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W EEKLY EDITION MAY 23, 2018 Buying a Rental Business …continued By James Waite, reprinted with permission of the author Where to start. Now that you know what to expect by way of the mechanics of an acquisition, let's back up and address some issues that factor into the decision to purchase a rental company in the first place. For a buyer, some of the most common — going from general to specific — are: industry and type of business, including equipment and customer mix, fleet size and overall growth prospects; market size, location and prospects; long - range planning, such as finance or strategic buy , roll - up and exit strategy; competitive environment; regulatory environment; efficiency enhancements and possible accretive value; tax implications; capital requirements; return on investment (ROI); managerial expertise, available and required; workforce quality and availability/company culture; intellectual property rights; vendor and supplier relationships; research and development capabilities; customer base; contracts, such as dealership agreements, real estate leases, floor - planning arrangements, main tenance contracts and more; outstanding debts and potential claims; price; purchase and sale terms; and, often most importantly, the desire to purchase a specific rental operation. Haste makes waste. Though buyers are well - advised to consider at least the above factors, the reality is many are driven by only a few, or perhaps only one, overriding objectives. For example, the 1990s saw waves of optimistic buyers paying inordinately high prices based on "accretive value/roll - up" strategies, often having give n little consideration to the true viability of the business or its assets. This proved a recipe for disaster in some cases. Whatever your primary goals may be, considering as many factors as possible can pay enormous dividends, particularly when doing so reveals an unanticipated problem or leverage issue. For example, even though "accretive value" may be the primary goal of a strategic acquisition, if a Phase I environmental investigation reveals high levels of contamination under the seller's rental facil ity, the only way to realize the potential accretive value may be to require the seller to perform the necessary remediation before closing. Otherwise, "joint - and - several" cleanup liability may extend to the buyer, limiting or perhaps eliminating the accre tive value proposition or worse. He who hesitates is lost. Counterbalancing the call for caution is the need to move quickly to avoid forfeiting buying opportunities. Ultimately, buyers do best when they enter the market prepared. Knowledge of the industr y, the market and the competitive environment in which the target business operates is critical. Having an established set of criteria for assessing different target businesses can help identify the best opportunities on an "apples - to - apples" basis, rememb ering that each operation will likely be substantially different from the others. Once a target is identified, knowing which areas of the business to focus on and asking the right questions of the seller can make the due diligence process far more helpful and far less time consuming. This knowledge also can help an astute buyer distinguish between reality and the wishful thinking that sellers sometimes understandably engage in. In any event, if investors and/or lenders are to be persuaded to provide funds f or an acquisition, obtaining this information early on will go a long way toward both providing them the requisite level of comfort and establishing management's credibility on the buyer's side. P AGE 4 CONTINUED ON PAGE 5