V-AID Business Investment Advises T&A LE, Inc. on its sale.
Dallas – A local liquor store established for over 2 decades, known as Buckeye’s Liquor, is now under new ownership since November 4th, 2022. Acquired by a couple, this store occupies 3,000 SF of a stand-alone building that is packed to the brim with alcoholic beverages of various kinds located at 2580 Walnut Hill Ln., Dallas, TX 75229 has an enormous selection when it comes to your alcohol needs at a competitive cost.
Stephen Lee with V-AID Business Investment, as an exclusive agent for Buckeye’s Liquor, provided sell-side advisory services for LFC Liquors, Inc., provided sell-side advisory services for sellers from business valuation, marketing, negotiating the sale to transfer of business. V-AID Business Investment is a fully-fledged business brokerage and M&A advisory firm that assists business owner to sell their business for the maximum value while finding the right buyer who can continue to grow the business.
This business was originally established by the original owner in 1999 and was later acquired by the current owner in 2006. A majority of customers are middle-class Hispanic individuals from the surrounding area and some white-collar professionals from the surrounding commercial office buildings.
“A perfectly sized Liquor Store in a high-traffic area with decades of history. The new and proud owners of this establishment have huge plans to expand and improve the business to new heights not seen in the history of this Liquor Store.” said Stephen Lee, Senior Business Intermediary for V-AID Business Investment in Dallas.
About V-AID
Since 2001, V-AID Group, a team of resilient business brokers and M&A advisors in Dallas TX, has been specializing in selling small to mid-size businesses in the main street to the lower middle market. V-AID’s experienced team of experts has a proven strategy that will ensure strict confidentiality, a streamlined selling process, and the maximum value for the business. With deep expertise accumulated from hundreds of done deals, V-AID delivers superior results by providing clients with strategic planning and creative solutions tailored to each transaction. Combining V-AID’s proprietary database of buyer networks and industry-leading marketing, V-AID offers a proven selling method that has been the solution to a value-added exit for hundreds of business owners with a completion of 590 transactions totaling over 129 Million Dollars and continuing.
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How Working Capital Can Kill or Save A Deal
If you’re a successful business owner, you have a good understanding of working capital and a firm grasp of your company’s working capital. As such, you’ve strategically utilized your working capital to grow and expand your company over many years, and you’re now ready to initiate your exit strategy. During this phase, research and crunch many numbers from your financials to create a valuation. After multiple calculations, you’ve determined that the valuation for your company in the current market is $10 to $11 million. After giving some thought, you decide to list your company for $9 Million in hopes of a quicker exit, as you’ve just received news of being a grandparent. You think this deal will likely be quick and easy as you’re selling a very profitable company below market price. So how can working capital kill a deal such as this? First, we need to elaborate on working capital to ensure we’re on the same page.
Defining Working Capital
What exactly is working capital? Working capital can be described as the funds you need to operate your business on a day-to-day basis. Many people also define it in its simplest form as the company’s current assets minus its current liabilities. It’s important not to confuse the company’s total assets or liabilities and focus only on its current assets and liabilities. If you’re wondering what’s considered current assets and liabilities, you can think of the word current as one year or less. To be regarded as a current asset, it must be an asset that can be converted into cash within one year or less, such as accounts receivable, inventory, marketable securities, etc. Current liabilities will usually consist of short-term debt such as accounts payable, payroll taxes, credit cards, etc. All these assets and liabilities are derived from a company’s balance sheet. A balance sheet is a financial statement that lists the company’s assets, liabilities, and equities for the given date.
By looking at a company’s balance sheet, you can calculate its working capital by taking its current assets and subtracting its current liabilities. When there is an excess of current assets after deducting the current liabilities, the company’s working capital is positive, whereas if the current liabilities outweigh the current assets, the company’s working capital is negative.
Why Working Capital is Important
We mentioned needing working capital to operate a business on a day-to-day basis. Without working capital, businesses wouldn’t be able to pay their utility bills, employees, purchase inventory, etc. Working capital can also be used to measure a company’s operational efficiency and short-term financial health. A company could invest in expansion and growth if it has substantial positive working capital. It’s also important to note that just because a company’s working capital is negative, it doesn’t mean it is in financial trouble, as some industries’ working capital is negative in nature. The company’s working capital will typically depend on its industry. Some sectors, such as manufacturing, with longer production cycles, may require higher working capital as they don’t have the quick inventory turnover to generate cash on demand. Alternatively, retail companies that interact with thousands of customers daily can often raise short-term funds much faster and require lower working capital requirements.
Now that we’ve reviewed working capital let’s put it into perspective with an example of how it can kill a deal when it’s not applied correctly.
Example
Let’s refer to the beginning when you calculated your company’s valuation at $10 to $11 Million. Shortly after you list your company for $9 Million, you receive an offer for your company for the asking price of $9 Million, and both you and the Buyer sign an Asset Purchase Agreement. Everything seems to be moving smoothly; the Buyer’s been approved for the loan, the due diligence has been complete, and you’re just waiting on the closing date to sign the dotted line. Few days to closing, the buyer inquired about working capital requirements as so he could continue operations without any interruptions but was shocked to hear an amount of $2 Million. This moment was when the deal started to sour, as there wasn’t any language in the Asset Purchase Agreement about the inclusion of funds for working capital for the purchase price of $9 Million. As your company requires about $2 Million in working capital, you and the Buyer will now have to renegotiate the Asset Purchase Agreement and the possibility of the deal falling through. This situation is not favorable for you as the Seller since the Buyer has already gained much confidential information about your company, leaving you more vulnerable.
Miscalculations of Working Capital
While working capital plays a role as a financial measuring tool for businesses, it can play a prominent role in M&A transactions compared to Main Street. For small businesses or companies categorized in LMM (Lower-Middle-Market) and higher, calculating working capital can be much more different as the formula will be dictated by the asset or stock purchase agreements. In some M&A transactions, working capital may involve cash or debt in the working capital calculation, while other transactions may exclude certain assets or liabilities. These calculations impact the Seller on a spectrum that varies and will be determined within the Purchase Price or working capital section of the stock or asset purchase agreement. Once the working capital has been determined, a target date will be set, and the company’s operations before closing can drastically impact the funds a seller receives at closing. Let’s look at another example of how a deal can go sideways when working capital isn’t applied correctly.
Example 2
Let’s use the same example from Scenario 1, but we’ll include the language for working capital funds in the Asset Purchase Agreement. In this scenario, let’s say you are selling a building materials company for $9 Million, which includes $2 Million in working capital. You and the Buyer signed the Asset Purchase Agreement in October and agreed on a closing date set for January. However, your company’s been struggling to keep inventory in stock, and the cost of goods continues to rise due to recent global supply chain disruptions and decides to purchase extra inventory in the amount of $700,000 in December. At the time of closing, your company’s working capital is close to $3 Million due to the extra purchase of $700,000 in inventory, but as there was no language about excess working capital, $700,000 of your proceeds is in jeopardy. If the Asset Purchase Agreement had included the working capital language of an asset purchase agreement stating, “a purchase price of $9,000,000 minus the amount by which the Working Capital as of the Closing Date varies from the six-month trailing average of the Working Capital.” The calculation methodology used for the working capital will then be described in the asset purchase agreement, and a working capital target is set by a twelve-month average trailing the closing date. At closing, if the working capital exceeds the average monthly working capital balance for the twelve months before the closing, you would’ve walked away with more funds.
Get a Second Look
The examples are just a few ways a deal can go sideways during M&A transactions. For business owners, a well-planned utilization of working capital can help accelerate their exit strategy and increase the valuation and amount they receive at closing. Although working capital can be simple to calculate at its basic formula, applying it to a company can become very complex in M&A transactions. Having a professional M&A Advisor like V-AID Business Investment take a second look at your working capital can help you better plan your exit strategy.
About V-AID
Since 2001, V-AID Business Investment, a team of resilient business brokers and M&A advisors in Dallas, TX, has been specializing in selling small to mid-size businesses in the main street to the lower middle market. V-AID’s experienced team of experts has a proven strategy that will ensure strict confidentiality, a streamlined selling process, and the maximum value for the business. With deep expertise accumulated from hundreds of done deals, V-AID delivers superior results by providing clients with strategic planning and creative solutions tailored to each transaction. Combining V-AID’s proprietary database of buyer networks and industry-leading marketing, V-AID offers a proven selling method that has been the solution to a value-added exit for hundreds of business owners with a completion of 585 transactions totaling over 124 Million Dollars and continuing.
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Q4 2022 V-AID Newsletter
Articles in this new issue are Small Business Acquisition Prices Drop in Q3, Seller Confidence Dims as Inflation Compresses Margins; Small Business Owner Confidence Fades Amid Rising Costs and Recession Fears, Buyer Demand for Restaurants Up as Dining Out Increases. Other Retailers sees fewer deals.
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V-AID Business Investment Advises Trinity M, LLC on Sale of Sylvan Learning Baytown to Quila A&A, Inc.
Baytown – (October 31st, 2022) – V-AID Business Investment is pleased to announce the sale of Sylvan Learning Baytown to Quila A&A, Inc.
Moon Kim with V-AID Business Investment, as an exclusive agent for Sylvan Learning Baytown, provided sell-side advisory services for Trinity M, LLC., provided sell-side advisory services for sellers from business valuation, marketing, negotiating the sale to transfer of business. V-AID Business Investment is a fully-fledged business brokerage and M&A advisory firm that assists business owner to sell their business for the maximum value while finding the right buyer who can continue to grow the business.
Established in 2007, Sylvan Learning Baytown has helped many families and kids in the area with a diverse product offering such as supplemental tutoring in variety of subjects, College Prep, SAT and ACT Prep, STEM (Science Technology Engineering Math) with customized programs that are unique to each student that helps students learn up to three times faster compared to in school.
Like many small business owners, Trinity M, LLC. has had their fair share of ups and down over the course of owning Sylvan Learning in Baytown. During the 15 years of ownership, Trinity M, LLC was awarded the Sylvan Honor Roll six times which is only given to 10 or less Sylvan franchisees per year. Trinity M, LLC. was also relied on by Sylvan corporate to be part of several pilot programs and major initiatives. The biggest challenges Trinity M, LLC faced were from natural disasters such as hurricane Ike in 2008, hurricane Harvey in 2017, and the Covid 19 pandemic. With every challenge the business faced, Trinity M, LLC. was able to overcome such downturns with their resiliency and strategic efforts with the help from the community. Sylvan Learning Baytown currently has contracts with many school districts in the region and is part of the Texas AIM initiative which provides services to at risk students in a partnership with the Boys and Girls Club.
Moon Kim, Managing Director of V-AID Investment, commented, “Sylvan is one of the leading brands in the tutoring industry. They have helped many children and their families worldwide as our children had to adapt to distance learning during the Covid-19 pandemic. The sellers in this transaction are a shining example of how planning your exit with the help of a business broker and M&A Advisor like V-AID Business Investment can truly maximize the sale price of one’s business. When the owners initially decided to put the business on the market 4 years ago, it was valued at one-fourth of what it sold for. When Covid 19 hit, the owners decided to double down in marketing and increase their market share even with a slowdown in revenue. As a result, they were able to grow their revenue over triple-digit percentage points and increase the valuation of their business by 4 times the original amount. The selling price was achievable by planning ahead with an exit strategy and great teamwork from the V-AID team and the sellers.”
About Sylvan
Founded in 1979, Sylvan Learning is one of the leaders in the exam preparation and academic tutoring services. With its proprietary Sylvan Method™, customized learning for each student, and guaranteed results, Sylvan Learning has over 750 locations worldwide and is one of the highest recognizable brands in the USA.
For more information about Sylvan Learning, please visit https://www.sylvanlearning.com/
About V-AID
Since 2001, V-AID Group, a team of resilient business brokers and M&A advisors in Dallas TX, has been specializing in selling small to mid-size businesses in the main street to the lower middle market. V-AID’s experienced team of experts has a proven strategy that will ensure strict confidentiality, a streamlined selling process, and the maximum value for the business. With deep expertise accumulated from hundreds of done deals, V-AID delivers superior results by providing clients with strategic planning and creative solutions tailored to each transaction. Combining V-AID’s proprietary database of buyer networks and industry-leading marketing, V-AID offers a proven selling method that has been the solution to a value-added exit for hundreds of business owners with a completion of 585 transactions totaling over 124 Million Dollars and continuing.
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V-AID Business Investment Advises Savory Recipe, LLC. on the sale of O I Shii Sushi & Japanese Steakhouse to Oishii Steakhouse and Sushi Inc.
Fort Worth – A local restaurant that’s been established for over 25 years known as O I Shii Sushi & Japanese Steakhouse is now under new ownership since October 31st, 2022. Acquired by Oishii Steakhouse and Sushi Inc, this restaurant is located in a 3,200 SF of a retail strip center at 6302 Lake Worth Blvd #6302 B, Fort Worth, Texas 76135, and will continue to provide patrons with its quality food and fiery shows at the hibachi table.
Moon Kim with V-AID Business Investment, as an exclusive agent for O I Shii Sushi & Japanese Steakhouse, provided sell-side advisory services for Savory Recipe, LLC., provided sell-side advisory services for sellers from business valuation, marketing, negotiating the sale to transfer of business. V-AID Business Investment is a fully-fledged business brokerage and M&A advisory firm that assists business owner to sell their business for the maximum value while finding the right buyer who can continue to grow the business.
O I Shii Sushi & Japanese Steakhouse was established by the seller in 1997, when it was converted from a Chinese restaurant into a full-service Japanese Sushi and Hibachi Restaurant. The restaurant currently provides a wide selection of hibachi, kitchen, and sushi menu items such as tempura, bento boxes, fried rice, sushi rolls, fresh sashimi, and much more. Patrons can also sit at one of the hibachi tables, where a professional hibachi chef will cook your meals right in front of you while providing entertainment with their culinary skills and friendly conversations. Many customers are locals of Fort Worth and the surrounding areas that have dined at the establishment for many years for their date night or a casual family outing. The quality and abundance of food at competitive prices has kept this business prospering even through Covid.
“This Japanese restaurant has been providing the locals of Lake Worth and Fort Worth with quality food at competitive prices that have kept it in business and prospering for over 25 years. I am humbled to have been a part of this transaction with my services and look forward to how the buyer, a young entrepreneur with a solid business plan to utilize current marketing trends and increase operational efficiency as an energetic operator, will continue to grow the business. The groundwork laid out by the seller for the last 25 years will be a strong foundation for the buyer to build on, as the seller passes on the torch knowing the business will be in good hands,” said Moon Kim, Managing Director of V-AID Business Investment in Dallas.
About V-AID
Since 2001, V-AID Group, a team of resilient business brokers and M&A advisors in Dallas TX, has been specializing in selling small to mid-size businesses in the main street to the lower middle market. V-AID’s experienced team of experts has a proven strategy that will ensure strict confidentiality, a streamlined selling process, and the maximum value for the business. With deep expertise accumulated from hundreds of done deals, V-AID delivers superior results by providing clients with strategic planning and creative solutions tailored to each transaction. Combining V-AID’s proprietary database of buyer networks and industry-leading marketing, V-AID offers a proven selling method that has been the solution to a value-added exit for hundreds of business owners with a completion of 585 transactions totaling over 124 Million Dollars and continuing.
Read More