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Unbridled Capital

Financial Benefits for Hiring an Advisor

Video

01.27.2020

I'm often asked about what financial value Unbridled Capital brings to a client in the sale of their business. Now each circumstance is different, but let me give you an example.

Let's say you're a franchisee who wants to sell a business worth $20 million. First and foremost, a good advisor should likely be able to bring you 10 to 15% in a higher sales price than what you could do on your own, even if you already know the neighboring franchisees and are comfortable in negotiating with them directly. A good advisor spends their entire livelihood negotiating deals for clients, is unemotional, understands the key leverage points, and should know how a buyer will finance your business, resulting in negotiating that is based on hard facts, not just what someone wants to pay.

More importantly, the advisor should have a network of outside buyers to help increase the price. We live in an incredibly connected world, but technology has made us much less relational, I believe, than we have ever been. Overall, any individual franchisee just no longer knows the entire universe of buyers for their business. In our example, a potential 10 to 15% higher price yields 2 million to 3 million in extra value.

A good advisor will spend weeks getting to know your business and carefully reviewing its details. They won't uncover every question mark, but their careful eye and command of your business before releasing it for sale, should result in more solid offers upfront and maybe three to 4% in lower re-trading costs and renegotiating risk during due diligence, after a buyer is chosen. This could be worth 600,000 to $800,000.

A good advisor should be able to shorten the process of closing the transaction. Remember, that time is money. On the $20 million transaction, with net proceeds of $10 million, money invested at seven to 8% return over an extra 90 to 120 day period is worth around $200,000. Quicker closings create more opportunities to earn money elsewhere.

At Unbridled, we do have an in-house attorney but we do not represent our clients from a legal perspective. However, we associate with several law firms that have done dozens of transactions with us. Most of our clients hire one of these firms instead of using their local attorneys. Our experience in association with them could likely result in a much better outcome from a contingent liability perspective. This could be worth a hundred to $200,000 in extra value, when considering the present value likelihood of a higher post-closing liability claim. This doesn't account for the likely lower legal bill as well.

Finally, what is your time worth? A typical M&A transaction could take 300 hours of your time to complete. A good advisor will help mitigate your time investment so that you can continue to run your business profitably. If your advisor could save half of this time, what would it be worth to you, your family and your business results? And if you did it alone, your attorney and CPA bill would likely be much higher than if you had an advisor to manage the process. This could be worth a hundred to $200,000 or more. Collectively, the financial value of hiring an advisor could be 3 million to $4.4 million in this example, which is between 15 to 22% of the sales price.

Now, clearly I'm not an unbiased party, but to me, this financial value is well worth several percentage points of a fee. As a matter of fact, this type of return on investment, if achieved, would be one of the best financial investments any franchisee could make.

Thank you for spending time with us and please feel free to reach out any time. At Unbridled, we are happy to give you a dozen references, who can attest to the value we bring to a sell side transaction. We're very proud of our industry disrupting two year success rate, of closing almost 93% of our engagements.

Feel free to check out Unbridled Capital's website at www.unbridledcapital.com for more videos, podcasts, white papers, and a list of our transactions.