In order to gain insight into a company’s future earnings and cash flows, a Quality of Earnings (QE) assessment must be done quickly after the signing of a Letter of Intent. In the M&A context, the QE of a business refers to how close a company’s earnings are to actual free cash flow. A QE […]
Commonly referred to in the Letter of Intent (LOI), a clause or similar verbiage may be found asserting that, “from the date hereof, until the closing of the transaction contemplated by this LOI, the Company shall conduct its operations only in the ordinary course of business …” What is the definition of the phrase “only […]
Currently, in the M&A community, discussions regarding the purchase price of a target company are most often expressed as a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization). If EBITDA is the benchmark, what is the justification for such a wide range of transaction multiples from 3-4-5 to 8-9-10 in the same or […]
Leading up to a transaction, buyers and sellers of companies can’t help but be enthusiastic about the endless opportunities that lie ahead. With all the synergies, growth possibilities and efficiencies to be realized; what’s not to be excited about!? This Honeymoon phase may continue post-transaction, but as integration becomes a reality, the excitement dissipates and […]
Nearly every M&A Advisor would agree that confidentiality is the foundation upon which successful transactions are built. Confidentiality is paramount throughout the M&A transaction process, but this is especially true when it concerns: the seller’s employees the seller’s customers and vendors the seller’s competitors and the public public companies and the possibility of insider information […]
When discussing the motivating factors of maximizing M&A sale prices, value drivers are best understood in terms of how they influence either expected cash flows (EBITDA) or the perceived risk (the purchase multiple). The significance of the planning and conducting phases of the sales process can often times be overshadowed from heavily focusing on the […]
The Letter of Intent (LOI) may be the single most important document created during the merger and acquisition process. This document outlines the mutually-agreed upon key business terms between the buyers and sellers. Although nonbinding in nature, sellers should always consider the following before signing the LOI: Provide the most accurate information and data during […]
In conjunction with the future earnings of a business, merger and acquisition (M&A) deals require the delivery of the ordinary and necessary balance sheet of the business to the buyer. The balance sheet should be adequate for the continued operation of the business and exclude cash and long-term debt (the “Enterprise Value”). Due to the […]
For many smaller middle market companies (less than $50 million in revenues), Private Equity Groups (PEGs) are “targeted” buyers that seek to acquire ongoing, profitable businesses with realistic growth potential. PEGs provide access to capital, offer insights and expertise, assist with improving market share and operating efficiencies, and have a clear exiting path. Often times, PEGs […]
QUESTION: “AS A SMALL BUSINESS OWNER, WHAT CAN I DO IN THIS PRESENT ECONOMY TO PROTECT MY COMPANY?” Know Your Key Performance Indicators! If you are not keeping score, you aren’t going to make it. You must know your numbers! You can start with your monthly income statement and balance sheet. You must identify the Key […]
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