1st meeting about buying another company

Discussion in 'Pesticide & Herbicide Application' started by grassmasterswilson, Aug 1, 2012.

  1. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Messages: 4,945

    Ok so I went and met with the guy this morning. Didn't get much info that would be helpful in making an offer. He wants to get a confidentiality agreement in order to see his quickbooks and financials.

    He showed my a gross number and a lower number that was for reoccuring income. His price came up to 1.5 x reoccuring income - 15% customer loss = asking price. I thought this was very high. He also has increased his asking price since I met with him 6 months ago.

    So i'm getting a confidentiality agreement drawn up and I need a good list of what info you would like to see that would be helpful in seeing if an offer was possible. I was thinking of asking for the following....

    1. p & l the last 3 years
    2. detailed customer report last 3 years with sqft, what apps done, what price for each app(this could be the estimate form he uses which breaks down each app and gives a price)

    Think that would be a start to see if I could make any money. Anything else that would be good to see or ask for?
  2. ztman

    ztman LawnSite Bronze Member
    Messages: 1,093

    Reading your comments about dealing with this guy raises a few red flags and would make me want to be skeptical. If you want to proceed with a business transaction, do yourself a favor and get some professionals involved on your behalf. Spending a few hundred dollars now could save you thousands. Dont try to draft legal docs on your own.
  3. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Messages: 4,945

    Thanks. Fortunately my father is an attorney. I don't ever sign my name without him reading it first.

    While the asking price may be a little steep. I really can't tell without seeing his cash flow and other info. I was upfront after we talked that I wasn't about to make an offer without some details.

    I agree that I need to go into this very skeptical since he is really unwilling to show any info. I respect privacy, but the quickbooks p&l sheet doesn't show much. I at least thought I would get that. I get the feeling that he wants to sell, but like all of us is reluctant to just give it away. guess it will take baby steps....
  4. turf hokie

    turf hokie LawnSite Silver Member
    Messages: 2,751

    He is my 2 cents.

    I wouldnt get my hopes up on making a deal with this guy.

    His starting point is WAY too high and this really wasnt your first meeting, so there should have been a little more information given. And add on the fact that his price went up at the end of the season is the exact opposite of where it should have gone.

    Look, we are all proud of what we built, I get it, but there is a reality of what our companies are worth...

    I know of a few companies that were making top dollar that went for 1-1.25x yearly gross or 3x net, they should be around the same roughly..... and that is for everything, customers, biz name and equipment....

    I am in the middle of negotiating a deal, we both agreed in the spring we were too far apart on the dollars, so we agreed to revisit it in the fall. He is serious about getting out but wants a fair price, I am serious about buying but am serious about what i feel its worth, there is middle ground somewhere and I know we have a better shot this fall because he is willing to lower his price at the end of the season because I will be sitting on a business that I cant begin to recoup my money on right away. I am sure there will be some negotiating still to do....

    But that being said, our 1st meeting was just to get a feel for each other and see where he was with selling and price. 2nd meeting was for him to show me his books, I dont need addresses...yet, just numbers....3rd meeting was offer time....4th meeting was negotiate offer....5th meeting was negotiate offer and decide it was not going to work right now with an agreement to sit down after the season....

    you have not gotten anywhere yet which does not bode well......good luck, let us know how you do...
  5. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Messages: 1,783

    3x net? Wouldn't consider for less than 5x EBITDA plus a value for our trademarks and IP
    Posted via Mobile Device
  6. turf hokie

    turf hokie LawnSite Silver Member
    Messages: 2,751

    wouldnt 5x put you into this particular sellers 1.5x reoccurring revenue asking price?
  7. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Messages: 4,945

    Is $1.00-1.25 per yearly gross revenue dollar on the app side in line?

    He also has some mowing, pruning, and mulching jobs. I was thinking about $0.30-0.40 per revenue dollar for reoccurring jobs.
    Posted via Mobile Device
  8. cwc257

    cwc257 LawnSite Member
    Messages: 24

  9. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Messages: 4,945

    saw the article and have gathered the same info in my research.

    I'm curious how long people have dragged out the payments? 6, 12, 18 months??

    The company i'm in talks with has been around for 20+ years but doesn't have a website, truck lettering, or direct mail. I do and making the deal would put me in a completely different market that I'm not in.

    So I'm trying to figure out what the cost of picking up 30ish account(if they all transfer) and the added fact of my truck and mailers being seen.

    I'm haveing a hard time grasping the potential of having to pay more than 1 years gross, but entering the market may allow my to pick up even more work.
  10. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Messages: 7,961

    The trick here is to make a down payment then pay based on the remaining client base at various intervals.

    Personally, I would rather just grow my business with the same amount of investment.

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