Lift Truck
Before You Sell Your Lift Truck Dealership
Engage other professionals that have experience in business sale transactions and especially the unique valuations of heavy equipment dealers. You may have a great outside accountant that has done your books for years. If he has not been involved in multiple business sales transactions, you should consider engaging a CPA firm that has the experience to advise you on important tax and accounting issues that can literally result in swings of hundreds of thousands of dollars. What are the tax implications of a stock purchase versus an asset purchase? A lower offer on a stock purchase may be far superior to a higher offer on an asset purchase after the impact of taxes on your realized proceeds. Is the accountant that does your books qualified to advise you on that issue? Would your accountant know the best way to allocate the purchase price on an asset sale between hard assets, good will, employment agreements and non-compete agreements? A deal attorney is very different from the attorney you engage for every day business law issues.
Remember, each element of deal structure that is favorable to the seller for tax or risk purposes is generally correspondingly unfavorable to the buyer, and vice versa. Therefore the experienced team for the buyer is under instructions to make an offer with the most favorable tax and reps and warranties consequences for their client. You need a professional team that can match the buyer's team's level of experience with deal structure, legal, and tax issues.
You need to be reasonable in your expectations on sales price and terms. The days of irrational exuberance are over. Strategic buyers, private equity groups, corporate buyers, and other buyers are either very smart or do not last very long as buyers. I hate rules of thumb, but generally there is a range of sales prices for similar businesses with similar growth profiles and similar financial performance.
That being said, however, there is still a range of selling prices. So, for example, let's say that the sales price for a business in the XYZ industry is a multiple of between 4 and 5.5 times EBITDA. Your objective and the objective of a good M&A advisor is to sell your business at the top end of the range under favorable terms. In order for you to sell your business outside of that range you must have a very compelling competitive advantage, collection of intellectual property, unusual growth prospects, or significant barriers to entry that would justify a premium purchase price.
If you think about the process of detailing your car before you offer it for sale, a good M&A advisor will assist you in that process for your business. Let's say, for example, that 4 to 5.5 multiple from above was the metric in your industry and you had an EBITDA for the last fiscal year of $2.5 million. Your gross transaction proceeds could range from $10 million to $13.75 million. A skilled M&A firm with a proven process can move you to the top of your industry's range. The impact of hitting the top of the sales price range vs. the bottom more than justifies the success fee you pay to your M&A professionals.
If your company has any issues like a pending legal action, under funded pension, ground water contamination, etc. get those issues out on the table early in the merger acquisition discussions. A seemingly insignificant minor negative revealed early in the process is an inconvenience, a hurdle, or a point to negotiate around. That same negative revealed during negotiations, or worse yet, during due diligence, becomes, at best, a catalyst for reexamining the validity of every piece of data to, at worse, a deal breaker. No contract in the world can cover every eventuality if there is not a fundamental meeting of the minds and a trust between the two parties.
Unless you are lucky enough to get an all cash offer without any reps and warranties, you are going to be partnered with your buyer for some period in the future. Buyers try to keep you on the hook with reps and warranties that last for a few years, employment contracts, or non-competes that last, escrow funds, seller notes, etc. These all serve a dual role to reduce the risk of future surprises. If future material surprises occur, buyers tend to be punitive in their resolution with the seller. Volunteer to reveal your company's warts early in the process. That will build trust and credibility and will ensure you get to keep all of the proceeds from your sale.
You should be flexible and open to creative deal structure. Everything is a negotiation. You may have in mind that you want a gross purchase price of $13 million and all cash at close. Maybe the market does not support both targets. You may be able to get creative in order to reach that purchase price target by agreeing to carry a seller note. If the sale process produces multiple bids and the best one is $11.3 million cash at close. You may counter with a 7-year seller balloon note at 8% for $3 million with $10 million cash at close. If the buyer is a solid company, that may be a superior outcome than your original target because the best interest return you can currently get on your investments is 4%. Be flexible, be creative, and use your team to negotiate the hard parts and preserve your relationship with the buyer.
You may have spent your life's work building your heavy equipment business to provide you the income, wealth creation, and legacy that you had planned and hoped for. You prepared and were competitive and tireless in your approach. You have one final act in your business. Make that your final business success. Exit on purpose and do it from a position of strength and receive the highest and best deal the market has to offer.
About the Author
Dave Kauppi is the editor of The Exit Strategist Newsletter, a Merger and Acquisition Advisor and Managing Partner of MidMarket Capital, providing business broker services to owners of middle market companies. The firm counsels clients in the areas of M&A, valuations, "Smart Equity Capital Raises", sales and acquisitions. Visit our Web site to review our lists of buyers and sellers.
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MOTORZ: Off Road Warehouse Truck Lift Install
Bush Views Fuel Cell Powered Lift Truck at Graftech
President George W. Bush viewed Wednesday a demonstration of a fuel cell powered lift truck while touring the GrafTech International Ltd. facility in Parma, Ohio.
GrafTech manufactures graphite material for the proton exchange membrane (PEM) fuel cell power unit created by Cellex Power Products Inc., a subsidiary of Plug Power Inc. The Cellex fuel cell system provides clean, reliable power for electric lift trucks made by Crown Equipment Corporation. Representatives from both companies participated in yesterday’s tour and lift truck demonstration.
GrafTech is one of the world's biggest manufacturers of high quality synthetic and natural graphite as well as carbon based products. The company manufactures graphite electrodes; products which are essential to the production of electric arc furnace steel.
GrafTech Chief Executive Officer Craig Shular has this to say: "It is an honor for GrafTech to host President Bush. Our team's collaboration with Cellex and Crown has been crucial in gaining support for the early adaptation of what we believe represents a significant growth opportunity in fuel cell power generation."
Crown, headquartered in New Bremen, Ohio, is a leading manufacturer of electric lift trucks in the United States and the fifth biggest lift truck maker in the world. The company’s award- winning line of lift trucks has etched a reputation for outstanding product design, engineering and manufacturing. From the smallest hand pallet truck to the highest lifting turret truck, Crown seeks to provide users with safe, efficient and ergonomic lift trucks that lower total cost of ownership and maximize uptime.
"As a technology leader in the lift truck industry, Crown is actively participating in and supporting the development of alternative fuels that provide power savings for our customers," said Crown President Jim Dicke, III. "Crown has been working closely with Cellex for many years to find the right balance of fuel cells, amount of fuel, weight requirements and other factors to give lift truck customers the performance they expect."
Fuel cells offer an ideal value proposition within the $1.5 billion motive power market to operators of large warehouses, manufacturing facilities, and distribution centers. With fleets consist of hundreds of lift trucks, these operations can benefit from centralized maintenance and fueling infrastructures.
The Cellex Power system offers value to purchasers via increased productivity and diminished fueling time and cost, as well as the eradication of environmental and safety issues linked to conventional lead acid batteries. Adoption in the lift truck market is expected to pave the way for development of other markets on the path toward a hydrogen economy and increased energy independence.
The fuel cell power system from Cellex Power was used to power a Crown model PE End-Controlled Rider Pallet Truck. The Cellex fuel cell contains a fuel cell stack supplied by Ballard Power Systems of Burnaby, British Columbia, Canada, which incorporates GrafTech's GRAFCELL(R) material as a primary component.
"President Bush's visit marked an excellent opportunity to showcase how fuel cells can be used as an environmentally friendly alternative to batteries for material handling needs in warehouses and distribution centers," said Chris Reid, Cellex Power's President. "Supply chain partners such as GrafTech and Crown are vital in building a strong foundation for the widespread application of fuel cell systems."
President Bush has graced several demonstrations of environment-friendly vehicles including the Chevrolet Volt and other flex-fuel vehicles. And the industry is absorbed in making it big. In the near future, auto shoppers could expect that Chevrolet Cavalier cargo carrier will cram a flex-fuel vehicle.
Plug Power, a leader in providing clean, reliable on-site energy products, recently purchased Cellex Power and General Hydrogen Corporation as part of its strategic business initiative.
About the Author
Anthony Fontanelle is a 35-year-old automotive.buff who grew up in the Windy City. He does freelance work for an automotive magazine when he is not busy customizing cars in his shop.