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E-Folder - Cashing In Your Business?
Watch Out For The Financing
Its almost 9 PM and you've got just one more order to fill because you promised “Henry” you'd have his order ready for pick up first thing tomorrow, Henry's an old customer, a good friend and has a machine down and the part we
Its almost 9 PM and you've got just one more order to fill because you promised “Henry” you'd have his order ready for pick up first thing tomorrow, Henry's an old customer, a good friend and has a machine down and the part we
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
stock will have him up and going again. But the nagging thought comes back again . . . . “after 27 years I don't need this anymore, I'm gonna sell it!”
There are many different reasons why businesses are sold. But of all the reasons, the three most pop
There are many different reasons why businesses are sold. But of all the reasons, the three most pop
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
ular are retirement, burn out and major illness.
When you own a business and have fought the battle over the years, the time does come when you're ready to cash in the business and turn it over to someone else. You've built your dream, watched it grow an
When you own a business and have fought the battle over the years, the time does come when you're ready to cash in the business and turn it over to someone else. You've built your dream, watched it grow an
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
d it has taken good care of you. Finally you've talked to your family, your CPA and your attorney and decide to do it. You place your business on the market! About a year and a half later, after negotiating with two individual buyers and two corporation
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
s, you do the deal with “Pete,” the nice guy from Cincinnati. Pete seems to be a good person, has a nice family and the proper background for the business. You've structured the deal with a good down payment and have agreed to finance the balance with in
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
terest over a seven year period. Sweet deal, right? Well, maybe.
After working with hundreds of business owners over twenty plus years and hearing all their stories, one precaution comes shining through the excitement of a sale! If owner financing is g
After working with hundreds of business owners over twenty plus years and hearing all their stories, one precaution comes shining through the excitement of a sale! If owner financing is g
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
oing to be a part of the deal . . . be very careful! It might come back to sting you. Especially if you plan to retire after the sale.
Typical “Sell The Business Scenario”
Here's why. Take the case of an owner we'll call Jack Stokes. Jack had his tir
Typical “Sell The Business Scenario”
Here's why. Take the case of an owner we'll call Jack Stokes. Jack had his tir
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
e business for almost 30 years. He and his wife are in their 60's and both are in good health. They have two sons and a daughter that are grown and gone. The daughter teaches, the older son is an attorney in a nearby town and the younger son is finishin
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
g up his accounting degree. He wants to be a CPA with his own practice. None of his kids want anything to do with tires or the business. Selling tires isn't easy. The kids grew up in the business and their “big plan” was to go to school, get a degree a
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
nd go their own way. And so it is. But the business has been good for the Stokes. It paid for their house in town, their condo at the beach . . . and the note on the business real estate was paid off two years ago. So now with the business sold they ca
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
settle back, take it easy and enjoy their grandchildren.
A beautiful picture but let's look at reality. Jack's deal with Pete from Cincinnati is based on a 30% down payment and there could be some major problems down the road. Let's see why.
Details O
A beautiful picture but let's look at reality. Jack's deal with Pete from Cincinnati is based on a 30% down payment and there could be some major problems down the road. Let's see why.
Details O
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
f The Deal
After lengthy negotiating, the final price for the business was $380,000. The price included the building and land, shop and office equipment, all 4 vehicles and the complete inventory. Pete will provide a down payment of $125,000, leaving a
After lengthy negotiating, the final price for the business was $380,000. The price included the building and land, shop and office equipment, all 4 vehicles and the complete inventory. Pete will provide a down payment of $125,000, leaving a
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
balance to be financed (by owner Jack) over seven years at 10% interest. The owner was not looking for an “all cash” deal in view of tax implications. After calculating the finance balance of $255,000, the monthly payment for the new owner comes to $4,23
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
3. And that monthly payment doesn't seem that bad since tire sales and shop service have been steady and growing.
How Sellers Get Hurt
But . . . what if something goes amiss, say, 2 _ years into the payback period of the seller's loan? Like an economic
How Sellers Get Hurt
But . . . what if something goes amiss, say, 2 _ years into the payback period of the seller's loan? Like an economic
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
or regional downturn, or losing one or more of the business's name brand tire lines, or one or two key shop people? These are problems that can have a direct bearing on cash flow and the ability of the new owner to service the debt. And if after several
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
months of missing some or all of the loan payments and the loan goes into default, guess what? The original owner, Jack, may get the business back. And Jack most likely will not want it back for various reasons. Legally, the original owner will retain
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
title on the business and assets until the balance to be paid has been satisfied. But from the time the new owner took over, the inventory may be depleted, the shop equipment abused, some of the employees may have left and the bank account emptied. Who w
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
ould want it back!
When Owner Financing - Be Wary
So what is the admonition or lesson here? If you plan to provide the financing when selling your business, proceed with extreme caution. Before entering into any purchase or buy/sell agreement, its b
When Owner Financing - Be Wary
So what is the admonition or lesson here? If you plan to provide the financing when selling your business, proceed with extreme caution. Before entering into any purchase or buy/sell agreement, its b
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
est to break down the price of the business into several scenarios of down payment and the amount to be financed, so you can take an advance look at what the typical monthly payment may be for the new owner. As a general rule, the larger the down payment,
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
the lower the risk of downstream payment problems. And during the “high anxiety” period of ownership transfer, knowing the debt service risk has been fully considered and is hopefully minimal, is knowledge that can be of real comfort to the present owner
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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