Is selling out or passing on the business a possibility? Make a plan.

by Hal Mattern

With consolidations on the rise in the motorcoach industry through mergers and acquisitions, many operators are considering whether now might be a good time to sell their businesses.

Brad Lindsay

And when they do decide to sell and drive off into the sunset, operators basically have two choices, said Brad Lindsay, managing director of Corporate Finance Associates in Memphis: They can sell to their managers or family members, or they can sell to or partner with a third-party buyer, both of which require planning.

Or they could do nothing, which usually turns out badly.

“This is something we see a lot,” Lindsay said during the EXPO education session “Planning and Positioning Your Business for the Future – Creating an Asset that Can Be Sold, Acquired or Passed on Within Your Family.”

“An example would be when a husband passes and his wife unexpectedly is handed responsibility for the business,” he said. “That passes the liquidate-or-sell position to the family while they are mourning.”

Such a scenario inevitably results in the value of the company diminishing. “We’ve never seen this play out differently,” Lindsay said.

That’s why he recommended that operators who are thinking about selling conduct strategic planning to prepare for the sale. That includes developing a transition plan and determining the value of the company. There also are tax considerations.

Lindsay said there are pros and cons to selling your company to a manager or family member. On the positive side, if you have built a great company your manager should be able to step in and continue to run it well. If you sell to family members, they will be able to control the company’s future.

On the negative side, there is a good chance the buyers will need you to personally guarantee debt.

“Do you want to personally guarantee a million dollars in bank debt while someone else runs the company?” Lindsay said. “Does your manager have the cash and means to purchase it? How many managers (or family members) have a million dollars burning a hole in their pocket to pay a 25 percent down payment?”

He said another consideration is whether the buyers are comfortable with the challenges they will face, including insurance, the driver shortage, fleet purchases and maintaining a solid management team. He suggested that you take a month off now and then to see how they do running the company on their own.

Selling or partnering with a third party is another option that has been popular in the motorcoach industry. That could involve selling the company outright to another motorcoach operator or to private equity investors. Operators can agree to stay on with the company for a few years to help with the transition or keep a percentage of their ownership.

Lindsay said there currently is about $2.4 trillion invested in private equity that is looking to buy businesses, including motorcoach companies, and private equity investors often are willing to pay a premium.

“There is more capital chasing fewer deals,” he said.


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