Jason Pereira talks to Jason Watt. He recently was part of the sale of his family business. Today they will discuss the tales of what it's like to sell a family business. They will also discuss the ups and downs and unexpected turns that may be included in that.
Episode Highlights:
- 1.06: Watt trains financial planners and he was never a financial planner previously. He was in the military till 2006 then he entered the family business.
- 1.58: Watt says that they had a pretty good transition as far as family businesses go and in 2018, he became CEO of family business. There was no friction back and forth about control from the elder generation to the younger generation or any of that kind of stuff.
- 4.33: The due diligence process must have alerted Jason Watt to issues and deficiencies that he had and that he needed to get cleaned up prior to any kind of sale, says Jason.
- 7.15: There was a very short meeting in January 2020 with local company Yardstick and Jason Watt talked price a little bit just to kind of get a feel for whether it would be enough money for them to consider a deal seriously and whether the price would be right for the buyer to make a deal work.
- 12.37: The working capital is important to business as any talent they have or any equipment they have acquired because it is also a part of the factory process.
- 15.36: Jason Watt talks about the negotiation of the deal. What is the methodology of price negotiation, its timeline and how that goes?
- 18.38: Jason Watt doesn't have a big product liability concern or anything like that and in fact there was a sort of pro buyer reason for the share sale because there are a bunch of regulatory approvals that go along with business.
- 20.10: Jason Watt shares after the negotiations stage, how long does it take to come to the final contract.
- 23.01: It took six and half months from negotiation to final conclusion and Jason Watt thinks that is a reasonable time frame. It should have closed a month earlier than that if they hadn't had that sort of shareholder reorg snag.
- 31.20: Jason Watt faced some complicated tax issues where his accountant helped him to resolve the issue.
- 32.59: The due diligence process is a two way as much as you should be, you know going through and providing a lot of information about your business, you should be learning about the business that's acquiring you, says Jason Watt.
3 Key Points:
- If the parents are deeply entrenched within the business operation or the value relative to cash flow is not something that's going to work out over a reasonable amount of time then you do have to consider a third party, says Jason.
- Working capital adjustment, shareholder loans and all similar things were things that Jason Watt wasn't as prepared to deal with because they were pretty good about sort of operational metrics.
- Deal with specialist lawyers and people who have been there and understand the process well before.
Tweetable Quotes:
- "When it came time to talk about their retirement meaningfully, we really had to look at a third-party acquirer." – Jason Watt
- "You wouldn't sign the letter of intent if you are not seriously intending to proceed." - Jason Watt
- "As long as you are earning income going forward at a reasonable level, you actually get that credit back." - Jason Pereira
Resources Mentioned:
Facebook – Jason Pereira's Facebook
LinkedIn – Jason Pereira's LinkedIn
Full Transcript
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