Ownership Transition - Key Buyer Risks

Whether you are buying or selling a construction business, it is important to understand the perspectives of the other party.

D. Brown Management Profile Picture
Share

While different, buyers of a construction business have just as many risks as sellers. Each will tend to discount the risks of the other, impacting the ability to create the best deal. 

Succession: Key Ownership Transition Risks the Buyers Side.
  • The seller has deep knowledge about all operating dynamics of the business. The buyer must rely on very effective due diligence to truly understand what they are buying. A purchase by management will have the advantage of time with the company. An outside buyer will have the advantage of a structured process, but neither will have the clarity that the current seller has.  
  • True accuracy of the financials are hard to assess depending on the sophistication of the contractor.  Often there are related party balance sheet transactions and non-business expenses buried deeply within the financials that are hard for anyone, including external CPA auditors to identify.  
  • The team is truly what the buyer is purchasing. Getting to know the culture, team, and their capabilities is crucial but difficult for an outside buyer. 
  • Underlying risks that may come up years in the future are difficult to quantify, which is why many outside buyers do an asset purchase. 
  • The buyer has to be cautious when it comes to paying too much because they may not be able to cash flow the transaction or generate the returns they were projecting.  

Deeply understanding the risks for both parties is a great start to creating the foundation of a deal.


Ownership Transition - Key Buyer Risks
Continue building value in your business, yourself and your key team members with a good succession strategy....

Ownership Transition - Key Buyer Risks
Continue building value in your business, yourself and your key team members with a good succession strategy....

Pulling Knowledge
There are few things that will accelerate career and team development faster than improving learning capability. Some thought processes and habits that accelerate learning are:
Cash Flow Tip 17 - Cascading Reporting Systems
Developing rigorous weekly Operating Rhythms in your business will help everything run smoother just like they do at the project level.
Leaders Make Things Fun
Leaders are always looking for ways to make really challenging things fun. This stretches teams and builds the relationships that hold teams together in good times and bad.