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Exit and Growth Strategies for Middle Market Businesses

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Selling Your Business – Life After Closing

By Gerald W. Lindsay | Sep 28, 2011

If I sell now then I will have to retire or find another job.
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Selling Business Myths – Part 7

Boy with SuitcaseYou’ve just sold your business.  Congratulations!!!  Now what?  Ok, hopefully you and your Investment Banker have worked something out prior to even taking your company to market.  It’s a big decision and luckily you have many options.  If you determine what YOU want on the front end then it will drive the sales process. Read more »


Selling A Business – What Happens To The Employees?

By Gerald W. Lindsay | Sep 23, 2011

A sale will have negative effects on my employees.

 

Selling Business Myths – Part 6

The single most valuable asset to a buyer is the employees.  Imagine the worst case scenario…the buyer purchases a company and the key employees depart.  An empty facility full of equipment that does not produce revenue would be a disastrous investment.  For this reason, buyers are Business Meetingextremely cautious that the employees are properly motivated and happy to stay post-transaction.  Often times, buyers will offer multi-year employment agreements that allow employees to participate in the profits of the company.  The mantra is “let us help our management so they can help us grow the company.”

If your buyer is a Private Equity Group (PEG) there are further reasons to breathe a sigh of relief.  A PEG’s purpose for existence is to build a portfolio of companies that can outperform traditional investments.  The management team of the average PEG spends over 75% of its time seeking new acquisitions to invest in.  They typically do not get involved in the day to day operations of its portfolio companies, unless there is something that the portfolio company seeks assistance and advice with (new financing, introduction to a new customer, guidance on how to implement new software, board level management).  Therefore, PEGs look for opportunities where strong management teams are already in place.

 

7 Step Guide to Business Exit Planning

 

Posted by Gerald Lindsay.


Confidentiality is Key in Selling Your Business

By Gerald W. Lindsay | Sep 13, 2011

Once my business is on the market my competition will find out.

Selling Business Myths – Part 5

Business PlanningConfidentiality is a key in selling your business.  Many sellers worry that their customers or competitors will find out they are for sale and that it will have a negative impact on the business.  Customers could lose confidence in the company’s ability to perform.  And, competitors could use this information to their advantage.

Here is how your Investment Banker will work to keep your selling process confidential:

Non Disclosure Agreement

All prospective buyers will be required to sign a carefully worded Non-Disclosure Agreement (NDA) prior to receiving any identifying information on the company.  The NDA will protect you from a prospective buyer discussing the potential sale of your company with anyone outside their advisor group.

Qualify the Buyer

Your Agent knows how to qualify and work with prospective buyers.  I spend large portions of each and every day talking to buyers.  During each conversation, I am gauging the prospects financial qualifications, capabilities to complete a transaction and their motivation to act.  If we are only working with qualified buyers, the tire-kickers are eliminated and so is a good amount of the “rumor mill”.

Release of Confidential Information

Once a competitor has signed an NDA, your Agent will be able to gauge when it’s appropriate in the decision making process to reveal the more secretive aspects of your company’s operations.  Not everything needs to be provided up front for prospective buyers to make informed decisions.

 

 

Posted by Gerald Lindsay.


I’m Selling My Business – I’ll Find the Buyer Myself

By Gerald W. Lindsay | Sep 09, 2011

I know everyone in my industry; I’ll call them up and work out a sale.

Selling Business Myths – Part 4

Industry buyers are great buyers! They know your industry and already have the logic behind why it would be a good deal. They may even be actively in the acquisition mode and have a few done deals under their belt. They may even want to motivate you to stay with the company post sale. So, how do you get this scenario to work out just right for you?

Money BlocksMany business owners think that the best approach is to pick up the phone and begin a conversation something like, “Hi, I am thinking about selling my business.”  After all you probably know each other through competition over the years and in passing at tradeshows. This seems like a good approach. However, below are a few reasons that a licensed Investment Banker should make the first contact on your behalf, even with acquaintances: Read more »


I Want To Sell My Business Now But I Will Not Get A Fair Price In This Market

By Gerald W. Lindsay | Sep 02, 2011

Selling Business Myths – Part 3

You may think that because the markets are depressed that there is no point in even trying to sell right now.  There is no way I will get full price for my business today, right?

Business ChartThe reality is that Private Equity Groups (PEGs) and strategic buyers are still actively looking for business investments.  These groups have an amount of capital they are committed to invest yearly on behalf of their shareholders.  They are willing to pay fair values for solid investments.

Additionally, many industry buyers are looking to gain a competitive edge through acquisitions.  An excellent way to sell your business and still get fair value is to establish an earn-out.  An earn-out is a contingent payment tied to future performance.  The payments can be tied to whatever value the parties agree is measurable and desirable, such as revenues or EBITDA. Buyers like earn-outs because they can get in with less cash on the front end.  And, they are happy to pay the earn-out because the business has performed well!  The seller’s involvement in the business may or may not be a condition.

In all scenarios, your Investment Banker is creating a competitive marketplace for multiple parties to bid on.  If multiple bidders are fighting to win the company, that is an efficient market.   You always have the right to say no.  If you get a low offer, reject it!  The ball is in the bidder’s court to make an offer that is fair to all parties.

How to Sell Your Business at Full Value in a Down Market

 

Posted by Gerald Lindsay.


I Can Always Sell my Business Later – Just Give Me “One More” Good Year

By Gerald W. Lindsay | Aug 30, 2011

Selling Business Myths – Part 2

Is your business at the top of its game? You have considered selling your business, but are holding out for that “one more” good year? Just recently I had a seller client who received a full price offer on his business…more than he had ever expected. You know what he did? Turned it down and waited one more year! This decision pained me. Not because I wanted to just get the deal done, but because I have seen this logic too often go wrong. In the seller’s mind he thinks that next year he will get back out there with double the earnings and bring in an even bigger offer. But, more likely, that big fish that was just released won’t come back.

Nest EggThis is what we know for certain: there is no certainty! The risk/reward with privately held companies goes both ways. Why gamble your nest-egg on the next 12 months of potential profits? Who is to say the next year won’t have average or decreasing revenues? So, what is the real question here? Not if you can get more tomorrow, but are you ready for the next steps? Here are some signs that it’s really time to sell your business:

• You no longer want to make the financial commitments necessary to grow the business.

• You no longer want the burden of having all your capital tied into a business.

• You are ready to pull your chips off the table.

• You have had your business plans in place, but don’t have the energy or time to do the next steps.

• The thought of expansion is exhausting. • You have grown your business past the point of where you comfortably want to run it alone.

• You don’t get into the office like you used to. You would rather be out playing golf or enjoying free time.

• You have effectively managed your staff where you are no longer needed in the office every day. The business could run successfully without you.

• You have gotten your financials in order. You have reviewed or audited statements from your CPA for at least three years.

Posted by Gerald Lindsay.

Request your copy of  The 7 Step Guide to Business Exit Planning.

 


I Can Sell My Business Myself

By Gerald W. Lindsay | Aug 24, 2011


Business Selling Myths – Part 1

Would you feel comfortable going into open heart surgery with a doctor who had never performed the procedure before?  So, why would you try to sell your business alone, or let your CPA try?  Your business is your precious child.  Hire someone who is seasoned and understands the nuances involved in successfully marketing and selling businesses.  Hire an Investment Banker!  You’re more likely to get fair value for your business, in a reasonable time frame with fewer complications IF a good Agent represents you.

An Investment Banker will:

•    Set Pricing Expectations:  We will work with you so you have a reasonable expectation for the price your company will bring in the market.  We will not set an asking price, as we let the market bring their best offer and create a competitive process.

•    Market the Business:  Marketing your business successfully is a time consuming and expensive process.  We have a team of professionals that work for you to prepare, and keep current, a Confidential Descriptive Report and Blind Profile.  We will handle all of the time consuming details while you keep an eye on the performance of your company.

•    Find and Screen Prospective Buyers:  We have a vast network of Private Equity Groups (PEGs) and Strategic Buyers that we work with on a regular basis.  Additionally, we will form a customized communication plan, based on your needs, to reach out to new prospects.  After prospects are found we quickly determine their financial and competitive qualifications as it relates to the potential transition.  An attractive offer is worth very little if the odds of a successful closing are low.  A good Investment Banker will not waste time or money with “tire kickers” or unqualified prospects.

•     Negotiate the sale:  There are so many other important factors to consider beyond price.  Of course, pricing is important and we will work so that no money is left on the table.  But, we have structured many sales and know how to ask for those “extras” that make the
deal really special.

•    Work through Due Diligence and Reach Closing:  This process can get rather involved.  We will help keep the deal on track and focused on reaching a successful closing.  We have experience that is much needed during this often frustrating phase.

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Posted by Gerald Lindsay.


Growing Your Business Through Capital Partnerships

By Gerald W. Lindsay | Jul 09, 2010

Business owners know everything there is to know about running their business, whether it be heavy equipment sales or healthcare services. As an M&A advisor, I have spent my life walking alongside business owners as we tour their facilities talking about products, sales, employees, competitors and every other aspect of their business. However, most become uncomfortable when we begin discussing how to finance growth.

If you are a growing company you will have cash flow problems. Do not be lulled into the belief that because sales continue to increase that your business is growing at the best pace. Optimum business growth is reached through a combination of sales and capital infusion.

Banking Problems
In today’s economy, banks have tightened their lending standards. Many owners have developed banking relationships throughout their years in business, but in today’s lending climate they are not able to get the funds they need. Because of this, it is a great time to consider a capital partnership.

A Solution
If you are like many business owners, you may reach a crossroads where taking on a partnership makes sense. Capital Partnerships mainly come through two channels: Private Equity Groups (PEGs) or Strategic Buyers.

When many owners think of the typical transaction they think of a majority buy-out, time to retire, but retirement is not the only option. Capital Partners are willing to make either majority OR minority investments. They often prefer the management team to stay in place and operations to continue as before. They are simply making an investment in a company they feel has solid foundations and most importantly – room for growth. These investors do not require control because they are backing companies they believe in, companies with a solid history of growth, a capable management team and the potential for future expansion.

How to Choose a Capital Partner:
When choosing a partner there are several factors on which to focus:

  • TRUST – You need to be working with individuals that you trust and like. If you don’t care for the group, save yourself some time and walk away. Remember this is a partnership and you will need to work together to be successful.
  • FUNDING – Your partner needs to have the ability (either through fund raising or through already allotted means) not only to finance the transaction, but to have capital for growth. Going forward you will want to look to your partner to essentially be “the bank” for the company.

There are many options to owners of middle market businesses looking to grow their business or prepare for retirement, but often a Capital Partnership is the most attractive. An M&A advisor can help you begin the process of exploring capital partnership.

posted by Gerald W. Lindsay