Tag Archives: Plan & Prepare

“True-Up Payments” May Be Expensive

In merger & acquisition (M&A) transactions, the valuation and purchase price of a company normally assumes a going concern business which implies that the company will have an appropriate level of working capital to continue operations and support future growth. A purchase price adjustment is often used to assure both buyer and seller that a […]

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Transactions Structured for Success!

Transactions between buyers and sellers of middle market businesses are often complicated. Driven by opposing motivations and interests, both parties want the most advantageous deal for their side. Sellers must be sure to consider every offer, especially offers that are less than the asking price of their business. A “lesser” offer in hand will not […]

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Show Me the Cash in Private Company Stock

In company sell transactions, secured and unsecured promissory notes, public and private company stock, short and long term earn-outs, all consideration has to be measured to its equivalent value in cash. Equivalent cash measurements allow for the meaningful comparison of offers by Sellers, and it is necessary to enable Sellers to make rational and informed […]

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What’s a Rolodex?

Technology has disrupted nearly every sector of the economy, and there appears to be no slowing down or looking back from this trend. Due to the uniqueness of each deal, the numerous and varied complexities, and the amount of “hands-on” hours required to complete a transaction, the investment banking industry has proven to be a […]

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Teamwork Makes the Dreamwork!

Selling a middle market business is a multifaceted process that requires tremendous preparation, patience, and strategic positioning. With the uncertainty of capital markets, the unpredictability of prospective buyers, and a business to run, business owners will find themselves well-served by assembling an experienced M&A Team to manage and execute a formal sales process. At a […]

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Define Your After- Sale Role?

When a buy/sale deal closes, many times the interests of the buyer and seller differ. Most sellers want to take all the consideration due to them immediately, and disappear. It is rare for a buyer to not want the seller to provide a seamless transition of the operations of the business just sold by remaining […]

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Appearance Matters?

The physical appearance of a business’ equipment and facilities, including office, manufacturing, and warehousing space, weighs heavily with prospective buyers and must be consistent with the purchase price. Business owners who are determined to receive a premium for their business have to consider the inherent value of a fresh coat of paint, clean workspaces, an organized […]

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Barriers to Entry: Build a Wall!!!

Business owners must “build a wall” around their businesses to avoid advances from would-be competitors, and reinforce their position in the market. Barriers to entry deter new competitors from entering a market, secure the revenues and profitability of established companies, and increase the value of protected businesses. Consequently, businesses with high barriers to entry reduce […]

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Brand Recognition Enhances Value?

Early orchestration of a strategy for your business’ brand will create additional value at the time your business is sold. A brand represents the face of the business; a unique and recognizable design, sign, symbol, or slogan employed to create an image that identifies a product and differentiates it from its competitors. Aside from generating […]

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Drive Value Through Operating Systems!

In addition to a knowledgeable and ambitious management team, developing innovative operating systems and procedures enhance the value of a business. Effective operating systems and procedures must be reliable, updated and maintained regularly, documented systematically, administered consistently, and adequate for growth of the business. Operating systems, or formalized business processes and procedures, are utilized most […]

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Management Team: Exit With A Deep Bench!

An experienced, motivated and stable management team is the most significant value driver of M&A transactions. Businesses with a strong management team focus on the sustained growth of cash flows and profitability, command higher valuations in the marketplace, and allow for the seamless exit of the owners. In the eyes of prospective buyers, there is […]

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Not From Concentrate!

Client concentrations may be the curse of M&A transactions. They cultivate uneasiness with buyers due to the potential loss of revenue, and raise significant concerns with major lending institutions. If a substantial percentage of a business’s revenue is generated by a limited number of clients, buyers tend to have apprehension regarding future cash flows and […]

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Earnouts: Creating Confusion or Promoting Prosperity?

Earnouts, although palatable in principle, may be complex in structure, difficult to define, and subject to unintended consequences. Thus, the gut reaction of most investment bankers to the proposed use of earnouts as an instrument to close transactions is unequivocally: “Don’t use them!” This declaration will more than likely be superseded by a full disclosure […]

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Prospective Buyers: What’s the Scenario?

The most desired transaction for lower middle market business owners contemplating the sale of their business requires deep consideration of the characteristics, motivations, and aspirations of the businesses’ prospective buyers. Customarily, strategic and financial buyers have the largest appetite for acquisitions in the private capital marketplace, and there are significant differences between the two buyer-types […]

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Restricted Stock Award Plans

Ownership can be a powerful tool in the effort to attract and retain talented people, have employees think and act like owners, create an ownership culture, and build successful succession plans. Restricted stock gives employees the right to earn shares of stock over some period of time through continued service or the accomplishment of certain […]

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CIMs: A New Pair of Glasses

Detailed Confidential Information Memorandums (CIMs) require collaboration between Sellers and their Investment Banker(s), and will provide prospective Buyers with enough information to make purchasing decisions. Highly effective CIMs consider the Buyers’ perspective throughout the preparation process; accordingly, CIMs must emphasize the value drivers of businesses and all decision-critical content and data. Motivated prospective Buyers expect […]

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Know the Exit Channel!!

Most business valuations calculate the value of a private company using fair market value, and this value is rarely suitable for making investment and financing decisions. Fair market value, although compliance-oriented and theory-based, fails to consider a business owner’s objectives or reasons for a transaction. The type of transaction will determine the owner’s exit channel, […]

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Leaving It To Chance?

Since a company owner never knows for sure what exit strategy may be successful, they should always consider decisions based on maximizing company value no matter what strategy is ultimately followed. Company owners should focus on the qualitative factors that drive quantitative results that align and strengthen the organization, improve profitability, enhance access to capital, […]

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Private Markets: Stop the Clock!!

According to Robert T. Slee, an investment banker and influential author of Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests, US private markets operate on a 10-year transfer cycle, and mid-market companies are currently in the midst of unprecedentedly high valuations and a pre-recession earnings boom (Seller’s Market). Slee’s corroborated data suggest […]

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Growth Strategy: Leave It All On The Field

A solid growth strategy provides companies with a quantifiable vision for growth in revenues and profitability; thereby, enhancing the value of the company post-implementation and increasing its attractiveness to strategic buyers. Company owners must identify the value drivers of their business, determine an acceptable level of risk, and decide on the best method for their […]

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