May Is A Corporate Matchmaker -- Arranging To Buy Businesses Is a Business
(News Item #0255, Published: 03/03/92, Author: Tim Healy, Seattle Times Newspaper)
Love doesn’t play a role in his matches. But compatibility, attraction and financial fitness do. May brings together buyers and sellers of businesses.
Many of those who come to him are dreamers - in love with the idea of owning a business, but not ready to make the commitment.
"It takes a lot of guts to buy your own business," said May. "A lot of people have the ability - but they fail on guts."
May, founder and president of Stonemark Inc., says one of his clients recently admitted he would have backed out if May hadn’t been there to see the deal through.
And these were "solid, talented" businessmen, said May. "Anyone can get the jitters."
As corporate restructuring and a withering economy displaces many middle managers and upper-level executives, more people are considering their own businesses, said May.
That’s where Stonemark comes in. In recent years, Stonemark has seen several Weyerhaeuser executives looking for businesses to buy. More recently, bank executives from Seafirst and Security Pacific have expressed interest, said May.
"A lot of people are realizing there’s no such thing as a job for life," said May. "The only difference now between a guy in a big corporation and someone working for himself is that, the guy working for himself knows his position is unstable."
May said he’s likely to spend 500 hours and more working for a buyer seeking a business. He said he charges a commission of between 5 percent and 10 percent of the value of the deal, if it goes through. A $2 million business purchase could, therefore, result in a commission between $100,000 and $200,000.
David Price worked for Hewlett-Packard for four years and later for a mid-size stock brokerage. But the jobs didn’t suit him.
"I could have stayed forever if I wanted to," said Price of his brokerage job. "I was spending all my time cold-calling for clients. I thought I was going to be talking to people about investing, but that was a small part of it."
Price quit his last brokerage job in 1990 and went looking for a business to buy. He found one three months ago, but the interim period was tough.
"I was 36 years old, and my future was totally up in the air. It was easy for me to think I was a failure," said Price. "Looking back, I realize that the only thing I failed at was not listening to my intuition and getting out of a job I didn’t like sooner."
Price doesn’t want to identify his new business, which he says is a distributor of shelving, cabinets and work benches.
Cordell Berge, a Portland business broker who, like May, brings together business buyers and sellers, said there are many more potential buyers than there are viable businesses for sale today. Berge and May work in the mid-range size of businesses - from sales prices of $1 million to as high as $50 million. Both men work for both buyers and sellers.
"I’m seeing a lot of executives who were laid off because of reorganization or downsizing or whatever you want to call it," said Berge. "But most of them don’t have the resources they need to buy a business. Banks aren’t willing to lend as much as they used to."
May said deals that used to be financed 50 percent by banks, 25 percent by buyer equity and 25 percent by seller financing aren’t being made anymore. More commonly, May said, banks will come up with 25 percent, but the buyer and seller have to figure out how to make up the rest.
Cost has been a problem for one executive of a multinational oil company in Texas who has been looking for a business to buy in the Northwest. The executive, who asked not to be identified because he didn’t want his employer to know he’s planning to leave, has been looking for three years.
"The corporate culture is stifling. I have the security of a large corporation, but it’s a fur-lined bear trap. I’m constantly frustrated by the inability of the corporation to move quickly," he said.
His biggest problem in seeking a company to buy is that he hasn’t found one that’s affordable. Not surprisingly, he thinks sellers have unrealistic views on how much their businesses are worth.
"I refuse to get into a position where I’m highly leveraged. The patience - waiting for the right opportunity - is a hard thing to learn.
"At least the thought of buying a business isn’t terrifying, like it used to be. The first time I made an offer on a business I was tied in knots. Now I’ve come to grips with it. If only I could find the right business, I’d jump at
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