From NAPL's vantage point, more than 90% of printing industry mergers and acquisitions involve a continuing relationship between the buyer and seller.
The seller's ultimate realization of value is probably affected by future events controlled by the buyer. This could involve employment/consulting services, or landlord-tenant aspects, and there may be earn-out or royalty payments to collect.
My blog post dated December 15, 2010, discusses the importance of seller's due diligence into the buyer's financials and strategy. But even before actual due dilgence which takes place between the letter of intent or term sheet and the Closing, should a potential seller seek verification of a buyer's financial viability?
I believe a conversation on the topic of financials is appropriate even at a very early stage, although verification should await the due diligence process.
For example, the potential seller can fairly ask, "So, what are you seeing as to year over year comparisons? How did you do last year compared to this year?".
Another prompting question can go like this: "So, are you treading water like 95% of the industry?"
As to debt, here's one of my favorite ice-breakers: "We all know that this is a capital intensive industry. Are you guys heavily leveraged, just about right, or not carrying much debt?"
Remember, trust but verify. Trust via conversation early on; verify during due diligence before Closing.
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