The oil and gas industry saw some slowed growth recently, but according to IBIS World, those in the pipeline business can expect steady growth over the next five years. This growth, along with an annual revenue of $62.5 billion dollars, make it a great time to consider selling your oil and gas pipeline business. This may seem like a challenging process, but there are things you can do now to ensure you sell to the right buyer for the right price. Consider the following things you need to know when selling an oil and gas pipeline company.
After running a successful oil and gas company, you understand the value of working with industry leaders. The same philosophy holds true when selling a business. While some business owners prefer to take on the task of selling their business themselves, most know the value of working with an M&A professional. Unlike selling a home, a vehicle, or other property, the process to sell a business is both detailed and time consuming, with many moving parts along the way. Your business broker can manage all the details, from locating and vetting potential buyers to verifying funding and getting to the closing table, all while you continue to focus on what you do best, running your successful business.
As you know, the oil and gas industry is complex. When you are choosing a business broker, look for a company with experience in this unique industry. Your broker should have access to a network of potential buyers, suited for running an oil and gas pipeline business. Vetting potential buyers is an important part of the selling process, one that greatly increases the likelihood of making it to the closing table. In addition, verify that your broker has experience closing complex deals in the industry.
One of the most challenging aspects of selling a business is determining the best value for the business. For oil and gas companies, whose values are so closely tied to ever-changing economic factors, the task may be even harder. While there are many valuation formulas online, they may not take into account all the factors going into creating a valuation, including Master Service Agreements, customer concentrations, condition of equipment, Financial trending and West Texas Intermediate (WTI).
To come to the best valuation, one that both seller and buyer find fair, it is best to work with an experienced business broker with extensive Oil and gas business valuation experience. In the right economy, it isn’t uncommon for businesses in the oil and gas industry to receive multiple offers on the business, which may drive the price significantly higher. A broker with industry experience will also analyze the market and factor this possible scenario into the equation when determining the best valuation for your business.
Prospective buyers are usually cautious investors. Even the most committed buyer may walk away from the deal if they begin to notice too many red flags. Therefore, it is important for you to solve any potential problems long before you place your business for sale. One area of critical importance is financial records. Because the buyer’s future may rest on the financial state of the business, be prepared to offer your records in a neat and well-organized manner. Become acquainted with the day-to-day details of your financials, if you aren’t already, and meet with your accountant or CPA to be sure your records are as accurate as possible.
Once you are prepared to offer potential buyers organized and accurate financial records, begin to focus on any other potential red flags that may turn off future buyers. Evaluate your client concentrations, as these can be a major warning sign to some oil and gas buyers. Fill all vacant positions with highly qualified employees that intend to stay with the company once it changes hands. This provides your buyer with peace of mind, knowing that they can rely on a well-trained staff through the transition and beyond. When buyers feel confident about the future of the business, they are much less likely to get cold feet later in the sales process.
Business owners are often so focused on the sale of their business, they don’t take the time to prepare for what comes next. Often, in medium to large businesses, owners are asked to remain with the company for a period of time after the sale. It’s not uncommon to stay in the same role, or a similar role with slimmed-down responsibilities, for six months up to 3 years following a change in ownership. Be sure to create a transition plan with the new owner before you close the sale, so that you, your family, and the new owner know what to expect.
In addition, have a financial plan in place to manage the proceeds of the sale. Whether you plan to retire immediately or re-invest in another business, partner with a financial planner to best determine how to manage and protect your funds. It is also recommended to consult a tax lawyer to ensure the contributions from the sale and the transaction itself minimize tax implications. Consider the needs of your family, as well, whether you need to set aside money for your young children or your aging parents. While selling your business is a major life change, having a plan for the future is essential to making the most of this transition.
You’ve worked hard to grow a successful oil and gas pipeline company, so it’s understandable that you’d want the sales process to be as smooth as possible. Whether you plan to sell now or years from now, these tips will ensure you’ll sell to the right buyers for the best price. First, find a business broker with oil and gas industry experience. Together, you will determine the best valuation for the business and prepare for sale. Eliminate red flags before your buyers step through the door to have a simple sales process and a smooth transition. Don’t forget to prepare for your future, as well. Have a plan in place for the proceeds of the sale before you close the deal. Find an experienced business broker to start the sales process today.