Guest post by Keith Oringer
Over the many years of brokering transactions for sales in the security guard industry, there have been a few lessons that really stand out for sellers.
Do Not Be Fooled by the Buyer
Some buyers include the receivables in the purchase price. In reality, the receivables are owned by the seller and should not be included in the purchase price.
Guarantee Versus Earn-Out
The seller should prefer a guaranteed process of the account after close of a period of normally 6-12 months, whereas earn outs are contingent on hitting targets between a floor and ceiling of revenue. If a buyer makes the parameters difficult to reach, it will significantly affect the purchase price.
A Broker Who Knows and Worked the Security Guard Industry Should be the Intermediary for Negotiation
The broker acts as a buffer between the buyer and you, which benefits the seller in terms of achieving the best possible value for the seller. If the seller negotiates on their own, they are at a disadvantage which usually results in a lower purchase price.
Opportunity to Replace Lost Business and the Opportunity to Increase Purchase Price
This provision should be included in the purchase agreement. Sellers Need to Recognize When They Reach the Glass Ceiling
Sellers should understand if their sales have been flat or decreased over the last several years and realize it might be time to exit.
Types of Accounts Effect Company Value
- Commercial work preferred versus government
- Unarmed preferred over armed
- Non-union preferred over union
Holdback Calculation
Holdback calculation should be based on revenue instead of EBITDA. A revenue benchmark is a lot cleaner to figure out than EBITDA. EBITDA can be defined differently by the buyer and seller, resulting in disagreements.
About Security ProAdvisors and Keith Oringer
Founded in 2015 by Keith Oringer, Security ProAdvisors offers advisory, consulting, and brokerage services to the security guard industry and has an extensive network of former chief financial officers, controllers, and operating executives all of whom have worked in the security guard industry.
Keith is a security executive with 27 years of experience with extensive experience in the acquisition of companies and valuation. He was the third employee of a national company and was instrumental in building the company over 20 years to over a billion dollars and 46,000 employees and the president of a $100 million business unit. Keith holds both a CPA and MBA in finance.
For more information on Keith Oringer and Security ProAdvisors and to see recent transactions, please visit our website at www.securityproadvisors.com
