Positioning Your Company for a Sale

The economic downturn of recent years has brought focus to aviation business owners who are suddenly contemplating the sale of their FBO, flight school, aircraft maintenance, or other general aviation businesses. It is not uncommon to find that few have planned their exit strategy or how to best position the company for a sale. And, at a time when the average sales cycle for aviation businesses is in excess of 12 months, it is important to begin laying the groundwork well in advance of the decision to sell.

Understandably, over time, a business owner’s attention is focused on building the business, improving sales, managing cash flows, and serving the customer. All are critically important to the ongoing reputation and viability of the business. However, over the longer term, it is vital for any aviation business owner to devise a series of long- and short-term strategies to help position the company for a sale.

When it comes to positioning a company for sale, time is a valuable resource which must be used wisely. Over the years, our experience has shown that those business owners who’ve invested the time, and who’ve taken the steps necessary to ready their company for an eventual sale achieve far better results than those who haven’t.

Make no mistake; in a time when the average business sales cycle is lengthy, one’s ultimate goal is to enhance the company’s value and marketability to prospective buyers, and to get the best price in the shortest possible time.

Long-term strategy/handling critical issues

As one reflects on the process of selling their business, it is important to view one’s business and its operations from the buyers’ perspective. Consequently for the business owner who is planning for that future date, an important part of the “positioning” strategy includes identifying and dealing with future issues which could directly affect the business’ value and buyer interest.

Future issues may include the need to renew a lease agreement with the airport or landlord, a requirement to refurbish or construct a hangar or other facility, the need to acquire or upgrade additional certifications, maintaining employee training and certifications, or the renewal of key contracts with customers or distributors. Simply put, to properly position an aircraft maintenance business for sale in future years, any issue or relationship which may affect value, buyer interest, and the company’s future profitability must be addressed and remedied as soon as possible.

Consultants and experts in the sale of aviation businesses, frequently see circumstances where economic and personal issues suddenly arise which force an owner to pursue a sale immediately. This situation is generally a result of disagreements within partnerships, family issues, owner’s health or death, declining financial performance, or a sudden desire to retire.

In these situations, timing may play a key role and may diminish the owner’s capability to solve those outstanding, “future issues.” When unforeseen events occur, the impact on the value of the business is usually negative, because those outstanding issues which one had always planned on eventually solving are now left undone.

Given the above, one’s best long-term strategy is not to procrastinate. Even if the plan to sell is projected in three to five years, spend time now (once or twice yearly) to plan your exit strategy and solve problem areas. Work toward adding value and eliminating problem issues.

Is your business ready to sell now? The selling process

Spring is typically a busy time when many aviation business owners become re-focused toward improving their sales, pursuing customers, and developing opportunities for growth within their organizations. It is also during this time (from March to July) that many FBO and aviation business owners seriously entertain the idea of selling their businesses.

Once an owner has made the decision to sell, their attitude about how to approach the selling process is of critical importance. While some choose to take the path of least resistance, others accept that the process of selling their business must be approached in the same way as any other important project or task. This approach may have a significant impact on the selling process and can determine one’s success or failure in the effort to find qualified buyers and to facilitate the sale of their aviation business.

Though their reasons may vary, once the decision is made in the affirmative, an owner’s first step must be to determine whether or not the business is indeed, ready to sell.

Here are three of the most obvious ways that one can gauge their readiness to put the business on the market and begin the selling process.

Identify the base of potential buyers

To the aviation business owner who hasn’t experienced the process of selling their business, there is one undeniable fact: selling an aviation business (especially an aircraft maintenance operation) is not like selling real estate. Aircraft maintenance businesses are unique entities, with a limited base of qualified buyers, and the process of marketing, buyer screening, and presentation demands specific expertise and industry knowledge that the local real estate agent usually doesn’t have.

While FBO acquisition opportunities tend to attract a wide range of potential buyers (some qualified and some not), the buyer demographic for aircraft maintenance businesses is typically much narrower. Buyers are generally from within the industry and knowledgeable about processes, regulations, and the scope of services they’ll want to acquire and provide.

Knowing this, the business owner’s first step in the selling process is to honestly identify and determine who their base of potential buyers may be. These candidates may include the local FBO, an aircraft charter or flight school operator, competitors, senior maintenance employees or managers, or a larger regional maintenance operator.

Gather and organize key information

Once the potential buyer base is identified, the next step is to gather, organize, and develop a professional package that presents the company, its operations, financials, and other pertinent information. Whether this is accomplished “in-house” or by an outside consultant, the goal is to present the qualified buyer with information, data, and materials that portray the company in the best light possible. And, perhaps most important of all, the sales price of the business must be determined and included in the package before the first contact or exchange of information begins with any prospective buyers.

As one positions their aviation company for a sale, the type and quality of the information conveyed to the buyer will be the key to success in the selling process. Many owners make the disastrous mistake of thinking that the “financials” are all that buyers are interested in. In reality, nothing is further from the truth. Legitimate buyers want to know the details behind the financial picture. They’re interested in the how and why of the business’ success and they want to know where the future potential is. They’re interested in information about the company’s assets, facilities, FAA certifications, key personnel, airport and landlord relationships, owned aircraft, and validation of the customer base. All are essential to the buyers’ decision-making process.

Until the owner takes the time to ensure that the informational package being conveyed to the buyer accurately describes the scope of their aircraft maintenance business, they’re not ready to sell.

The final step: buyer-screening

One final key: During the selling process, confidentiality is usually a critical issue.

Before the business is ready to sell, the final step is to decide who will be involved in the selling process, and how those representatives will interact with prospects, screening, information exchanges, and followup. The absence of a buyer screening plan may risk the inadvertent release of information or disclosure about the potential sale to people who the owner may not want to know about the potential sale (airport personnel, key employees, bankers, customers, and others).

For those seeking additional information on positioning their aviation or maintenance business for sale, it may be best to consult an expert, who can provide assistance in both valuation as well as insight to potential buyers in the market. One such expert, Michael Dye is the president of Business Presentation Solutions LLC, a Denver-based company that owns and operates www.FBOsforSale.com and www.FBOConsultant.com, aviation-related web sites focused toward assisting aviation business owners and buyers with the marketing and sale of their aviation businesses. Dye was instrumental in the resourcing of this article. AMT

 

DeborahAnn Cavalcante leads Diversified Aviation Consulting (DAC) and along with her associates has firsthand experience in air carrier operations, private charter aircraft, general aviation operations, military/civilian interface, FBO management, maintenance repair station training, safety training, human factors training, and customer service training. For more information on DAC visit http://www.dac.aero.

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