Ep. 23 — The CEO’s M&A with Alan Schlotzhauer

Welcome to the "Show Me The Way" podcast with David Seitter

In this episode of “Show Me The Way,” Dave sits down with Alan Schlotzhauer, Managing Principal of 2717 Group, LLC, to discuss everything from the importance of assessing potential buyers with his curated list of 20 essential questions, to how businesses are valued, and how to determine the multiplier of your business.

Ep. 23 — The CEO’s M&A with Alan Schlotzhauer

On today’s show, Dave is joined by Alan Schlotzhauer, who assists individuals in the acquisition or sale of companies. Alan breaks down his experience into three key indicators to ensure you are performing your due diligence when looking to acquire or sell a business.

They start off the show by exploring Alan's background and his early business experiences. Though he is a Missouri boy, he graduated from Texas A&M with a degree in accounting. He started his career off in the corporate world and then shifted his focus to the construction industry.

Alan explains how he moved into the acquisition space and was the director of acquisitions for a small publicly traded company, where he had to learn the construction business model and what to look for in a company.

Qualifying Buyers and Preparing for Sale

Alan discusses the importance of taking a step back and assessing the situation before making a decision. Realizing that business owners can get offers all the time, he provides insight into his list of 20 questions to ask buyers to determine their legitimacy.

Dave and Alan also explore the potential for leverage deals returning and how to pre-qualify buyers. They stress the importance of not providing financial information to a potential buyer, unless a confidentiality or non-disclosure is signed.

Selling a Business Roller Coaster

Alan continues by discussing the importance of preparation when it comes to selling a business, and how that step cannot be overstated. He says that maintaining a business in a ready-to-sell state increases the likelihood that you will find a suitable deal, and be able to accept the offer.

He also stresses how essential understanding what is important to you, as well as the buyer's perspective, before signing an LOI. Assessing the situation and having your ducks in a row is key.

Alan adds that having an outside advisor can help smooth out the bumps along the way. The both note that even with an advisor, it is to be expected that the deal may die three times before it's closed.

Deal Breakers and Challenges

Dave and Alan then begin to explore deal-killing and price adjustment areas that can arise when selling a business. Alan runs through his three A's of financials - accuracy, acceptability, and audit - as well as the importance of having a strategy and understanding what is important to buyers.

Alan notes that poor financials, a lack of strategy, and an inability to articulate key points can all lead to a failed transaction, so it is important to be prepared.

Navigating Valuation of a Business

Dave and Alan dive into the unique challenges of merging and acquiring a business in today’s markets. Dave brings up how it can be difficult to plan for the family members who are on the payroll, after which, Alan shares his experience of dealing with a client who had to fire his wife.

Alan then discuss the law of unintended consequences and how banking issues, customer cancellations, lawsuits, and key employee departures can throw a deal off-course.

Finally, we explore the ‘reality gap’ between the owner’s view of a company and the buyer’s view of a company, and the importance of preparation when selling a business. This preparation, Alan notes, involves more than just asking your friend who is a business owner what multiple they received for their business, because every business is different.

Preparation and Strategy in M&A Transactions

This topic continues as Alan explains how buyers look at business multiples and the implied return buyers expect from a business. Dave then asks Alan his thoughts on the potential for a lack of money in the future due to the aging population.

Together they also look into the role of private equity in the current economic climate and the possibilities of ESOPs and offshore companies when it comes to doing transactions.

 

Dave wraps up his conversation with Alan Schlotzhauer on the topic of mergers and acquisitions by discussing the best ways to find his help. Alan provides us with his website, email, and phone number - (480) 800-4107 - so that listeners can easily contact him.

 

 

To reach out to Dave for advice or consultation, please visit www.davidseitter.com or email him at dseitter@spencerfane.com

 

Disclosure

This podcast is provided for educational purposes. It does not constitute legal advice and is not intended to establish an attorney-client relationship. The recommendations contained in this podcast are not necessarily appropriate for every individual or business. In determining the best course of action, business owners should consult with an attorney on their distinct circumstances.