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What is working capital? Working capital represents the short-term liquidity and financial health of a business. Positive working capital can indicate the business is well-managed and financially stable. Working capital is the money available to meet current, short-term obligations. It is calculated by subtracting short-term liabilities from short-term assets. Short liabilities include accounts payable, salaries, taxes, and other debts/accrued expenses. Short-term assets include cash, accounts receivable, and inventory that will be converted into cash within twelve months.

Oftentimes, sellers are taken by surprise when a buyer demands a specific amount of working capital to be included in the sale price of a business. In lower-middle-market valuations based off EBITDA multiples, working capital is included in the price. In main street business valuations based off SDE multiples, working capital is not included in the price. However, with a stumbling economy, more sophisticated lower-middle-market buyers are reaching down into main street businesses and applying their expectations to main street acquisitions. So, why would a buyer want to include working capital in the acquisition?

Here are seven reasons why a buyer may expect working capital to be included:

It is important to note the inclusion of working capital in the sale price should be clearly defined in the purchase agreement. Both parties should agree on the methodology for calculating the working capital amount, any adjustments, and the target working capital amount at the time of the sale. Proper due diligence is crucial to ensure the working capital included in the sale price accurately reflects the needs of the business and is fair to both parties.

Sources: Bank of America and Chat GPT

In light of the devastation from Hurricane Helene, we want to provide some information that may be helpful in providing assistance to businesses that have been affected by Hurricane Helene.

For 7(a) loans that are not sold on the secondary market, Lenders may:

For 7(a) loans that are sold on the secondary market:

Payment Deferment:

Any payment modifications, changes to the loan amount, interest rate changes, extensions of maturity, and deferments over 90 days (cumulative):

References for the above actions:

Please help us spread the message about SBA Disaster Assistance:

SBA is in the process of putting together a communication outreach for Hurricane Helene disaster survivors.

Meanwhile, please help us spread the word…

Please call 800-659-2955 (TTY 711) with questions. Once a business has applied for a loan, the applicant may ask questions through the My SBA Portal.

When considering new 7(a) loan applications:

Subordination of SBA Disaster loans:

For SBA Lenders requesting subordination of a lien securing an existing SBA COVID-EIDL or Disaster Loan:

Upcoming 7(a) Connect Quarterly Update on Oct. 8th:

Please join us on Tuesday, Oct. 8th at 3:00 Eastern using this link. We will have SBA subject matter experts on all of the above to discuss this and other information and to answer questions.

In the current market of business sales and acquisitions, private equity groups (PEGs) are some of the most active buyers of mid-market companies. They are placing a growing emphasis on what is commonly known as “industry roll-ups” – a strategic merging of multiple companies within the same market or vertical.

This has been a growing trend throughout the state since the beginning of this year and could present some big opportunities for Florida business owners looking to sell. At the same time, sellers need to be well informed about how roll-ups work, so they can properly protect themselves during the sale process.

Understanding Industry Roll-Ups

Industry roll-ups involve a buyer, often a private equity group or another financial entity, acquiring several companies within a specific industry, usually one approaching maturity. These acquired entities are then integrated or “rolled up” into a single overarching company.

According to Investopedia, private equity firms use roll-up mergers to streamline competition in crowded or fragmented markets and to combine companies with complementary capabilities into a comprehensive business entity.

Buyers like industry roll-ups because they help them achieve substantial, rapid growth and increase market presence in a relatively short period of time. Investors who acquire businesses with the roll-up method can consolidate back-office functions, allowing them to increase overall revenue without increasing overhead. This helps increase the per-company return on investment much more than if a business was purchased on its own.

Benefits of Industry Roll-Ups for Business Sellers

Selling a business as part of an industry roll-up can offer sellers advantages not typically found in conventional sales processes. The competitive dynamics of multiple PEGs pursuing roll-up strategies in the same industry can drive up the selling price due to heightened buyer interest. More buyers lead to increased leverage for the seller.

Even more importantly, roll-ups give sellers the opportunity to realize additional profits by opting to “roll equity” in the transaction. In a typical roll-up scenario, sellers receive a combination of cash and shares in the holding company in exchange for their ownership stakes in the acquired companies. This arrangement can potentially yield substantial returns in the long term.

To clarify the concept of rolling equity, here is an example. Instead of selling your company for 100% cash, you decide to receive 75% of the value in cash, then roll 25% of the value in the roll-up. Five years later, after more companies have been added to the roll-up, the combined company sells for a lot more money, and you, as one of the individual sellers, can cash out.

Considerations When Selling a Business

While industry roll-ups present enticing opportunities, sellers must exercise caution. Unlike conventional sales, where buyers typically drive the due diligence process, sellers must also scrutinize the buyer’s capability to execute successful acquisitions and ensure post-purchase earnings growth.

As a seller, it is important that you are comfortable with the buyer’s strategy and track record in executing roll-ups. Some key items to ask about include the buyer’s experience in the industry, their past roll-up endeavors, integration plans for acquired companies, and your continuing role within the new entity. Make sure you gain an understanding of how many deals the buyer has executed and the value those deals have created. With respect to the current roll-up, ask about the number of companies that are included and specifically which ones.

Navigating the complexities of industry roll-ups requires the involvement of a seasoned M&A professional, such as a business broker. A broker can navigate you through the intricacies and potential risks associated with roll-up transactions. Do not underscore the necessity of expert guidance in this type of transaction. If you are not an expert on roll-ups a small mistake can prove to be very costly. Choosing the right professional to guide you through the process can significantly improve the chances of a successful and lucrative transaction.

If you are considering the sale of your business in the near future, or even within the next few years, it’s important to understand what your options are, and what type of buyers your business may appeal to. Unless you’ve sold multiple companies, getting a holistic picture of the entire process can be overwhelming.

As I write this letter, I am sitting waiting for Hurricane Milton to descend upon Florida. Wherever it lands, we are going to have many BBF members that will be seriously affected. We have already had several BBF members that have had to deal with Hurricane Debby and Hurricane Helene already in 2024. I am keeping all our members in my prayers and hope everyone suffered minimal damage. Please reach out if there is anything we can do for you.

District election results are completed and congratulations to our District Leaders for 2025. They are as follows:

I am happy to announce your Board of Directors has negotiated and come to an agreement for BBF to continue to purchase for the next 3 years (through 2027) membership to IBBA for all active and current members of BBF. This is a great opportunity for all our members to take advantage of the fantastic educational opportunities IBBA has to offer along with all the free tools that are available. Please take advantage of all the good things that IBBA has to offer.

Embarking on a business deal is a complex journey that demands strategic planning, negotiation skills, and a shared commitment to success. After years of experience in business sales, I’ve been able to highlight the key attributes shared by successful deals that navigate the twists and turns of negotiations and ultimately reach the closing table.

Clear Communication

Successful deals are underpinned by clear and open communication, not only between brokers and their customers, but between brokers, and after due diligence is concluded, between buyers and sellers themselves. Both parties must articulate their expectations, concerns, and priorities transparently. Effective communication fosters understanding and trust, laying a strong foundation for the deal’s success.

Mutual Understanding of Value

Before reaching the closing table, both buyers and sellers must have a mutual understanding of the value of the business. This involves a realistic analysis of financials, assets, and market conditions. Aligning on value minimizes surprises and promotes a smoother negotiation process. It also keeps all parties invested in seeing the deal through when an inevitable bump in the road comes along during the process.

Thorough Due Diligence

Successful deals share the attribute of thorough due diligence. Buyers delve into the details of financials, contracts, and operations to gain a comprehensive understanding of the business. Sellers, in turn, provide transparent and detailed information to instill confidence in the buyer, in a timely manner. As a broker, I’ve found that monitoring the due diligence process and helping buyers and sellers keep track of all documents requested and received, aids the parties in a smoother due diligence process as well, which in turn, leads to clearing the due diligence contingency.

Flexibility and Adaptability

Flexibility is a hallmark of successful deals. Both buyers and sellers should be willing to adapt to changing circumstances, adjust expectations, and explore creative solutions when issues do arise. A flexible approach allows the parties to overcome challenges and find common ground. This attitude keeps deals moving forward toward the closing table.

Negotiation Expertise

Successful deals are marked by effective negotiation skills on both sides. Buyers and sellers who approach negotiations with a collaborative mindset, a willingness to compromise on non-essential points, and an understanding of each other’s needs contribute to a positive negotiating environment. Brokers or buyers/sellers who take a hard nose approach to negotiations most often never win in the long run. Their inflexibility cultivates mistrust and distance from the other side of the deal, which ultimately will not work in their favor.

Professional Guidance

Engaging professional advisors, such as business brokers, attorneys, and accountants, is a shared attribute of successful deals. These experts provide guidance, navigate legal complexities, and ensure that the deal gets done right. Their involvement adds a layer of professionalism and expertise.

Focus on Long-Term Vision

Both buyers and sellers with a focus on the long-term vision contribute to successful deals. Rather than fixating on immediate gains, parties prioritize the sustainable success of the business post-acquisition. This shared vision fosters collaboration and commitment throughout the deal process. In most cases, the seller wants their business to continue to thrive after the sale, and the buyer wants to be successful with their new business, so keeping everyone’s eyes on the prize is the key.

Resolution of Contingencies

Successful deals involve the resolution of contingencies in a timely and efficient manner. Buyers and sellers with their brokers need to work together to address any potential obstacles, whether related to financing, contracts, or other critical aspects. Proactively resolving contingencies prevents delays and builds confidence.

Trust and Relationship Building

Trust is a vital component of successful deals. Building a positive relationship between buyers and sellers enhances trust and fosters a collaborative atmosphere. Parties who prioritize relationship building are more likely to overcome challenges and work together towards a successful closing. Brokers are there to guide the deal and to provide a much-needed buffer during negotiations, but encouraging trust-building between the parties is important too.

Commitment to Win-Win Outcome

By far, the most successful deals are characterized by a commitment to a win-win outcome. Both buyers and sellers recognize that a mutually beneficial agreement, where both parties achieve their goals, is the ultimate marker of success. This collaborative mindset paves the way for a positive closing experience. As brokers, we should always strive to foster a win-win scenario, rather than purely focus on a one-sided deal, as those often go sideways.

In the realm of business deals, success is not solely defined by reaching the closing table but by the attributes that underpin the journey. Clear communication, mutual understanding, thorough due diligence, and a commitment to a win-win outcome are shared attributes that distinguish deals that stand the test of negotiations and ultimately reach a successful conclusion. As buyers and sellers navigate the complexities of deal-making, embracing these attributes enhances the likelihood of a positive and enduring business transaction.