FAQ

Sell-Side

What is EBITDA? Why is it important?


EBITDA stands for earnings before interest, taxes, depreciation, and amortization. EBITDA is used interchangeably with pre-tax operational cash flow. Normalizing EBITDA is the process of removing any non-recurring items and adjusting any items which are not recorded at fair market value. See our blog post for more info.




What is SDE? Why is it important?


SDE stands for seller’s discretionary earnings, also known as owner’s free cash flow, is the net income of a business before deducting the owner’s salary, non-recurring items, depreciation, amortization, taxes, and interest. It is primarily used with smaller owner-operated businesses. See our blog post for more info.




What is a VTB? Should I expect a VTB?


VTB stands for Vendor Take Back. It’s used when the seller of a business provides a portion of the purchase price as a loan to the purchaser. It usually takes the form of a promissory note with agreed upon repayment terms, interest rate, and sometimes security. See our blog post for more info.




Are there other ways to value a company besides EBITDA and SDE multiples?


Yes, there are many other approaches to determine a value of a company. Some businesses are valued at their asset value. Sometimes businesses are sold pre-revenue and in that situation are valued using expected future cash flow methods.




What is EV?


EV stands for enterprise value. It’s a measure of a business’s total value if an investor were to purchase 100% of the shares of the company, free of long-term debt. EV is widely considered by industry experts to be the most accurate representation of a company’s value. See our blog post for more info.




How do you find potential buyers for my business?


We meet with individuals and groups who are looking to acquire businesses on a regular basis. We gather as much information as we can with these prospective buyers, including but not limited to desired location, industries of interest, and size of investment. We will also conduct our own research to determine if there are any other prospective buyers outside of our buyer database.




When should I start the process of selling my business?


It’s never too early to have the initial conversation with a Confederation M&A advisor to ensure saleability and to maximize your return on the sale of your business. We suggest the initial conversation should be had at least two years before you plan to approach potential buyers.




Can you explain the confidential measures you take?


We go to great lengths to ensure confidentiality of our clients. We keep an updated database of qualified buyers who are required to sign non-disclosure agreements prior to viewing any information regarding a business which is for sale. Any documents involved in the sale of your business are stored on our secure, view only Confederation M&A data room, which adds comfort that your documents aren’t being duplicated and viewed by others.




What is the range of transactions that you work on?


We have worked on deals of all sizes throughout the years. From smaller, locally owned businesses to working with global leaders in the private equity industry.




Do you work on transactions outside of PEI and New Brunswick?


Yes, although most of our engagements are in the Atlantic Canada, we do have clients right across the country and internationally.




Do you provide legal and accounting guidance when selling my business?


No, we suggest that you work with your lawyer and/or accountant during the process. If you don’t have an accountant or lawyer, we can recommend a trusted accountant or a commercial lawyer.




Do you have a buyer that would be interested in my business?


We meet with qualified buyers are on a regular basis and keep an up-to-date buyer database. We also consider buyers that are outside of our database.




Have you sold a business in ________ industry?


The answer is more than likely yes. We have worked in a great array of industries, including manufacturing, community care, automotive, technology, agriculture and seafood are some of the industries which we’ve recently had much success.




Can you explain the tax consequences of selling a business?


Although we can provide an overview of the tax consequences of selling your business, we highly recommend you having a conversation with your tax accountant at least two years prior to approaching potential buyers of your business to be sure your business properly structured to maximize your after-tax proceeds.




What should I do to help make my business more saleable?


Normal hours, financial records, business as usual maintaining normal inventory levels, keep business clean and in good repair, remove any equipment not included in the sale, provide required info in a timely manner, be as accommodating as possible in setting appointments with buyers




Why do I hear that some deals fail when a buyer is found?


There are a number of reasons a deal may ‘go off the rails’ after a buyer is found. Sometimes issues arise during due diligence that may not have been fully explained or understood by the buyer when he/she first came to the table.




What are your fees?


Our fees vary depending on the enterprise value of the business. Feel free to reach out to a Confederation M&A advisor to learn more.





Buy-Side

What are the advantages to buy an existing business?


Buying an existing business generally means there are existing customers, supply chains, employees and a relatively predictable cash flow. In general, it is easier to obtain financing when buying an existing business.




Why should I engage Confederation M&A to approach a business?


Confederation M&A has developed a professional buy-side advisory process to help buyers grow their business portfolios.




How can Confederation M&A help locate and buy a business?


A Confederation M&A advisor will have a discussion with you to gather some information and narrow in on what type of business may be of interest to you. After you sign a non-disclosure agreement, we will introduce you to businesses which meet your criteria. If there is a specific business that you would like us to target on your behalf, we can discuss that scenario as well.




What type of info do you require in order to help someone buy a business?


It is helpful if you give some thought to the following questions:

  • what types of industries are of interest to you;
  • how much capital you have to invest in a business; and
  • what type of role you would want to play in the business.
It can take a conversation to help answer the above questions. If you’d like to explore purchasing an existing business, please give a Confederation M&A advisor a call to set up a confidential meeting.




How much capital do I need as a down payment for a business?


The necessary amount of a down payment will vary with each transaction. Some variables include the industry in which the business operates, the amount of assets and goodwill in the transaction and available cash flow. If you are looking for more information purchasing a business, please call a Confederation M&A Advisor for a confidential meeting.





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