InSight

Exit and Growth Strategies for Middle Market Businesses

Archive for 2011

5 Reasons to Hire an M&A Professional to Sell Your Business – Reason #3

By John Hammett | Dec 27, 2011

Part 3

Most private company owners are used to doing things for themselves.  Many founded the companies that they run, and they took care of sales, operations, and financing alone before their company grew large enough to have an organization to manage those functional areas.  Entrepreneurs are successful because they are versatile and are unafraid to take on the challenge of doing what needs to be done at each stage in the life cycle of their company.  So it’s natural for company owners to want to take on the task of selling their company as one more personal challenge that they can do as well as an outside expert.

Money GraphAs I have mentioned in my last few blog posts, some company owners chose to handle the process of selling their company themselves.  Some of these owners successfully sell their company for a high valuation.  Many of them successfully sell their company, but for a lower price or on weaker terms than they may have deserved.  And too many of them aren’t successful at selling at all.

Company owners hire investment bankers to manage the process and represent their interests in the sale of their companies.  There are a number of reasons why smart owners pay investment banking fees for these services.

Reason #3

PERSONAL DYNAMICS.  The initial contact with a potential buyer sets the stage for subsequent negotiations.  An owner who contacts buyers directly may seem weak or desperate to sell.  Alternatively, too casual an approach can lead buyers to think that the seller is not serious about selling the company.

Having an experienced dealmaker make the initial contact sends a message of sophistication and seriousness on the part of the seller.  Furthermore, a third-party can maintain the confidentiality of the seller until an interest has been established and initial buyer qualifications are validated.  This protects the seller’s confidentiality in the marketplace.

 

Posted by John Hammett.


How Do I Know It’s Time To Sell My Company? Part 3

By Robert Contaldo | Dec 16, 2011

Risk vs. Reward May Signal The Time To Sell A Business

Your business – it has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands and the decision to sell your business can be a difficult one to make.

In this series of blog posts I’ll be discussing the 10 signs that it might be time to sell your business.   The first sign is when the enthusiasm for the business has diminished.  A changing marketplace can also be a sign it’s time to exit.

Sign #3 – Risk Becomes a Four Letter Word

With all that needs to be done in a changing marketplace, business owners cannot afford to be squeamish when it comes to ongoing investment in the company. When one reaches the point of not making logical investments in the company or tends to count the debt rather than the probable benefit, it might be time to sell. Most business owners reach a point where they are tired of “betting the farm”, tired of personal guarantees, tired of meeting financing requirements and covenants, and worn out over protecting assets from legal liability. There comes a time when it makes sense to “take some chips off the table” and build financial firewalls.

 

 

Posted by Bob Contaldo.

 


5 Reasons to Hire an M&A Professional to Sell Your Business – Reason #2

By John Hammett | Dec 14, 2011

Part 2

As I mentioned in my last blog post, some company owners choose to handle the process of selling their company themselves.  Some of these owners successfully sell their company for a high valuation.  Many of them successfully sell their company, but for a lower price or on weaker terms than they may have deserved.  And too many of them aren’t successful at selling at all.

Deal  SigningCompany owners hire investment bankers to manage the process and represent their interests in the sale of their companies.  There are a number of reasons why smart owners pay investment banking fees for these services.  The first reason investment bankers are hired to sell a company is it allows the business owner to focus on the day to day operation of the company.

Reason #2 – The Buyers

Owners tend to think of buyers that they know.  They think of their close competitors and other companies they see in the industry.  A high-value sale requires finding buyers that have three characteristics: (1) they can realize a higher value from the company than the owner can realize today; (2) they have the cash and other resources to close a deal at a fair value; and (3) they are experienced at closing deals.  Just because companies come immediately to mind, or are convenient, does not mean that they are the best buyers.

A good investment banker will research and contact 300 to 400 potential buyers to find several that are qualified and ready to buy.   The advisor has access to research and to personal connections that will be used to identify a bigger pool of qualified buyers than an owner can readily access.

 7 Step Guide to Business Exit Planning

Posted by John Hammett.


How Do I Know It’s Time To Sell My Company? Part 2

By Robert Contaldo | Dec 07, 2011

Part Two

Your business – it has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands  and the decision to sell your business can be a difficult one to make.

Calculator and PlansWhen the cycle of business and our personal circumstances begin to herald the transition, it should be addressed in order to realize the financial security for which it was created.

In my next few blog posts I’ll be discussing the 10 signs that it might be time to sell your business.   The first sign, which I wrote about last post, is when the enthusiasm for the business has diminished.

 

Sign #2 – Your Marketplace Is Changing

Businesses that do not change will ultimately fade away. Change requires new market direction, more equipment, more people, new technology, expanded facilities, and other capital investment. Market changes can include more complexities involving government regulations, taxes, banking, certification requirements, customer reporting requirements, foreign competition that threatens margins and customers seeking fewer suppliers and lower costs. Many times the direction is clear, but the mind, body, and emotions are not willing to embrace change.

Download The Ten Biggest Mistakes Sellers Make.

Posted by Bob Contaldo.


5 Reasons to Hire an M&A Professional to Sell Your Company

By John Hammett | Nov 29, 2011

Part One

Most private company owners are used to doing things for themselves.  Many founded the companies that they run, and they took care of sales, operations, and financing alone before their company grew large enough to have an organization to manage those functional areas.  Entrepreneurs are successful because they are versatile and are unafraid to take on the challenge of doing what needs to be done at each stage in the life cycle of their company.  So it’s natural for company owners to want to take on the task of selling their company as one more personal challenge that they can do as well as an outside expert.

As a result, some company owners choose to handle the process of selling their company themselves.  Some of these owners successfully sell their company for a high valuation.  Many of them successfully sell their company, but for a lower price or on weaker terms than they may have deserved.  And too many of them aren’t successful at selling at all.

Company owners hire investment bankers to manage the process and represent their interests in the sale of their companies.  There are a number of reasons why smart owners pay investment banking fees for these services. Read more »


How Do I Know It’s Time To Sell My Company?

By Robert Contaldo | Nov 23, 2011

Boy with SuitcaseSelling your business, which is perhaps your largest asset, can be a difficult decision. It has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands.

When the cycle of business and our personal circumstances begin to herald the transition, it should be addressed in order to realize the financial security for which it was created.

After 30 years of selling companies, I have found that it is near impossible to convince a business owner to sell until the business and personal reasons align. But once they do, no good ever comes from delaying a sale.

So – in the next few blog posts I will cover ten signs that it might be time to sell your business:

Sign #1 – The Thrill Is Gone

We all go through seasons in life. Young business owners focus on raising a family, planning for the future and striving for a financially secure retirement.  To that end, fighting the battles and making the sacrifices are necessary and expected as part of growing a business.  However, there comes a time when a business owner does not care to take the business any further. The battles and victories that at one time were energizing have now lost their importance, and have become somewhat boring and wearisome. The focus shifts to more time off, warmer weather, grandkids, or more leisure time activities.  Many business owners want to pursue a new direction in life that satisfies a greater personal or community need.

 

7 Step Guide to Business Exit Planning

 

Posted by Bob Contaldo.


Valuing Your Business

By Kim Levin | Nov 18, 2011

You may sell your business only once…but chances are you will seek a true business valuation multiple times.  Even if business owners are years away from selling a business, it is still important to know what the business is worth today.  Guessing what your business is worth just won’t cut it.  Why?  Well, most business owners know that at some point they will transition to “life after business.”  Their ultimate post-business lifestyle will be determined by the cash flow stream from the proceeds of the sale and subsequent investments.  If the current business value is lower than the anticipated sales proceeds…there’s work to be done.  The good news is…you will have time to create and implement a business plan to bridge the valuation gap between current value and desired sale price.  Valuation specialists can provide an accurate measure of your business worth as a first step.  There are a variety of methods experts can use to arrive at the business valuation.  Lee Crawley in our Tulsa office wrote a great piece on the types of valuation methods that can be employed and is worth the read.  You can read the article in its entirety here.  Bottom line…any business exit plan should begin with an accurate valuation.

Download the Middle Market Pulse.

Posted by Greg McKinley.


Selling Your Company – The Environmental Factor

By John Hammett | Nov 17, 2011

There are five deal factors so significant that they don’t just affect price, they affect the fundamental ability to sell your company and complete a deal.  For this reason, these are considered Deal Killers.   If a company has one or more of these attributes, it will be difficult to find any buyer.  Any buyer will very likely discount the value to accommodate the risk that these Deal Killers bring.

My first three blog posts in this series discussed Deal Killer #1, No Management Depth and Deal Killer # 2, Customer Concentration and Deal Killer #3, Inconsistent Financials.  This post will focus on another problem some sellers may face…environmental concerns.

Deal Killer #4 – The Environmental Factor Read more »


Business Exit – Presenting the Positive

By John Hammett | Nov 10, 2011

There are five deal factors so significant that they don’t just affect price, they affect the fundamental ability to sell your company and complete a deal.  For this reason, these are considered Deal Killers.   If a company has one or more of these attributes, it will be difficult to find any buyer.  Any buyer will very likely discount the value to accommodate the risk that these Deal Killers bring.

My first two blog posts in this series discussed Deal Killer #1  No Management Depth and Deal Killer #2 Customer Concentration.  This post will focus on a current problem for many companies…financial inconsistency.

Deal Killer #3 – Financial Inconsistency Read more »


Planning For Your Business Exit

By Peter Ventre | Nov 08, 2011
Exit Sign

As a middle market investment banker, I talk with business owners every day who are thinking about selling a company.  They proclaim that they are finally ready to move on to another chapter in their lives and it’s now time to sell the business that they have spent a lifetime building.  Interestingly, many of these business owners have done little or no planning for their business exit and although they may be ready to sell…their business isn’t.  Learn how to.. Read more »