Selling a privately held company requires the owner to make significant decisions while continuing to operate the business. An experienced M&A advisor manages the transaction process and helps the seller make informed decisions at each stage. The M&A advisor responsibilities extend far beyond finding a buyer. They begin with preparation and continue through closing. Establish […]
Strong earnings provide an essential foundation for business value. However, buyers also evaluate the quality and sustainability of those earnings. They want to understand how the company produces its results and whether those results will continue under new ownership. Buyers also consider the resources required to maintain current performance and support future growth. These business […]
Many privately held businesses own the property from which they operate. That ownership creates additional considerations when the owner prepares for a sale. The business and real estate represent separate assets, even when the same owner controls both. Therefore, evaluating real estate and business value requires understanding the economic relationship between the company and its […]
Babson College recently examined the conditions shaping mergers and acquisitions for small and middle market businesses. Professor Kevin J. Mulvaney directed the research with participation from M&A advisors, bankers, and other transaction professionals. The survey evaluated trends affecting buyers, sellers, financing, valuations, and transaction execution. The 2013 Middle Market M&A Survey described a market that […]
Business owners frequently hear that companies sell for a multiple of EBITDA. While generally true, the appropriate multiple may vary significantly between businesses. EBITDA measures earnings before interest, taxes, depreciation, and amortization. Buyers commonly use it to evaluate operating performance and compare acquisition opportunities. The basic calculation appears straightforward. A company generating $2 million of […]
Key employees represent a significant source of value in a privately held business. Their departure may also create create a substantial risk during a sale. Owners often need an incentive that rewards these employees without transferring actual ownership. A Stock Appreciation Rights Plan may provide one solution. Stock Appreciation Rights, or SARs, generally provide employees […]
Business owners encounter financing needs throughout the life cycle of their companies. An opportunity may involve an acquisition, ownership buyout, expansion, recapitalization, new facility, or significant capital investment. Each opportunity may make strategic and financial sense. However, the transaction must also support an appropriate financing structure. An attractive business opportunity does not necessarily represent a […]
A business sale involves more than negotiating the purchase price. The transaction structure significantly affects the economics for both buyer and seller. Accordingly, tax considerations in M&A should enter the discussion early. Decisions made during negotiations may directly influence each party’s after-tax outcome. Buyers and sellers often approach these decisions from different perspectives. What creates […]
Selling a privately held business requires sharing sensitive information with prospective buyers. However, sellers should control when and how they disclose that information. Maintaining confidentiality in M&A protects the company while allowing qualified buyers to evaluate the acquisition opportunity. Premature disclosure can create significant problems. Employees may become concerned about their jobs, while customers may […]
Business owners often expect a business valuation to predict the price their company will receive in a sale. In practice, valuation and transaction value may differ. A business valuation in M&A provides an analytical framework for understanding value. The marketplace determines what an actual buyer will pay. Both analysis begin with many of the same […]
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