Pest Management Professional, September 2012

2012 Merger guide Continued from page M5 PMP How do you decide the value of a company NC Thats the merger question Im asked more than any other Annual sales is only one of many factors helping determine a companys value Would you think that a company grossing 1 million annually and making a profit of 150000 is worth more than a company grossing 850000 annually and making 200000 annually Geographic area pricing structure percent of regularly recurring commercial and residential accounts brand reputation and customer retention history are just a few of the myriad factors contributing to a company valuation In the final analysis the EBITDA Earnings Before Interest Taxes Depreciation and Amortization formula can more accurately reflect a companys true value At the end of the day buyers care about what you care about quality of service professionalism of technicians and office staff profitability reputation of company brand power and sales growth PMP Can you briefly discuss the unique challenges a family business faces in a merger How do you make sure everyone is happy NC My advice is that while you own the company separate employment vs shareholder issues Its okay to treat all of your children equally in terms of share ownership but employment opportunities and salaries compensation should be rewarded based on performance and a meritocracy In terms of a sale my best advice is to be open honest and fair A family business is a business first and foremost If its not looked at and treated as such both the family and business will suffer PMP Merging cultures can be a challenge How can culture clashes be avoided so all involved parties can benefit the most from a merger NC The buyer should spend time getting to know the current culture of the operation being bought and respect how the business was run If the buyer wants to make changes it should diplomatically explain the rationale and try to bring the key people along by treating them with respect and honesty The seller should consider the purchasers reputation and past performance in terms of how the company has treated customers and employees in other acquisitions Leveraging optimal synergies requires joint planning and execution Involved parties must jointly plan their merger work and work their merger plan Goals should be set for what types and depth of sharing can be achieved and what duplicate costs can be eliminated A smart merger also involves assessing the strengths and weaknesses of all teammates on both sides to identify how best to organize the combined companies and who best fits in which roles The use of outside consultants and or facilitators can help keep this integration process objective and on track PMP What does a merger Dream Team look like NC Accountants are essential in advising you of the legal strategies to reduce your tax bite Your accountant might have provided exemplary service to you for many years might have gotten substantial tax refunds for you and has clear knowledge of your companys financial situation However accountants do not know the true value of your business and should not negotiate price and details for you Their function primarily should be advising you of the tax consequences and the wisest tax strategies to follow Your lawyer might have been invaluable in selling your home or getting you out of a legal jam and could even be a trusted relative but lawyers also do not know the true worth of your pest management business and should not negotiate price and basic terms The lawyers primary function should be to avoid hidden legal booby traps and to ascertain whether the pros and cons of the Asset Purchase Agreement and all other legal agreements concur with your understanding of the same instead of with the sellers understanding of the same An experienced consultant who specializes in buying or selling pest control companies and is in constant contact with potential purchasers working in tandem with the accountant and lawyer should result in an optimal resolution for the seller Leveraging optimal synergies requires joint planning and execution Involved parties must jointly plan their merger work and work their merger plan M8 September 2012 Pest Management Professional www mypmp net