Prospective buyers typically want to see three years of financial results for a potential acquisition, but in many cases, sales cratered in the first year of the COVID-19 pandemic.
Not to worry, Mark Radosevich, president of advisory firm PetroActive Real Estate Services, told members of the Roady's brand network of independent truckstop operators in a recent presentation.
Radosevich said buyers realize 2020 could be an anomaly, and they’re willing to evaluate businesses based on the results for 2019 and the end of 2021.
More tips to help evaluate your business in the current market:
Get an unbiased assessment. There are reports of EBITDA multiples of 10x or higher but that's only paid by the larger, well-funded companies for the high-volume, most profitable sites in the best locations. The market dictates the price. “A 6x multiple is reasonable for average stores,” he said.
Consider the after-tax transaction price. Taxes could rise under the Biden administration and substantially reduce sale proceeds. Many marketers set their companies up as c-corps, which have more severe tax consequences than s-corps or limited liability corporations. Also, consider selling only the business and leasing the real estate to the buyer. Then you avoid the tax impact on the real estate.
Beware of ultra-high bidders. There are unethical firms trying to entice sellers with initially high offers. If six buyers will pay a 6x EBITDA multiple and one prospective buyer offers 10x, the high could be a re-trade in which the price is whittled down over the sale process. The other half-dozen buyers represent the market price. “Ideally, the final price should match the letter of intent if the original data was accurate and nothing comes up in due diligence,” Radosevich said. “The goal is to have the deal close at the offer amount.”
Donna Harris - Senior Editor, Oil Express
Possessing over thirty five years of downstream petroleum experience, Mark Radosevich is a strong industry advocate. He is president of PetroActive Real Estate Services, LLC, offering confidential mergers & acquisition representation and financing services exclusively to petroleum wholesalers. He can be reached by email at mark@petroactive.net and by phone at 423-442-1327.