Episode 82: Preparing Your Property Management Co for Acquisition Ft Dylan McGrath
Feb 6, 2024
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Business acquisition expert Dylan McGrath joins host Bob Preston to discuss preparing a property management company for acquisition. They cover topics such as engaging a business broker, valuation models, due diligence, and structuring the sale. They also touch on the current state of company valuations and the steps involved in closing the sale.
Costs to engage a business broker in the sale of a property management business
Different valuation models for property management businesses
Importance of proper documentation and due diligence in the sale of a property management business
Deep dives
Overview of the Podcast Episode
This podcast episode discusses the process of selling a property management business. The host interviews Dylan McGrath, an experienced business sales advisor, who provides insights on preparing for a sale, negotiating with potential buyers, and navigating the steps involved in an acquisition. They highlight the importance of having a succession plan or exit strategy, as well as the need for a business to be able to run independently without relying solely on the owner's presence. The episode emphasizes the significance of proper documentation, due diligence, and structuring a deal that works for both the seller and buyer.
Marketing and Finding Buyers
The episode explores various methods to find potential buyers for a property management business. These include utilizing buyer databases, advertising to the general public through confidential marketing packages, and targeting strategic buyers who may be looking to expand their portfolios. The host and guest underline the importance of confidentiality and approval from the seller before sharing specific business information with potential buyers.
Due Diligence and Documentation
The podcast highlights the level of due diligence and documentation required when selling a property management business. It covers the exchange of financials, bank statements, insurance policies, client contracts, and other obligations. The importance of preparing a comprehensive marketing package which addresses common buyer questions is discussed. Additionally, the episode touches on the potential need for a buyer's legal representation, based on their level of experience and complexity of the deal.
Deal Structure and Financing
The episode provides insights into structuring a deal for the sale of a property management business. It outlines the options available, including upfront payment, deferred payment, and the possibility of the seller carrying a note. The importance of matching a motivated seller with a motivated buyer is emphasized, as well as the need to establish trust and confidence between the parties. The role of non-compete agreements and the protection of the buyer's investment are briefly mentioned.
Key Considerations and Recommendations
The episode offers key considerations and recommendations for property management business owners considering a sale. It suggests that businesses should be able to run independently without heavy reliance on the owner's presence, and highlights the importance of early preparation for a sale. The episode advises business owners to seek professional advice and explore the possibility of selling within a three-year timeframe. It also suggests engaging with business sales advisors or brokers who can provide guidance and support throughout the sales process.
In this episode, host Bob Preston and guest Dylan McGrath discuss how to prepare a property management company for acquisition, what is involved in the process, and various valuation models. If you have ever wondered what it would be like to sell your business and what steps would be involved, this episode is a must-listen!
Takeaways:
Costs to engage a business broker
Models for valuing a property management business
Structuring of a property management business sale
Due diligence and information exchanged
Chapters: 00:00 Introduction and Dylan’s background 04:54 Getting started in selling a property management company? 08:42 Fees paid to a business broker 12:14 Due diligence process and information exchanged 16:23 Valuation models for property management companies 21:11 Structuring the purchase arrangement: asset sale vs. stock sale 25:58 The current state of company valuations 32:05 Steps involved in closing the sale 46:49 Clawback provisions in an agreement 49:20 Closing comments and how to connect with Dylan
Episode 82 Featured Sponsor: RentScale RentScale is the largest sales consulting and coaching company in the residential property management industry. Over 400 residential property management companies in North America have trusted RentScale to craft their custom sales playbook, install a repeatable selling system, and train their team to attract new property owners at profitable rates. (https://rentscale.com/)
