I have had an initial conversation with a pair of gym owners. They are 50/50 partners in ownership. The older one (early 60s) would like to retire, while the younger one (early 50s) is a little less sure about selling the business although she is definitely burned out after 25 years of ownership. They have not engaged a broker and have not set themselves up for a proper sale at this point. I would love to hear some stories or advice that people may have around:
1 - Buying from partners that are not necessarily aligned
2 - Getting the owners comfortable with appropriate valuations
Business Valuation
by a searcher from University of California, Berkeley
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1) Impossible to take out one partner from 50/50 ownership.
2) Even when owners are aligned, and value is agreed, you will have financing headaches, reps and warranty issues and governance issues.
Regarding valuation, again, as the buyer, you will not be trusted with your advice. They need to hire their own business valuation expert/business broker to help them understand what a likely value/price might be. Even then, it may be tough for that valuator/broker to help them reach agreement and understanding.
Regarding having your banker order the valuation, it has been my experience that those valuators hired by lenders are not necessarily going to do a thorough analysis because they typically just verify or dispute the value described in the purchase agreement. I've had several situations where the calculations performed by the lender's third-party valuators were incorrect and didn't follow proper valuation theory. Because I am a certified business valuator/appraiser, the lender listened to my argument regarding the appraisal reports. In fact, two banks that I worked with later terminated their relationship with this particular nationwide valuation company because of its calculation errors and unwillingness to fix them..