working towards it.


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