Oil & Gas: Positioning For Sale

Allyson Baumeister - 05/10/2009

 

Q: What are some good preparatory steps to position a company that works in the oil and gas industry for eventual sale?

A: Every owner and/or CEO should be prepared for the opportunity to sell their company should the right timing and buyer indicate interest or even present you with an offer. The most important way to ensure such a position as a viable, lucrative, and worthwhile purchase is to assure presentation of your company's finances accurately and professionally.

A successful business must to be able to reflect its success in an understandable way, and business owners usually manage this by adhering to standard accounting best practices, including accurate books, financial reporting, and so on.

The first step is guaranteeing that your company has a solid accounting system in place. It doesn't have to be the biggest, most expensive, or most complex system available, but it should be both comprehensive and professional in scope. Maintaining concise, clear, and accurate records is important so that future buyers can assess your company as a worthwhile investment. In essence, a strong accounting system can significantly influence a buyer's intent to purchase.

One of our clients, a drilling location construction concern, started small and eventually grew to over $25 million in annual revenues. While this looks like it would be an easy sell, a potential buyer noticed a glaring issue that impeded and stalled the purchase process: inadequate bookkeeping and reporting. Throughout his company's rapid growth, the owner maintained a small business approach to his company's bookkeeping. The business owner needed a way to bring his bookkeeping into line with the success and professionalism of his enterprise before a potential buyer would turn into an actual, affirmative buyer.

To alleviate this problem, we recommended that the business owner hire a controller. SB&F interviewed prospective controllers from an exclusive pool and handpicked an individual for the position. We also suggested that the company submit to a full audit of its financial statements. These actions solidified the company's status and positioned it as a great value for any interested buyer. As a result, the company sold for cash and stock at a large premium from the original investment.

Clearly, even successful companies need advisors who can understand company workings from the inside, make the informed and difficult decisions, and work alongside business executives to position the company for a successful sale.

A host of excellent business or entrepreneurial experience simply might not include high standards for accounting and bookkeeping records and reporting. A professional and comprehensive approach will better complement the success-and potential value at sale-of any enterprise.

 Certified Public Accountant Allyson Baumeister is an officer and partner at Sanford, Baumeister, & Frazier, PLLC. Allyson works tirelessly for businesses of all sizes, maintaining a primary focus on business tax and consulting by providing clients with creative resolutions for technical business tax issues and clearly interpreting proposed and existing business tax law. She actively participates in the Council and PCPS Executive Committee of the American Institute of CPAs, Strategic Planning Committee of the Texas Society of CPAs, and Fort Worth Chamber of Commerce.