Selling an industrial services or equipment business

The problem

Plenty of good businesses don’t sell for what they’re worth, or don’t sell at all. Buyers walk away when the books aren’t clean, the business depends too much on the owner, or one customer is too big a share of sales.

And the real estate can kill a deal late: a landlord who won’t consent to an assignment, a lease with too little term left, or a property question nobody looked at early. Here, a buyer will look hard at whether key customers and skilled staff will stay after you leave.

What I do about it

I start with a confidential look at the business and the real estate together, so the things that make buyers nervous get fixed before they ever see them. I know what active buyers are looking for, I help you get the business ready, and I handle the lease or property side, which is where a lot of sales get stuck.

Everything goes through Coldwell Banker Prestige Realty and is agreed in writing first.

Ready now or planning ahead, the first step is the same. See succession planning for what happens on the first call, realistic timing and what to gather.

What buyers in this space look for

• Repeat industrial customers and service agreements, as well as the big projects.
• Dealer or supplier agreements that can transfer to a new owner. Check the change-of-control terms.
• Skilled technicians and a service manager who can keep things running.
• Equipment and inventory that’s been looked after, with records.
• A shop or yard with the right zoning, power and loading.
• Owner-operated, steady profit. Size is a moving target, but many of the private equity and holding-company buyers I talk to look for businesses with about $1 million or more in yearly profit (EBITDA). Some look smaller, and individual buyers often do.

Why and when owners sell

Retirement, no successor in the family, or a business that has outgrown what one owner wants to carry. Some owners like the idea of selling to a buyer who will invest in new equipment or systems while keeping the team.

How a confidential sale works

1. A first conversation. Just us. What you have, what you want and when.
2. A quiet look at the business and the real estate. I can tell you what buyers are likely to like and where they’ll push.
3. Getting ready. Statements, the lease or property, a list of what’s included. Your accountant and lawyer come in early.
4. Approaching buyers carefully. A short, anonymous summary first. Details only after a confidentiality agreement, and only to buyers you’re comfortable with.
5. Offers and due diligence. Usually a letter of intent, then a closer look at the books, contracts, staff, equipment and the lease.
6. The lease or property. Landlord consent and a release, or the property terms if you own the building. This is where deals often stall, so I start on it early.
7. Closing and handover. Many owners stay on for a set period to help with the transition, if they want to.

Where the real estate fits

A good industrial shop is hard to find in Metro Vancouver, so the lease or the property often carries real value in the sale. If you own it, keeping the property and leasing it to the buyer can be an option.

If you lease, enough term and an assignment clause that works are a must. Any work I do on a sale is through Coldwell Banker Prestige Realty and agreed in writing first. Where the sale is shares only, with no real estate, I’ll say so up front and work with your lawyer and accountant on those parts.

Where everybody wins

You want a fair price, care for your staff and customers, and a clean exit. A buyer wants a well-run business they can trust, with a lease or property that supports it. A landlord wants a strong new tenant.

When the business is ready and the real estate is sorted early, all three can say yes.

Questions people ask

Do dealer agreements transfer when I sell my business?

Some do and some need the supplier’s approval. Many have change-of-control clauses. Read them early, since a lost dealer agreement can change the price.

What size of industrial services business do buyers want?

It varies. Many private equity and holding-company buyers look for about $1 million or more in yearly profit, while individual buyers often look smaller.