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FROM THE FOUNDER
B ecause there is so much interest in buying and selling AEC firms, I thought I would go into some typical questions I hear from buyers and sellers, and give our readers some answers to them. Exploring common questions – and their answers – from firm leaders about the buying and selling process. More on buying and selling companies
Let’s get right into it!
fan of profit-based earnouts and never have been for many reasons. Most importantly because they discourage integration and resource sharing between the acquired company and the acquiring company. The selling company won’t want to share its clients, projects, or people with the buyer because that could impact their earnout. Not good. And they frequently lead to disputes about corporate overhead allocations and more. That said, I do like commissions based on work coming from clients of the selling firm for a period of time after the deal closes. The work could be sold by either the selling company or the buying company, and done by either. It’s easy to account for it this way and does not discourage cooperation.
Mark Zweig
■ “If we want to buy another firm, what are some sources of financing?” Your first place to look for acquisition capital is always to the sellers to finance as much as possible of the deal. That will ensure that they are working to help you make the deal work out because their payment is dependent on it. But other sources of potential acquisition capital include the assets of the selling firm, namely their accounts receivable. The day the deal goes down, those are yours as the buyer ( IF they were included in the sale) – and you can borrow against them. Another source of financing is an SBA loan. They can have extended terms and don’t need to be refinanced every so often like a typical bank commercial note would have to be.
■ “Isn’t cultural compatibility the most important
■ “What do you think about earnouts?” I am not a
See MARK ZWEIG, page 6
THE ZWEIG LETTER APRIL 8, 2024, ISSUE 1532
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