Multi-Unit Franchisee Magazine Issue IV, 2016 | Page 73

go to the supermarket without knowing how they planned on paying . Not everyone applies this logic when they seek restaurant acquisitions . Buyers should establish strong relationships with various financing sources before they even begin looking at buy-side opportunities , so when the right deal comes around they aren ’ t scrambling to secure the acquisition capital . Further , a bid that details the buyer ’ s proposed debt / equity structure , with a signed commitment from a capital provider , is substantially more compelling to a seller than a bid lacking these things . Do have financing options in place . Don ’ t wait for a sell-side advisor to tell you your bid was interesting , but their client chose the buyer with more certainty around funding .

• Know the franchisor . Whether you are an existing franchisee or not , it is vital to know the franchisor you will be dealing with . What is their current growth strategy ? What kind of franchisee do they prefer ? Are they trying to bring new blood into the system or bulk up the operating platforms of existing franchisees ? This last question is crucial , especially if you are looking to enter a new brand . Before pursuing a specific opportunity , meet with the franchisor to discuss their approval process and present your operating plan and team . Transactions move far more easily and quickly when a buyer is preapproved and in good standing with the franchisor . Do establish this relationship early . Don ’ t wait until the bid process is complete to learn that the franchisor doesn ’ t view you as a viable buyer .

• Be aggressive . In today ’ s market , restaurant acquisitions are highly attractive , making for an exceedingly competitive environment . Buyers must be aggressive . This is especially true when the transaction is the buyer ’ s initial investment in a brand . Existing franchisees may have built-in advantages ( e . g ., predicted synergies that allow them to make a higher bid , and / or having strong ties with the franchisor ). New entrants be wary : you may have to pay a premium to tip that first deal in your favor . Buyers must always be prepared to move quickly as delays often cause sellers to become discouraged or reexamine the sale . Another way to anger a seller and potentially lose a deal is to delay the purchase process in

an attempt to re-trade at a lower price . If you ’ re actively looking to buy and you come across the right deal , do pursue it aggressively . Don ’ t dawdle and miss your opportunity .

Do ’ s and don ’ ts for all

• Have proper advisors . Whether buyer or seller , engaging experienced , industry-specific investment advisors and transaction-specific legal and tax counsel is paramount to your success . Acquisitions and divestitures alike have many moving pieces that can seem overwhelming without proper counsel . To achieve the utmost success , enlist the help of people who know how to plan , position , and execute transactions to your benefit . The resources required to navigate the intricacies of a multi-unit restaurant transaction are considerable . Do hire professionals with proven insight and transaction expertise in the industry ’ s inner workings . Don ’ t rely solely on your everyday business advisors or attorneys .

• Be realistic . This is possibly the most important concept in successfully completing a transaction . Both sides must be realistic about their expectations . If a seller is stuck on an unrealistically high purchase price or multiple , finding the right buyer will be a far greater challenge . On the flip side , it isn ’ t realistic for a buyer to propose a purchase price based on a 2009 transaction multiple . The most realistic thing for both parties is to recognize that every transaction is a constantly moving , two-way street . If you want a deal to be successful , the negotiated terms must be satisfactory to everyone involved . Do view transactions in an objective and realistic manner . Don ’ t rely on subjective inclinations or conjecture .

Dean Zuccarello is CEO and founder of The Cypress Group , a privately owned investment bank and advisory services firm focused exclusively on the multi-unit and franchise business for 25 years . He has more than 35 years of financial and transactional experience in mergers , acquisitions , divestitures , strategic planning , and financing in the restaurant industry . Contact him at 303-680-4141 or dzuccarello @ cypressgroup . biz .

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