InSight

Exit and Growth Strategies for Middle Market Businesses

Technology, Media and Telecom M&A Q1 M&A Update

By Kim Levin | Apr 18, 2014

Inside a ComputerM&A activity in the North American Media and Telecom sector for Q4 2013 through February 14, 2014 included 334 deals announced or closed according to data provided by S&P Capital IQ.  According to a report from international consulting firm PriceWaterhouseCoopers, the advertising and marketing, communications (telecom), and broadcasting subsectors were the big drivers of deal value in 2013 and the activity will likely continue in 2014 as large strategics look to consolidation for growth. Broadcasting deal value increased by $20.5 billion, from $5.8 billion in 2012 to $26.3 billion in 2013. Recently, deal value in the telecom and communications space has been dominated by large transactions, including Softbank’s $20.1 billion acquisition of Sprint Nextel in 2012. As the use of mobile devices and the appetite for big data continues to grow, this space should be as active as any for the foreseeable future.

Read the Entire Technology, Media and Telecom 1st Quarter Newsletter Here


5 Reasons the Timing is Right to Sell Your Business Now | Part 5

By Brian Ballo | Apr 16, 2014

Big ClockThis blog post is the last in a series of 5.

Business owners inquiring whether the timing is optimal for obtaining the highest price for their business, often start by inquiring: “What are business valuations in the market today?” EBITDA multiples provide a quick thumbnail answer to this question.

However, just focusing on today’s industry numbers, does not enable a business owner to evaluate the risk of whether the business will be worth more or less in the future, as compared to selling the business now.

Savvy business owners, who are attuned  to macro factors impacting business valuations, such as the aging population, financing terms and tax reasons, understand  that several conditions  exist today, which support selling your business in 2014.   In addition to  these  macro factors, the  question  of timing comes down to whether selling the business is strategically beneficial for the business, given its life-stage, as well as compelling personal reasons why it makes good sense for the business owner to sell.

5.  As an Owner, You Have Compelling Personal Reasons to Sell

Despite macro trends that support the case for selling the business, the emotional bonds of an owner to his business can be strong. In American culture, being an owner is an important part of how we define ourselves, part of our self-image. Ownership provides a general sense of self-esteem, pride, and a feeling of control. As a result, for many owners, their business and social lives are interwoven, making letting go of the business, all the more difficult. Read more »


5 Reasons the Timing is Right to Sell Your Business Now | Part 4

By Brian Ballo | Apr 14, 2014

watch on armThis blog post is the fourth in a series of 5.

Business owners inquiring whether the timing is optimal for obtaining the highest price for their business, often start by inquiring: “What are business valuations in the market today?” EBITDA multiples provide a quick thumbnail answer to this question.

However, just focusing on today’s industry numbers, does not enable a business owner to evaluate the risk of whether the business will be worth more or less in the future, as compared to selling the business now.

Savvy business owners, who are attuned  to macro factors impacting business valuations, such as the aging population, financing terms and tax reasons, understand  that several conditions  exist today, which support selling your business in 2014.   In addition to  these  macro factors, the  question  of timing comes down to whether selling the business is strategically beneficial for the business, given its life-stage, as well as compelling personal reasons why it makes good sense for the business owner to sell.

4.  Your Company’s Life-Cycle Timing Indicates a Strategic Reason to Sell

Each company has life-cycles, and the challenges of passing to the next developmental stage can often be strategically improved through a sale or merger. Companies in the initial development and emerging growth stages, require debt and minority equity capital, but, generally, are not good acquisition candidates.  On the other hand, companies in later stage growth, that have reached a stable, mature level, or that are declining, are attractive to both strategic corporate acquirers and Private Equity Groups (PEG). Read more »


Plastics & Rubber Q1 M&A Update

By Catherine Patience | Apr 11, 2014

Plastic boxesM&A activity in the North American Plastics and Rubber sector for Q4 2013 through February 14, 2014 included 33 deals announced or closed according to data provided by S&P Capital IQ. Activity in the space has been partly spearheaded by manufacturers of caps and closures according to data published by industry trade magazine Plastics News. There has been significant consolidation in this particular niche as strategic and private equity buyers look to gobble up market share and increase their product offerings. Consolidation has shrunk the number of companies with less than $50 million of revenue to just 18 percent of the market, whereas companies with more than $500 million in annual sales now control 22% of the market.

Read the Entire Plastics & Rubber 1st Quarter Newsletter Here


5 Reasons the Timing is Right to Sell Your Business Now | Part 3

By Brian Ballo | Apr 09, 2014

Train ClockThis blog post is the third in a series of 5.

Business owners inquiring whether the timing is optimal for obtaining the highest price for their business, often start by inquiring: “What are business valuations in the market today?” EBITDA multiples provide a quick thumbnail answer to this question.

However, just focusing on today’s industry numbers, does not enable a business owner to evaluate the risk of whether the business will be worth more or less in the future, as compared to selling the business now.

Savvy business owners, who are attuned  to macro factors impacting business valuations, such as the aging population, financing terms and tax reasons, understand  that several conditions  exist today, which support selling your business in 2014.   In addition to  these  macro factors, the  question  of timing comes down to whether selling the business is strategically beneficial for the business, given its life-stage, as well as compelling personal reasons why it makes good sense for the business owner to sell.

3.  Further Potential Capital Gains Tax Increases

In 2013, Congress passed the American Taxpayer Relief Act (ATRA), raising the capital gains tax from 15% to 20% for taxpayers in the 39.6% marginal income tax bracket, (individuals earning more than $400K, and married couples earning more than S450K, annually). Above and beyond that capital gains tax rate, high-income earners are subject to a net  investment income tax of 3.8%, as well as applicable state income taxes. Read more »


5 Reasons the Timing is Right to Sell Your Business Now | Part 2

By Brian Ballo | Apr 07, 2014

Big ClockThis blog post is the second in a series of 5.

Business owners inquiring whether the timing is optimal for obtaining the highest price for their business, often start by inquiring: “What are business valuations in the market today?” EBITDA multiples provide a quick thumbnail answer to this question.

However, just focusing on today’s industry numbers, does not enable a business owner to evaluate the risk of whether the business will be worth more or less in the future, as compared to selling the business now.

Savvy business owners, who are attuned  to macro factors impacting business valuations, such as the aging population, financing terms and tax reasons, understand  that several conditions  exist today, which support selling your business in 2014.   In addition to  these  macro factors, the  question  of timing comes down to whether selling the business is strategically beneficial for the business, given its life-stage, as well as compelling personal reasons why it makes good sense for the business owner to sell.

2.  Pressure to Invest Available Capital Before Interest Rates Rise

After years of inaction, optimism in the U.S. M&A market is beginning to grow. One of the key drivers for this optimism is the  sheer amount of money sitting  on  corporate  balance sheets, and an increasing desire to put that money to work. Read more »


Metal Fabrication Q1 M&A Update

By Kim Levin | Apr 04, 2014

Wire ThreadersM&A activity in the North American Metal Fabrication sector for Q4 2013 through February 10, 2014 included 36 deals announced or closed according to data provided by S&P Capital IQ. Deal volume has been relatively flat in the space over the past 24 months as steel purchasers exercise caution with topsy-turvy demand domestically. According to a report from industry research group First Research, US orders for durable goods, a key demand indicator for metal wholesalers, increased nearly 5 percent in the first 10 months of 2013 compared to the same period a year earlier. Overall, new orders for primary metals increased more than 3 percent. New orders at US iron and steel mills fell 6 percent, but orders for aluminum and other nonferrous metals rose about 14 percent. With the construction market slowly improving demand is expected to increase throughout 2014, which should relate to an uptick in M&A activity.

Read the Entire Metal Fabrication 1st Quarter Newsletter Here


CFA ESOP Capabilities to Enhance Value

By Mark Klopfenstein | Apr 01, 2014

glasses and financialsWe may be at the beginning of a new era of popularity for a sometimes misunderstood concept:  indirect employee equity participation through Employee Stock Ownership Plans (ESOPs).  Several emerging factors, including higher tax rates, the “graying” of America, an unyielding tax planning environment, and a suboptimal market for traditional sales, are prompting more business owners to use ESOP-based structures to extract value from companies.  Corporate Finance Associates has powerful capabilities around this concept to assist business owners interested in (i) a complete or partial exit, or (ii) an internal restructuring to allow the business to grow faster and the owner to make more money.

Under the basic structure, a company forms an Employee Trust (ET) and adopts a qualified employee retirement plan (the ESOP).  The ET acts as a buyer of outstanding or newly-issued shares for fair market value, and it can own a partial or total interest in the company.  The purchase price is fair market value, negotiated with the institution that serves as the trustee of the ET and supported by independent valuation advisors.  The ET can fund its purchase with external financing based on the company’s credit capacity and/or seller financing.  The financing arrangement can also include continuing participation in the enhanced equity upside of the company. Read more »


Industrials Q1 M&A Update

By Catherine Patience | Mar 28, 2014

Car ManufacturingM&A activity in the North American Industrials sector for Q4 2013 through February 10, 2014 included 946 deals announced or closed according to data provided by S&P Capital IQ. Strong momentum in the period is projected to continue into 2014 according to data published by international consulting firm PriceWaterHouseCoopers. In a sector as broad and imperative to the economy as industrials, improving macroeconomic trends and fundamentals are an indicator of the level of M&A activity. Average debt to EBITDA multiples continue to steadily increase, reaching 4.5x as of November 2013, according to S&P Capital IQ. This, in addition to the availability of cash with attractive terms, provides strategic and private equity buyers with numerous opportunities to recapitalize balance sheets and pursue liquidity events, which drives M&A activity and increases valuations.

Read the Entire Industrials 1st Quarter Newsletter Here


5 Reasons the Timing is Right to Sell Your Business Now | Part 1

By Brian Ballo | Mar 26, 2014

watch on armThis blog post is the first in a series of 5.

Business owners inquiring whether the timing is optimal for obtaining the highest price for their business, often start by inquiring: “What are business valuations in the market today?” EBITDA multiples provide a quick thumbnail answer to this question.

However, just focusing on today’s industry numbers, does not enable a business owner to evaluate the risk of whether the business will be worth more or less in the future, as compared to selling the business now.

Savvy business owners, who are attuned  to macro factors impacting  business valuations, such as the aging population, financing terms and tax reasons, understand  that several conditions  exist today which support  selling your business in 2014.   In addition to  these  macro factors, the  question  of timing comes down to whether selling the business is strategically beneficial for the business, given its life-stage, as well as compelling personal reasons why it makes good sense for the business owner to sell.

1.  Due to Aging Boomers, the Supply of Businesses for Sale Will be Increasing

In 2014, as the nation completes its climb out of the Great Recession, more businesses are being sold, mainly because the valuation gap has narrowed between more realistic Sellers and the number of competing Buyers. The larger trend, however, is the massive generational shift in wealth that  is underway, as hordes of boomer business owners are motivated to retire. Read more »