WIWO deals are no doubt the riskiest transactions in the market - for both sides of the deal. Which raises the question(s), why would anyone enter one? why and how do they arise? what do we do to complete? and how do you ever properly value a WIWO?
On the surface a WIWO deal seems simple but let’s at least be aware of the following:
Why would you?
Everything amortised long enough will even itself out… The attraction to these deals is the old Risk vs Reward and the reward can be enormous.
With terms favouring the brave.. why wouldn’t you?
Circumstances on the Vendors’ side
HEALTH: Minor injury, debilitating illness and the good old misadventure
TERMINAL DESTINATION: Death and Taxes, we work one side we eventually meet the other.
GOVERNMENT INSTITUTIONAL HOLIDAY: Yes, Accountants go here too – unfortunately
Circumstances on Purchasers’ side
Awareness of opportunity comes about from a Colleague, a Friend or even a Discussion Group – it’s a small industry and can lack anonymity. If a Broker is appointed, they will know the go to people for quick transaction ensuring anonymity and completion. The brokers normally know candidates that can handle this type of deal immediately.
Valuations
Expect to discount if you demand a WIWO as the vendor
Expect heavily reduced upfront, starting at say 25c in the dollar (maybe) – if incapacitated
Transactions can be formulated over multiple years to bring the price up towards market
Generally there are no clawbacks
Mindful Factors
Tougher terms are common due to lack of handover and fallout risk
Buyers do like theses types of deals; they have the freedom to drive it as they like
Family members and Coworkers of the vendor are generally nervous throughout the process
Beware of the external vulture and more importantly the internal vulture
Timing & Pace
Act now, act fast and with a sense of urgency as these types of transactions dissolve quickly – this goes or both sides.
External Advice
External guidance for both sides can help maintain your business and the new business generated and help you extract the diamonds in the rough whilst maintaining client satisfaction as the two are integrated. Integration focus of the following are imperative: Client, Staff, Culture, WIP, Debtors, Software
Don’t forget, charge out rates!
Let’s Talk Market, Let’s Talk Options – Discretion ensured
Magnus Yoshikawa 0408885944
– – – – – – – – – – – – – – – – – – – – –
By the way, if you can help us… we are seeking:
Vendors wishing to / pondering a phase out in the next 2~5 years
Vendors with REVENUE between 500k and 10m+
Merger Candidates with REVENUE between 3m and 10m+
