sell

Is NOW the Time to Sell your Family Owned Business? Selling a business Post-Pandemic.

good afternoon to everyone I hope

everyone is doing well welcome to our

fourth webinar now is now the time to

sell your business here at the NY bebe

group we hope that you your family and

your teams and your staff are doing well

I am Anthony solo and CPA a Managing

Partner of the my bebe group I'm

delighted to be your host for today's

seminar we do appreciate you joining us

and look forward to bringing you some

great information that will be both

impactful and value to you especially

your visit to your practice and the good

news is today is is the opening day for

Long Island so as everyone knows we can

get a haircut we can do some outdoor

dining and and hopefully you know all of

our businesses will actually progress as

as time goes on and as long island and

New York City begins to open a little

bit quicker hopefully just some

housekeeping there is an attendee chat

function for any questions you have just

click on the chat enter your questions

those questions will be addressed after

we do our presentation and also we do

have coming webinars one on June 17th

with we're going to feature options home

health care agency that is a great

opportunity and the second one is on

June 24th both are at new and we'll be

talking on June 24th about buy side

options and growth through acquisition

for companies that are in that mode so a

our entire staff excited we have an

action-packed hour and thrilled to have

three extremely talented and experienced

professionals who have had tremendous

success working with family owned

businesses privately held companies they

assist the owners in their exit and know

exactly what is necessary for that sale

to be maximized and typically really

protecting those folks with what is

really the most valuable asset in most

cases so a brief introduction of our

experts on on on hand today's we have

Stewart

Smith from Wilmington Trust he's the

national director of business value

strategies with Wilmington Trust he's a

founding member of the MA

corporate finances at M&T Bank

he was also past director of the

Investment Banking Group at

PricewaterhouseCoopers and he's been

involved in hundreds of transactions

many sophisticated transactions years of

M&A we have mark blaustein who is a a

CPA and a tax attorney he represents

clients in corporate transactions

including the purchase sale

restructuring mergers and acquisitions

corporate agreements in auditioning two

leading lending his tax guidance to

those transactions he has family

background which includes business

ownership which gives him some great

insight into the business owner today

and in terms of what they need and the

third is Kyle Griffith who is a partner

of mine at my BB Grove Kyle is a

certified business intermediary he's on

the board of governors for the IB BA

he's really a student of the industry

has helped many many people exit their

business successfully he's a master on

the marketing side and he actually has

been involved in a family owned business

the padrone in fact several that have

been very successful he specializes in

logistics some transportation HVAC

businesses welcome everyone welcome to

our panel of experts and we're gonna get

started and I think the first thing it's

and we'll start with Stuart and um we're

looking at business owners today and and

if they're considering and looking at

offering and selling their family-owned

business they're privately held company

they're valuable asset what do you think

they what how can they prepare

themselves given you know the past three

months and perhaps you know looking at

the past number of years would have been

some interesting interesting situations

everything from today's pandemic to the

2008 recession since things like

hurricane sandy okay well thanks Anthony

I apologize did everybody can't see me

for some reason but you can just focus

on the great picture of me that started

off the whole program yeah I think that

as we've been helping clients navigate

through this time I'm sort of looking

back to actually the 2008-2009 time

frame and during that period when we

were calling on a lot of commercial

clients of M&T Bank if you visited them

in late 2008 you know the sky was

falling right and the glass was

definitely half-full if you went and saw

him six months later they'd adapted

they'd done the things they could to

stabilize the business and go forward

that the glass was half-empty before now

it was half-full I'm sorry I misspoke

earlier so the fundamental thing there

was that the water level hadn't changed

in the glass but perspectives have

because they sort of adjusted to the new

normal and as I think about people as

they consider exiting their businesses

right now

you know I I'd encourage people you know

to take a hard look to make sure you're

not making a knee-jerk reaction in the

moment as you think about that because

if you look at the M&A market in my view

at least right now and I'd love to hear

from my fellow panelists I think the

traditional source of funding for an M&A

transaction is usually going to be a

bank loan and banks have got their hands

full right now and I think buyers are

maybe being careful about their you know

preserving that liquidity as well that's

good and Mark you know if you could

follow up in terms of what your

perspective is what you've been seeing

out there oh I've been seeing a lot of

people that were on the fence and now

the wall has collapsed and they're

really waiting their lives you know

older people may be in their late 50s

early 60s are looking ahead and saying

is this the time I should really be

thinking when maybe I wasn't staying the

business for the next five to ten years

so the they are the forward-looking has

really changed to a more

well my business comeback last something

to sell a lot of people right now are in

survival mode because they have to

reboot their businesses and see if they

can get their cash flows going and see

if things will come in I know personally

I have a lot of clients that are really

evaluating whether it's time to make

their exit when times are good you know

people don't act when times are bad they

tend to think more and they react so

there are opportunities out there have

clients are also looking to purchase

businesses good solid eight there

they're businesses from an overhead

point of view because there's gonna be

things out there to buy we were talking

about really before it started so I

think we're in between times I think

history repeats itself and those who

have vision going forward will be there

to pick up opportunities that other

people see for themselves yeah and I

know we've had an enormous amount of

buyer inquiries in private equity guys

and Kylie I know you're involved

nationally with some organizations you

probably have a perspective there in

terms of what's going on in terms of you

know and how what is going on in terms

of looking at business owners and what

they should do well I mean I have to

echo my colleagues and a panel here I

mean it definitely first off you want to

look back and see how you perform the

buyers good you don't want to see you

numbers from 2008 to see how you bounce

back you know there are it really

depends on the business owner and what

their motivations are okay most people

ask me when is a good time to sell your

business you want to sell a business

when you're doing well and your trend

that your numbers are trending upwards

so like what Stewart mentioned you know

you don't want to make a knee-jerk

reaction so the market crash we have to

spend Emek all of a sudden I want to

sell you want to plan five years and

ahead okay so if we have a situation

like we have right now at covet it

definitely has affected a lot of

businesses is is the reason you're

looking at sell because of kovaydin hey

I've been through recession now I'm

going to call ready yeah I'm done get me

out of here

are you already plan to sell before you

will seek and retire in you know 2020

you want to get out so it really depends

on what the sellers motivations are as

far as you're going to exit the the

steps you need to take doesn't really

change you need to assess where you have

that would start with evaluation and a

complete diagnostics of your company we

want to make sure we identify any flags

or do povo challenging challenges that

we can actually correct before you go to

markets now's a good time to assess your

business see where you add you know

strengthen up your strengths and your

weaknesses try to cover them so we can

make sure we can make you more valuable

when you do plan to sell as far as

throughout the market I mean activities

definitely up there a lot of buyers out

there looking for opportunity now is a

fabulous time to buy a business yeah a

lot of opportunities they are available

buyers capital is still available so

sellers can feel confident that yes

there will be buyers looking for their

business there is capital there is have

to be understand that buyers now they're

going to be doing more due diligence and

you know they're gonna be you have to

make sure you have all year I started me

at each cross gonna buy is going to be

checking everything you know it's before

they mean they may look over a couple

things but now they're gonna scrutinize

your documentation your business more in

you know in these times it's good that's

good

if anybody has any any follow-up

comments and you want to interject you

can but I think so let's say this

there's someone who really feels like

this is the right time and I need to

kind of move forward what would you

expect during like the marketing and

presentation process perhaps compare it

now to maybe the the normal timeframe

pre-pandemic let's say what what

obstacles would you expect someone to

see as we go through that process

sumit stewart maybe you can kind of

Condor you know I think that one of the

first things you got to consider is okay

where is your business relative to sort

of the growth and earnings curve that it

was on alright you know I think that

we're going to look back a year or two

from now

this really is behind us and they'll

definitely be this notion of what was

your Cova dad back right and so the

trick right now I think if you really

are going to go to market is

demonstrating that your business can get

back on the curve and that you you have

the number than the numeric and support

for how how you're off the curve and and

then you know the ways that you are

getting the business back on the curve

any buyer is looking to know that they

can that what they're getting is going

to transfer easily to them all the

know-how all the relationships etc they

want to know that what they're picking

up is predictable but for something like

this situation and they want to know

that the business is going to be

sustainable so and I don't mean

sustainable and the Eco sense although

that's important too but that it's going

to be able to manage through thick and

thin so demonstrating that is what's

going to be critical if you're gonna

make a move in the next few months it's

interesting because I've heard about the

Cova dad back in the COBIT kind of

restructure restructuring and I think

it's really uncharted waters um you know

mark what would you expect trying to add

in those terms I also think of a due

diligence point of view that as it's

happened and people have to be concerned

about the way we did our due diligence

has changed even physically going to

view a business walk around you know the

old deli days you sold the deli or

previous at in the pizzeria for the week

and you watch the register so certain

ways of doing it you do diligent to

physically look at the assets can you

get into the facility its I'm still

trying to figure out clients not talking

to how do you deal with these questions

that were very easy as I said before we

started this the things are now

difficult to do the simple things that

we did before now have changed the world

gets more comfortable with people

physically coming into an office or a

space

I think it's just gonna be a challenge

and you may see a buyer saying hey I

want to hold an escrow I want some type

of contingency on the back end because

of these unchartered waters and I really

didn't get to see take my x-ray of the

business like I normally would yeah

and Connie you've had some some

potential buyers who actually have met

with sellers and and viewed some of the

opportunities you have I mean what has

been the reaction and also from a

marketing standpoint and a presentation

standpoint what are you trying to

accomplish overcome it so you want to

distinguish your business and

differentiate it from what opportunities

if the buyers are shopping around right

they're looking for opportunity that I

can give them the best return on their

investment

they're gonna compare your business to

others so the key thing in the market

and the presentation is key what makes

your business better than your your

colleague you're down the block from you

that has a similar business what can we

do to enhance that and what we can do to

to make sure the deficiencies and issues

that we can get them resolved buyers do

have a lot of objections so for example

we are representing a HVAC company and I

when you guys those who left the house

today and flew myself was pretty warm

today it's going to be pretty humid

summer is pretty much upon us so you

would think that HVAC businesses would

be in demand no one once a sit sit down

in a house is 100 degrees right so you

would think that HVAC is an essential

business and hey my business would sell

right away maybe maybe not the buyers

are still very conscious to the fact

that we are going through a pandemic I'm

sorry I'm looking at your human capital

or your mechanics or their license are

they trained how you retain in New York

you know how you maintain and train your

staff how many have been affected by

micro vets if you don't have mechanics

and service men and women to service

your clients then what business is there

so apart from your delivery goals on a

park from the value bring to the

marketplace you have to completely look

at your business up and down and Steve

what we're and what needs to do what

needs to be addressed and you know as

Mark alluded to earlier you know you

have to understand that chances are most

buyers will want to manage their risk

and they can know them they can manage

that by actually you know going for in

our process paying your percentage of

retained sales earnings you know close

so that's something you have to

definitely be aware but the buyers that

that I'm speaking with they're very

cautious you know they make an

investment it's a risky time to invest

but the the buyers that actually are

educated and have been done a couple

deals is sophisticated they know that

they can be taken a risk and they're

willing to take the risk but you have to

pretend opportunity that makes sense for

them to to pull the trigger on so let's

pick up on the risk factor you know and

I think when we are going through

transactions and what we're kind of

speaking to folks who may be in the

process of looking we'd say look I think

there are three things people need to

look at and a lot of times the boys look

at once they look at net cash flow and

clearly you know that's been that's been

you know affected at least in the short

term and people don't know what the

future is the second thing is the SS is

risk and risk a lot of different levels

of risk and the third thing is they they

look at its scale they see if they can

scale the business so I'd like everybody

to kind of address some of the risk

factors that that even I mentioned that

even ones that you see as some of the

most critical ones that that there are

and really what is a way to overcome

them and and perhaps how critical do you

see them as as part of the whole process

in terms of getting a transaction done

Stuart yeah I mean I think you hit on

the right ones right out of the box you

know what's the earnings impact of what

we've had but what usually what moments

like this do is bring in two pretty

sharp focus some of the other areas of

your business that in normal times might

be just kind of clicking along but are

probably wise to be looking at I is this

all started I was working with the

client and they have a pretty neat

fabric

here in the US and they import two of

their pian you know key fabric items

from other parts of the world and I said

and they're coming from two different

factories that's it now so what happens

if that all gets stalled is this

pandemic starts to spread oh it's fine

then you dig a little bit deeper and not

only are they this you know really the

sole suppliers to the company but the

company sends its engineers over a

couple times a year to help the owners

of these factories fine-tune that

equipment okay Wow

that's a real value problem for you in

the long haul because that's know-how

that you're providing that if you

disappear as an owner because you're

selling the business you're not

necessarily going to optimize your

multiple there so that's just a great

example of something that's been exposed

because now their supply has slowed down

and they've had to have figure it out

and do things differently and the

factories abroad have been hit by kovin

so you know that's what I'm encouraging

folks to do if they can be stable with

their business and an echo something

that Kyle said a couple minutes ago in

the military this would be called what's

a tactical pause the battles died down

for a little bit you're looking around

what's next how do I proceed take the

time to think about your next moves and

plan them rather and that's not

necessarily easy to do I get but it's

better than being reactive in the moment

okay mark maybe yeah I don't know if you

have any any specific instances of

transactions that have happening

currently or some that maybe you've done

in the past that I'm in the middle with

one right now it's interesting supply

chain which I never really realized I

mean critical is I have a a client

that's a trophy manufacturer anything

with the word school or restaurant in it

and it's just amazing the devastation

these words have cause in the name of

the business have a trophy manufactured

about a hundred employees had to layoff

ninety five of them waiting ulcer reboot

and he's got his PPP money and we're

trying is going to be selling the

business and trying to prop it up and

and obviously going forward he never

thought about it but trophies are made

out of acrylic and all the sudden wants

to if the schools open Oh trophies and

awards internet based company the

suddenly you can't get material

everyone's making masks shields and

dividers for the office so to get clear

acrylic it doesn't exist anymore he has

a four month five month wait to

something he got the same week because

other peoples are opportunities to

manufacture and they took his supply of

acrylic that he had no longer can get so

what he had to do he's being created as

I'm doing clear he found black acrylic

or colored acrylic and now has to

redesign the trophies that was his

solution so business that depends upon

raw materials being used for other

things like when masks remember all of a

sudden everybody wanted to be in the

mask business this will change all the

sudden the raw materials for the hot to

be fast everybody wanted to manufacture

because again supply and demand will

always rule the market but it's

interesting the supply chain whether it

be in the pharmaceutical industry or in

my clients business is something to

factor in for a business owner wanting

to buy to make sure that he can actually

operate the business going forward the

way it was operated prior you know it's

interesting that we we don't realize

that you know those of us who just

haven't been able to find paper towels

or or or Clorox wipes or things like

that we we don't necessarily realize how

that affects some of the other

industries that use the same type of

products so I think it's uh it's pretty

interesting how that works

Kyle and maybe you can have to give us

some examples as well so you talk about

risk right so mark you you brought an

interesting point there so another thing

that buyers look at is no vendor

concentration so you have one vendor

that's supplying you majority of your

stock in inventory that could be a

problem if that raw materials are Kulik

if you mention and it's not available

you pretty much buy into a business that

has limited access to to inventory

materials all right the other big one

would be customer concentration you want

to make sure there's some

diversification and your customer base

is not the one customer that's bringing

in more than you know five to ten

percent of revenues I mean that would be

a huge risk if you had a customer that

brings in half the business and that

customer walks away now every deal has

its challenges right so that may be a

good or a bad thing but if we can get a

contract done with that particular

customer prize a closed missus could

give the buyer some confidence that that

will continue we can still get a deal

done and and work out some sort of a

earn out if that customer stays around

post transaction so the opportunity to

get deals done but you you want to

minimize the risk as much as possible I

mean I'm not an attorney or anything but

there's a lot of legal risk as well that

you need to review as far as contracts

leases you want to you know if the

business is location driven and it's

dependent upon the location you have an

expiring lease you know is that landlord

going to renew the lease we a business

in the city

it took us I mean almost close to a year

to get that lease negotiated the Llano

was a huge conglomerate

and you know that actually killed it I

mean it actually did kill the deal but

we you know the buyer is very motivated

to buy the business so you have a little

risky at the financial risk and you have

the risk of human capital as well are

you gonna make sure if it's some key key

personnel in place people are going to

make sure that they stay in place you

can offer them some stay agreements okay

to make sure that they continue after

the businesses board or I'm even even

option to offer some of them some stock

I mean there's some options as far as an

employee stock options and so on so it's

not opportunities but you have to make

sure that you you cover all these risk

and you have these conversations prior

going to market so we're gonna identify

them and and and and fix them and that's

good and for interesting we have a

client who's in the food distribution

business and you know the business was

LLO i and then the pandemic it prided at

one of the major customers when

bankruptcy and some of their clients

include the airlines and include some

big-box stores but one of their other

clients includes a customer like Amazon

fresh who has food so here we are with

three months in the numbers are clearly

off some of the existing customers are

starting to come back online some at

big-box stores the buyers is saying well

you know when will they come back online

how long will it take and at what level

will they actually lose business so it's

really we'll get to adjusting some of

the terms in a second but I think

sometimes you can't really you can't

really anticipate the risk right because

how many pandemics have we had but what

I wanted to talk about quickly is is

what about due diligence going to mean

what happens now if somebody is kind of

going through this process what do you

think you're diligent how does it really

impact what what we're looking at a

diligence site Stewart maybe you can

kind of touch on that yeah I mean from

my perspective I you know I I think the

diligence is gonna go real hard at the

numbers first because it gets back to my

point about where are you on your

earnings and and and revenue curve and

then from there you know most people

like to think that gosh due diligence is

just about the numbers you know quality

of earnings has a lot to do with some of

the things we've been talking about here

in terms of what systems do you have in

place that are gonna make the business

easily transferable what are the rookie

relationships and what is the health of

those relationships so those various

things I think are going to be really

critical in the diligence process you

gotta expect that there's going to be a

really deep dive because what people are

laying out cash in a time that's

uncertain with plenty of liquidity

concerns they're gonna want to you know

know that they're they're gonna be

receiving what they thought they were

gonna receive based on the materials

that were shared so it's it's gonna

buckle down pretty hard I'd say I think

so are

well I think you're gonna have again a

couple of years ago cash was king a lot

of people were getting a substantial

amounts of cash at closing with small

escrows I think that maybe flip-flop now

you may be getting smaller down payments

longer payout terms and the interesting

factor is you know someone took a note

over five years and they were getting

six seven eight nine percent interest

because of the the market now I think

we're going to see very low interest

rates on these stretch out payments

which affects the total value that a

business owner gets a lot of my clients

are looking for this is also part of

their retirement income and they don't

mind taking notes and holding notes

because they see it as a stretch out of

for their income I see that a lot of

practices I recently had an optometry

practice that sold and the last few

weeks I've been unwinding deals so

everyone that had and everything has

been negotiated everything has been

stretched out I can't pay I owe you

veneers now I'll pay over five years why

because glow has changed you know so a

lot of the people who stole or

reevaluating or some other complications

with clients say do I take back my

business why we sell it or but I'm

afraid some people bought businesses

said hey they're gonna hand it back to

the seller and say hey let's let's make

a deal you take it back cancel to know

whatever you're going to see

bankruptcies of my practice has been

damage control with opportunities so

we're gonna have to see the normal deal

you know Effie we did a deals the last

year substantial cash down that type of

I'd be around anymore for a while

because of the future uncertainty and

you're going to see the valuations of

good today will they hold the future

with a price adjust and this we've to do

deals and it would be a kicker a price

adjustment up what if the number we're

talking about last year if the numbers

went up I got a kicker at the end

they're outside but they also have you

structure a deal properly that could be

so upside to so if you're smart in your

negotiations you will try to get a deal

done and maybe protect the upside and be

able to get a higher price in the end if

you reach those numbers a lot of times I

the seller managed the transition and

also to potentially train the new buyer

you know for the opportunities out there

he becomes a partner in effect to make

sure eight is paid when he's bought and

potentially for maybe some future girls

that he can also get some value of Kyle

Anderson and we've been through a lot of

interesting due diligence processes and

I think we're doing a few now what would

you what would you kind of mention about

that I I think our colleagues have it

covered

one two things I want to input that you

know there is opportunity there for for

capital so you you your right is going

to be a lot of deals where is going to

be earn outs and a lot of contingencies

and so on but right now the SBA has a

program where if you were to get a deal

funded by September 27th they would make

it first six months and payments

obviously that's smaller transactions up

to I believe it's five million but you

know various opportunities and that's a

low interest rate as well but without

bank financing and you know sellers

gonna have to you know hold hold of

paper and and so on so but with that

being said I mean I'm not economist the

one really has a crystal ball or

anything but I do read a lot of reports

and and you know the feeling is that I

think we have reached the bottom office

you know I'm gonna kind of saw no way

out

we took a huge hit the first quarter

when the second quarter numbers come out

for the M&A industry we're gonna see

that we dropped again but I think the

third quarter fourth quarter should be

pretty good the economy starting back up

stimulus has has helped many businesses

between the PPP and the eid loan which

has been wonderful for a lot of

businesses they have 12 months to make

their payments and it's over 30 year is

at a 3.75 interest rate so you think the

confidence in the market as in buyers

that an opportunity is going to increase

and you know a lot of them are very

thirsty for deals too you know so if you

have a solid company but great

infrastructure a good business you could

hold close to your price and you know

maybe get close to you determine such

that you request so we think that

there's going to be good opportunities

for both buyers and seller you know in

the next few months to come but you have

to be have to be patient you have to

understand it we still go in through our

friend Amex so yeah you have to be

patient with the current circumstances

dimension good mention and I think you

know we we're all not a turn you see a

mark is and but I think there's going to

be an impact on and you mentioned it

earlier mark terms conditions on

contracts so I wanted to see what that

with the patent thought about that and

and if you have seen any specific

adjustments that have already been made

on deals that make an in process and you

know you can give some specifics on

deals that had closed in terms of what

the overall ramification was I know

there was something mark on are we

talking about with someone who had

escrow and the escrow was tied into

meeting certain targets was given the

pandemic they couldn't meet the targets

so obviously that escrow went away but

if you could talk about some of those

type of things I think it would be

useful one of the comments from one of

the people who are watching a seminar

said you know there's the risk of the

economic downturn seems to be the

biggest concern at the moment and maybe

that's something that it gets addressed

in the terms and conditions so I mean

what we thoughts about that story you

probably structured a lot of deals in

your time and what's they I don't have

somebody protect protect you know on the

downside in the upside and what do you

think in this situation what we're

looking at well I think first we've sort

of whether we like it or not we've sort

of entered a bit of a buyers market

right now with where we are yeah it was

cited earlier in the conversation the

the number of folks that are out there

willing to buy well they're willing to

buy because the prices are potentially

right so you know I think that if I were

putting a business out there right now

you got to consider what you think you

need to get out of the business and what

you can get out of the business and that

Delta becomes the structuring that you

end up doing to try to close that gap

okay so as an example or an urn out okay

I'll take you know I really thought I

really think my business is worth six

times e but you want to pay me four and

a half how does that earn at work to get

me really better than six times

ultimately if the business you know does

what I think what the owner thinks it

can do and you're sort of putting your

money where your mouth is seller paper

is another way to go

that's usually a classic way of trying

to narrow a a gap between what the

expectation is on a current multiple and

and what the market is willing to bear

out there I think there's probably some

added pressure on seller paper right now

because of where I think you're going to

see the the bank financing market go and

then you know reps and warranties and

these transactions they're going to be

really heavily negotiated even more so

than maybe usual because you know again

it gets back to a point I made a few

minutes ago but okay and is what I'm

getting sustainable transferable and

predictable and I think that's going to

flow to working capital adjustments and

transactions as well in particular if

you think about the collectability of

receivables so those are things that I'm

you know would be really focused on

right now and I think that it's you know

again it gets back to the opening

comment I made during this particular

ramble of mine that it's it really is

kind of a buyers market in my belief

right now and so it's going to require

some flexibility and creativity to get

where you want to get that's good and I

really believe you know you hit on

something big I think the working

capital adjustment is going to be kind

of almost could be a backbreaker right

depending on now and how it works out so

mark particularly with the emphasis on

liquidity right now right absolutely

mark well you look at your structuring

deals with the terms again well the

interesting thing is

it's funny I don't know we've heard this

new word forced Monsieur you know take

my business law textbook base used to

teach business law route and read a

couple paragraphs because all of a

sudden the legal world that new word has

come about and in terms of negotiation

so what I'm seeing it a couple deals I'm

involved in now sometimes you do a deal

and the contract and closing will occur

simultaneously so you got no deal into

the end most deals you have a contract

an executory period and then a closing

the due diligence is done in the middle

so I'm already finding the force majeure

language the negotiation on it you know

for an event a kovat 19 pandemic

I actually heard the word civil unrest

last week and had an argument with an

attorney

and all of a sudden my stories board I

want to be able to terminate the

contract so I'm more concerned about one

such thought the process give it down

payment I'm in the due diligence the

second everyone stay in the second wave

so it's been interesting I'm talking to

a lot of people like what school

roommate it was involved with the NBA

players associations elite Council and I

went on the sports maggiorin it's they

actually in the NBA's contract they have

the word virus in it so a lot of these

contracts or had the word virus in the

force majeure clause so there's gonna be

some litigation but now i'm using google

riots virus pandemic who would have

thought these things were never come

into contract but now they're like

negotiated term so it's an interesting

factor of the risk allocation because

I'm not sure bio wants to go to closing

if we have a second wave and that will

possibly destroy what he thought he was

buying so there's a big fear factor in

that and we're trying to Remy that

obviously contractually yeah kind of

what are you thinking if I can add to

two things I can add one is I think what

you will see in a lot of contracts is

some clauses about the PPP

so for example if the the seller has to

paint that back you're gonna see in some

contracts where the attorney actually

put the PPP fun that may or may not be

forgivable in escrow in the event that

they have to pay it back so they may

carve out the PPP funds from the actual

from the purchase price and hold that in

escrow that's one thing that with that

adds its new and then the other thing

well I would say the employment contract

for the owner most buyers want to keep

their own on at least for at least for a

year or six months a year or more it

depends on the nature of the business or

the negotiated contract and be very

interest I'm sure mark can attest to

that you have some owners that may want

to continue making what they made when

the only business you know so as now as

an employee of the buyer you would not

expect to make the same amount as when

you work for yourself so that can be

very tricky as well so those are two

things like that but then stealing more

covered all the other items you know

very clearly and articulated well sure

sure and you know it's interesting

because we have a couple of another you

know ongoing transaction that it was

pre-pandemic and the person was approved

for financing and then all of a sudden

it's in the HVAC space the individual

said gee there's so many things I don't

know I don't know if the staff is going

to come back to work if the staff is

going to want to come back to work we

don't know if the customers are gonna

let them in the house we don't know if

there's going to be a second wave so the

the buyer said listen you know what I'll

do I'll take an urn out and and he

wanted to take an urn out basically on

on the complete purchase of the business

with a small amount down and you know

obviously the the sellers felt that that

was too much risk the unfortunate part

is there aren't as many buyers who were

willing to make a transaction happen

during this whole pandemic period so I

think you know you kind of kind of limit

your options in a lot of ways and and as

one person said you know the risk of the

current economic downturn seems to be

too

things either a concern of people or

it's a great way to leverage your

position right so if you're negotiating

a deal you can really kind of negotiate

a deal and lever lever your position

that way and I think we'll see a lot of

that happening and and and that's that's

where we're going I have a few questions

from the audience um is anybody on the

on the panel have anything else to add

in terms of what we're talking about any

other case studies that you have or

anything else yeah one comment Anthony I

think you know here act as facilitators

and we have to be creative so one of the

things I you know Lou try again with

depends if I represent a buyer or a

seller there may be a view that you try

to facilitate a deal by having a partial

fixed price with a partial contingent

price so you have to be creative here

because if you're a seller you want to

make sure you know you want to cut your

risk and everything but you also want to

realize maybe your minimum so I haven't

done in years but I think I've been to

talk to people about potentially hey do

we take part of this fixed part of this

contingent and maybe they don't I sub I

hate these were with with partners in

the new business to a certain extent but

we also feel comfortable that we've

gotten out what we need these for what

we need I think was Stewart brought up

what we want what we need maybe two

different things but you know we as

advisors will help to facilitate these

things and come up with creative ideas

you know I always tell people if you're

a little unhappy to make a deal if

someone's really happy then someone got

a good feeling someone got a bad deal so

everyone's got to be a little unhappy to

strike the chord where we can get the

deal done that's a good point

good point so uh and I think I think

that's probably the message no matter

when you're doing the deal right there

has to be some level of flexibility and

we find I would say we would get a

hundred percent of all of our deals

completed if if you know sellers or for

kind of I think sometimes the sellers

remorse in terms of deals and and

sometimes it's closed they're not

willing to be flexible I think you find

that here yeah we need ultimate

flexibility I think in all

to get something done and look if you

believe in your business there could be

a very good upside for you depending on

how you structured the deal and if the

businesses has been up and a hold hold

hold strong we have a few questions in

the chat and one's pretty interesting

that I think we want to we want to

attack once said how should we adjust

the 2019 tax return so we can apply a

multiple based on what's happened with

the pandemic is there a prudent method

to use or you know what would be your

thinking about that I know stupid you've

mentioned that before but if you kind of

circle back that would be good so you

know I'm thinking about the fact we

would want to adjust the 2019 tax return

because Cova didn't really affect 2019

earnings right so is I'm wondering if

the notion is do you do you do you

reduce your income there that's what the

question is you know I think that you

let the history be the history quite

honestly and you've got to think about

what's going on in the near term with

your business I think you know hopefully

your folks were using a good dashboard

to keep track of what's going on in

their business on a month-to-month basis

April was particularly harsh right

because it was the first full month and

people were trying to figure out what

was going on so I'd probably be looking

at the Delta of this April versus prior

April's to start to try to figure out

where what's the hit that I've incurred

here and I'd then look and see how may

trended verses prior May's I'm sure it's

down but perhaps it came up and try to

start to construct an argument that way

with respect to the Ovid impact here so

if I if I may add Anthony yeah those

excellent points George so I think you

what you wanted to do is look at the the

benchmarks for your particular industry

so it's a Stewart's point if your

revenue is down and

April and May of 2020 compared to 19 you

want to see to see the house that want

to look compared to other so for example

if you're in the trucking business and

most companies or a 15 percent

hit on their their revenues through the

do to covet but you had a twenty five

percent hit you know you may want to

look at me between adjusting your your

your income between fifteen and twenty

you know some some along those lines and

banks and I'm sure Stewart can assess

this when they're reviewing the 20/20

numbers they don't look at the kovin

impact that it will make they'll make

some adjustments within reason the key

question is you know can you i do you

have ability to bounce back because we

have seen incorporate actually

obliterate some companies and they

haven't have been able to reopen and

they have lost a lot of customer base to

maybe some of the competitors so it is

unique to each business owners

particular scenario but to the transit a

question from the banks that i have been

working with you know they're willing to

make some adjustment in 2020 numbers

because of the corporate impact but not

a lot is within reason and its benchmark

based upon other other businesses that

in your particular sector

sure you know it's interesting because

one of the transactions we're working we

have trailing 12 months information and

now we're updating the trailing 12

months every month and the first month

where things were very bad the gross

revenue was what it was down by about

55% and now slowly but surely here we

are in the third or fourth month of the

comparison and we see the gross revenue

is down by about 45 or 40% and we can

identify the clients who have not begun

reordering and have not been gotten have

not received deliveries so you know if

you can kind of track it and you look

you know year off a year in trailing 12

months and you look at the one customer

and one client versus another

you can see their revenues coming back

at least you can present the case that

the business will be back to some some

sort of normalcy of some sort of

sustainability and maybe you can predict

it based on the ones that are coming

back it's it's you know it's a little

bit about hard sell sometimes because as

I said before I think you know people

will leverage that information it's

funny because what the one question

really was is there a rigorous rigorous

way to determine the value based on

what's been happened what's happened

based on past irritations so someone

said comparative 9/11 you compare it to

sandy you compare it to the previous

previous downturn and I don't really

kind of have any inclination in terms of

what happened back then I know in 2008

we we had deals that just got kind of

kiboshed at that point so I know if

anybody has any kind of memory about

what's happened based on what you know

those periods of times I mean I could

think back to 2008 2009 it became kind

of what I would call a barbell market

you had companies that were pristine

through a companies and you had F

companies and those tended to be the

ones that were in the market yeah and

the a companies as everybody settled

down actually had great interest I can

certainly reference some different deals

we did at the time the F companies you

know they're struggling for survival a

lot of times particularly in the private

equity world those B C and D companies

which was the very yeah that was the

barbell itself the very thin part you

know that those were of particular

interest because the fixer-upper

opportunity in an environment like that

just wasn't particularly attractive

those are the folks that I think take

advantage of the tactical pause right

now figure out what they can do to

improve their businesses and move them

from a C to a B or B to an A for that

you know for companies out there it's

going to take a little bit but if if

they are really good on the

transferability predictability and

sustainability fronts and have been it

may be affected but have navigated

through and have been reasonably a

recession proof here they're gonna get a

lot of interest I think that multiples

will still be depressed but think about

particularly private equity buyers is

they've got to put money to work and at

some point they're gonna have to start

loosening up the purse purse purse

strings yeah and I could see it happen

anyone else have any any any specifics I

mean III can't say that it could happen

in Reverse as well to have a client

where the numbers actually went up there

in the DM e space and I mean they went

up at least twenty-five percent so you

you could be adjusted back yet over here

as well because it's that is probably

not gonna continue into 2021 so and I

can have yeah Justin could be in Reverse

as well we see a lot of liquor stores

that we don't sell my liquor stores but

in that particular space you did they've

made a lot of money during these times

and that's might this be a blimp and

April and may possibly through June but

it may not continue in this defense well

it raises a really good point in

something that I've said a few times

during the call it's all about the curve

that the business is on from an earnings

standpoint we see so many entry or I

used to see so many owners I've had my

best year ever

let's sell because my earnings are as

high as they've ever been and I

get a multiple of that and it's like

yeah but wait a second you executed on a

really sweet contract last year that

pushed your earnings to that level it

was a spike relative to your history

what's gonna happen next so I agree with

you wholeheartedly Cal that's good one

other question from from the audience

and it's an interesting one does anybody

see that there may be more possibility

for employee buyouts of businesses with

retiring on is you know using it

actually says how about retiring on its

using broad-based employee buyouts to

achieve their goals

you know we not necessarily maybe an

e-stop but perhaps employees would be a

good opportunity for someone mark have

any thoughts I think you have an age

difference you have an older self

younger the second generation that might

be the time to raise those discussions

because they may be your best purchasers

because you know them you know their

capabilities and you may be able to get

better terms with them in terms of

valuation and II trust them more than

the stranger that comes to buy your

business so I do see that as

opportunities to engage in discussions

with the second generation that's been

in your business with it yeah and it's

interesting it will see if there any

succession plans or any kind of exits

that that go in that direction

I know 20 I'm seeing a lot with a lot of

older I remember the 1986 Tax Act and I

487 there were these older accounts is

it I don't want to learn that so you

know I think with the adaptability with

technology about running your office

like how many people want to run an

office remotely a lot of these older

accountants are used to coming into the

office having their staff and the

technology of learning to run a remote

office so I'm talking to a lot of older

accounts like mark it's time I'm not

going to go through this transition I

can't I can't handle the technological

changes of adapting my old style of

working I don't want to I'm 70 years old

and I'm gonna go talk to my staff or the

younger accounts say hey why don't you

think about taking over my practice and

as an exit strategy so I think you know

professional practices we have engineers

accountants even those lawyers I've been

discussing they don't because I see from

the professional practices the

traditional office may change

permanently because a lot of people are

seeing they don't need the space they

can do everything in the cloud they

don't need to only meet with people I'm

only going to the office twice a week

only to meet with people everything else

is done remotely because I'm trying to

space out in my office with the people I

share office space with so until

everyone gets a comfort level of having

the same capacity in the office and

they're getting used to operating their

notebook computers to drive costs down

for your physical space because

physically be there traffic patterns so

I think even as a dynamic change in the

way people live their lines want to work

and factor into certain businesses that

give you the Flex Billy maybe you want

to work at home today so we can go to

the office two days this is concept

they've never heard of Hotelling I had a

discussion one of the major accounting

firms that they are cutting down their

physical office space going forward and

no one will have office you will make a

reservation and any office you want to

be for the day to log in and that's your

office for the day the whole structure

of partner offices associate offices

that hold the platform may be gone may

drive your post eight courses it's

interesting I have another to represent

a lot of mechanical contractors the the

big REITs at all the real estate in the

city are very nervous how do I get

people back into elevated my stager

office hours so in terms of

opportunities some of the HPC guys they

see you still have as one guy said to me

we still have to protect the asset

meaning that holding whether it's

occupied or not they still have to do

the maintenance work on the physical

plant so they'll chew them discussing

with my clients is that getting the

mechanics in and out of Manhattan you

know to do the work I think it's a whole

different dynamic there's

opportunities there has to be some

creativity in some vision because if you

come up with a solution you could get a

nice service contract to manage an empty

or building or building that's empty

until they figure out what to do with

the office in Manhattan yeah yeah we

have a minutes left I'd like to give

everybody a minute just to kind of you

know give their thoughts about going

forward you know like a little bit of a

summary in terms of what you feel things

are going forward and and maybe just a

little tidbit for today's business

owners kind of takeaway Stewart I think

that I appreciate everybody being on I

hope that I was able to add some value

here tidbit for me is keep plugging I

had to give some commentary very early

in the the Kovach crisis and I said

don't panic and I had executives to the

bank say but everybody's panicking and I

said but that's the whole point we can't

panic be really directed about where

you're trying to go with your planning

and and follow that and and involve

others too many business owners in my

experience try to DIY stuff rather than

thinking through who do I need in my

boat with me to help me get to where I'm

going and there is a lot of

interconnected advice that you need to

get through a business transition make

sure that you go get that advice it is

gonna benefit you I promise you that's

great mark yeah along that note I think

the team concept is very important

anytime you look to buy or sell a

business it's you know it should be a

quarterback but you don't get a

touchdown without the players and there

are players that are necessary you know

it's my little tip it would be I'm a

student of history I always look at

history I believe history itself you

don't look at history you failed to

repeat it so we've been through good

time bad times the world didn't end and

you know I think if we view history with

a going forward look we can learn and

achieve our goals that's good

if I were a dye mean you want to take a

deep breath okay um we're gonna get

through this right you wanna first of

all manage your liquidity manage your

cash flow take advantage of you know the

opportunities as far as cash is

available from the various state and

local federal sources and manage your

cash flow make sure you're not spending

more than you need to spend and and you

know make sure you keep in contact with

your customers and clients you can

maintain that revenue stream and then

you know if you decide that hey I do

want to exit make sure you get the right

advice it would stop it would start with

of complete diagnostics of your if your

company an evaluation and you want to

talk to people who have kind of been

there at least the past ten years I

would think so they can give you some

indication as far as what happened in a

previous session because it's a

rollercoaster ride you know we have a

scene in our business and if the deal

has to die at least five times before we

can before it's done so you know it's

it's you know we become a psychologist

at a certain point you know we you know

don't worry we're gonna get through this

make sure you have some good people in

your team and we had a my people hope

you'll be glad to help you

you know what any of your transition

needs but as my colleagues on the panel

stated make sure to write advisors right

team around you that have been there

done that I can advise you and point you

in the right direction it's great I just

got a few things in closing I mean I I

just I agree I would you folks are

saying you find somebody who's been

there done that so to speak right I

think attitude is key it's very hard to

have a good attitude as you're going

forward with with trials and

tribulations but it kind of keeps you

focused and your attitude is really

important and I think the one thing you

don't want to end up on with I mean you

don't want to end up with do make a move

that doesn't make sense and you kind of

have a firm grasp on an empty bag you

really you don't want to you don't have

to because if you have the right people

surrounding you be okay and look our

next webinar and Kyle's going to be

hosting but the company called options

which does some home health care agency

and then now be on June 17th and then

June 24th my other partner Lou dalip

Rita is gonna be hosting exploring by

side growth

through acquisitions those going to be

two great events that are going to give

me different information than what we

had here so I I do really appreciate

everyone for attending I thank you to

the folks who were the experts on the

panel you did a fantastic job and she

had some great information thanks to you

in the audience for attending and listen

have a great day have a great summer and

enjoy the fact that you can go at least

outside and have a hamburger sitting in

the street