C&D World: Business Sense

Buying or selling a business can be a trying experience, but practicing due diligence can help the process run smoothly, according to Tom Roberts, JR Capital Corp. and Innviron Engineers, who spoke at a session about mergers and acquisitions at the C&D World Exhibition & Conference held recently in San Antonio.

Roberts said that in a general sense, due diligence is assessing the benefits and liabilities of a proposed acquisition. This includes examining a company’s past, current operations and any benefits or liabilities the buyer or seller can expect in the predictable future.

Roberts said a first step to take in any acquisition is to clear up potential problems, including outstanding zoning issues, legislation or litigation, operational deficiencies or overdue payables.

During the process, both buyer and seller will be asking tough questions and seeking certain information that one or the other might not want to disclose. This can be damaging to the relationship between buyer and seller, according to Roberts. To maintain a good relationship, Roberts recommends both parties put their intentions in writing with official letters of intent. He also advised securing confidentiality agreements to protect the information disclosed between both parties during the course of negotiations.

A next step after establishing the ground rules of communication between buyer and seller is determining the value of the business for sale. Roberts said many factors weigh into the value of a business. He recommended getting a good appraisal of the company’s assets, including real machinery, property and saleable inventory. But a company’s value is not limited to its physical assets, Roberts said. Intellectual property, including basic patents, real estate, goodwill among customers and even wider factors such as local tipping fees and remaining landfill space can be counted toward a C&D company’s value. “Each of these things you can assign a value to,” said Roberts.

Research is critical, particularly for the buyer, Roberts said, adding that a smart buyer will even look offsite for pertinent information, including checking public records to supplement the information he receives from the company itself.

Diligent research pays in the end by helping the buyer or seller make the smartest decisions, making for a successful merger or acquisition in which the buyer and seller are still on friendly terms and financially satisfied.