Exit and Growth Strategies for Middle Market Businesses

Author Archive

M&A Lessons from the Shark Tank

By David Sinyard | Jul 06, 2012

Shark TankOne of my guilty pleasures is watching “Shark Tank” on Friday evenings.  If you’ve never seen it, the premise is as follows:  business owner appears before a “panel” of investors (a.k.a. The Sharks), business owner pitches his company to the sharks and none, or one or more of the investors make him an offer.  The show gets really interesting when more than one shark makes an offer for the business and when this happens usually the owner ends up with a much better deal than when only one offer is on the table.

Sound familiar?  If you’re a business owner with a company to sell and this doesn’t sound familiar, you’re probably working with the wrong advisor.  One important function of an experienced professional M&A advisor is to establish a competitive selling environment.  Whether your company is being positioned to appeal to a private equity investor, strategic buyer or both, competition usually improves the seller’s results.

 Download the 10 Biggest Mistakes Sellers Make 

Posted by David Sinyard.

The Importance of Succession Planning in Family Held Businesses

By David Sinyard | Jun 22, 2012

Passing the BatonDeveloping a succession plan may be the most important business plan a company owner will ever make – it secures their family’s future long after they are gone. Yet, the vast majority of family owned businesses do not have a succession plan in place and statistics show that nearly three quarters of family owned businesses do not survive the transition from founder to second generation. Given the importance of such a plan, understanding the obstacles that stand in the way of a successful business succession is the first step to putting a plan in place.   Given the importance of such a plan, understanding the obstacles that stand in the way of a successful business succession is the first step to putting a plan in place.

Most family business owners fully intend to keep the business within the family’s control, but choices made by the founder can derail such a plan from coming together. One common reason for inactivity is that the founder fears losing control of the business. They view succession as a demotion from the central role in the business and associate it with retirement and even their own mortality. Research demonstrates that founders tend to remain at the helm on average between 25 and 30 years. This length of tenure has an effect on how second generation family members view their opportunities. Read more »

Facebook – Is it really that hard to play fair?

By David Sinyard | May 24, 2012

Facebook ChartAre there any lessons business owners can learn from the recent Facebook IPO?  If nothing else… it should teach us the importance of due diligence and fair play.

For months, Facebook’s IPO has been the dominant story in news media all around the globe and the more you read or view, the more interesting it gets.  The taking public of a private company is just one way for the initial investors in a growing concern to create a liquidity event.  But when your liquidity strategy involves government regulated entities, such as the public markets, you’d better do it by the book.  No shortcuts, no surprises.  And should anything surface that indicates a change in the economic picture of the company, you better let everybody know about it, and yes, all at the same time.  Unhappy investors are not usually investors for long.

As M&A professionals, we work on behalf of one party in a given transaction, and the goal is when all the dust settles, both parties in the transaction are pleased with the outcome.  Happy seller… happy investor.  That wouldn’t happen if one of the parties was acting on information that was inaccurate or untrue.  We stress a thorough due diligence process and the need to keep all parties informed of material changes in information, financial and otherwise.  No one wants to see surprises at the end of a deal.

The story of the Facebook IPO is certainly not over yet.  We’ll soon see how the inevitable investigation into who knew what when pans out.  Bottom line…would it really have been that hard to just play fair?

Posted by David Sinyard.

Government Lends a Helping Hand

By David Sinyard | May 08, 2012

Our client was faced with a serious challenge.  He has been in the food processing business for 23 years and has a great reputation.  His products are sold to broad line distributors, branded restaurants and major grocery stores around the country with some international distribution as well.  The recession of 2008 was challenging for the food service industry and his lender at the time used the downturn to really put pressure on him.  Sales declined, negatively affecting his company’s debt covenants.  In addition, a low appraisal significantly reduced the valuation of his business.  The bank used these unfavorable conditions as leverage to cut his credit line, increase interest rates and impose harsh fees and penalties on his company.  With the banking industry and financial markets in turmoil, it was difficult for our client to seek alternative solutions.

We advised him to refinance his mortgages using the new SBA 504 program.  Based on a more favorable appraisal, he successfully closed on loans funded by the SBA and his new lender.  As part of the refinancing, his debt service payments were reduced by $6,000 per month.  We were able to negotiate a refund of nearly $50,000 worth of related expenses imposed on his company by the previous lender.  In addition, a recalcitrant partner was bought out.  Our client now has a great relationship with his new bank and is enjoying record sales and profitability.

Posted by David Sinyard.

A Good Time to Sell to Private Equity?

By David Sinyard | Dec 16, 2010

My recent Capital Ideas article focused on private equity funds and why they just might be a perfect partner for a private business owner.  After reading a recent quarterly report from Pitchbook, a research company that collects information on Private Equity Firms and deals, the time to either sell or partner up with private equity may just be now. 
According to the report, there is roughly $485 billion in unspent capital sitting on the sidelines and this money must be spent before any new significant fundraising will occur.  Positive trends continue in rising valuations, availability of debt financing and economic recovery in general, which likely will translate into increased deal flow into 2011.

posted by David Sinyard