How to Prepare for the Sale of your FBO Continued from page 25 expenses, and this amount can be added to EBITDA. These non-recur- ring expenses when added to EBITDA and multiplied by an agreed upon multiplier can amount to a very sig- nificant increase in purchase price. TERM, TERM AND TERM While you cannot do much to alter your location, and you may have limited means to prevent or forestall competition, you are likely to have some ability to extend your FBOs lease term by promising to make capital improvements in return for lease term. A lease term of less than twenty years will decrease the price or multiple paid, while a term in excess of twenty years will signifi- cantly increase price and multiples. It is best to negotiate and codify these extensions before you sell rather than during the process. Remember, if you have a business that is attractive to buyers, it’s the next owner—not you— who will have to invest money back into the business to satisfy future capi- tal improvements (assuming you sell your FBO). However, even if you have to spend the money now because a renovation or certain repairs are nec- essary, an extended lease term makes this expenditure an attractive option. SIMPLIFY Simplicity is always better than complexity. Many FBOs are a mail- gram of multiple leases, some with conflicting terms. Airport sponsors are sometimes willing to consolidate and produce a single lease document. However, if the price of a consoli- dated lease is giving up a valuable right, it may not be worth it. UPDATED MINIMUM STANDARDS The FAA suggests that Minimum Standards be updated from time to time. Many airports with Minimum Standards (they are not required) have outdated standards that do not account for the realities of modern day general aviation and the use of jets and turbine aircraft. It is always in the existing FBO’s interest for Minimum Standards to require (1) at least as many services as the exist- ing FBO(s) provides, (2) similar land acreage, and (3) as many hangars, the size of which equals the existing FBO. Since incumbents are grandfa- thered in and do not have to comply with standards requiring more than the existing FBO provides (unless the incumbent seeks a lease exten- sion), Minimum Standards tougher than what the existing FBO provides are sometimes worth supporting, but note if you decide to upgrade your facilities or request a lease extension, it is likely you will be asked to comply with the revised Minimum Standards. PREPARING THE SPONSOR Even if leases do not contain a change in control provision, buy- ers may still insist on some form of consent or approval to a sale, and in an asset sale, consent is almost always required. While it is always smart not to disclose a possible sale to an airport sponsor until it is absolutely necessary, there are ways to prepare for con- sent. First, understand whether it is a county or municipal executive, or the governing body of the county, munici- pality or airport board that will be called upon for consent, and then work on improving existing relationships. If necessary hire a local lobbyist or Aviation Business Journal | 4th Quarter 2018 person of influence, join a local rotary or other service club where board members belong and make all reason- able efforts to improve your relation- ships with the decision makers. When presenting the proposed new owner, be ready to show how the sale process sought out a buyer that was excited to be at the airport and ready and able to invest not only in improvements, but also in its workforce, equipment and in training programs. The buyer should be prepared to demonstrate its financial viability and prepare a well thought out and illus- trative presentation for the sponsor. USE OF CONSULTANTS, ACCOUNTS AND LAWYERS No money spent for professional assistance is spent unwisely. The sale of your business may be the most important financial action you ever take, and it is bound to face some difficulties. Assume, if something can go wrong, it will go wrong. While you should shoot for the moon by asking a high price, have realistic expectations. Sure, buyers are paying historically high prices, but buyers still have to make money, get Board, and some- times bank, approval. So, when you hear rumors of fantastic multiples, in some instances it may be true, but in most cases, they are simply rumors and are not based on facts. Leonard D. Kirsch, Esq. chairs the Aviation Law Practice of McBreen & Kopko, and is the CEO of NextGen Business Brokers Inc., which brokers the sale of FBOs and other airport- related service companies. He can be reached at [email protected] or [email protected]. NextGen’s management team also includes Mark Willey, Glen Gross and Millie Becker. 27
