With nearly half a billion dollars to invest, US Private Equity firms are a major source of capital for middle market business owners…both those seeking growth partners and those interested in divestiture.  This quarter’s Capital Ideas takes an open, candid look at the types of private equity firms in the private equity space and examines why you may want to take a careful look at a potential private equity partner before you sign on the dotted line.   Not all private equity firms are created equal…so as the article suggests…seller beware.  You can read the article in its entirety by clicking here.

Posted by Greg McKinley.

If you are a middle market business owner and are contemplating a sale…more than likely the first thing you will ask your investment banker is “what’s my business worth?”   You will become familiar with terms like “valuation” and “multiples”, and will want to be certain that when you sell the business you have spent a lifetime building, that you are selling at the right time.

Data shows that for the past 10 years, valuations and multiples for middle market businesses have remained fairly steady… and that’s good news for anyone considering a sale.  There really is no right or wrong time to sell a quality business.  March’s issue of the Middle Market Pulse gives some insight into this issue and you can read it here.

Posted by Greg McKinley.

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.

What You Need to Know Now

The hour that I spent listening to an overview of the Manufacturing Industry M&A Market Monday morning was time well spent.  More than anything it confirms what I already knew to be true…even looking at a very narrow sector of the market…times, they are improving…albeit slowly.  Morgan Burns of Faegre & Benson, Michael Dillahunt of Piper Jaffrey, Mike Israel, Mill City Capital and Bob McGrath of H.B. Fuller & Company joined forces to discuss the current state of M&A in the manufacturing sector, each bringing a different expertise to the panel.  If you didn’t have time to listen, but still want to know what was said, read on. Read more »

Case Study

Situation: Twenty years following the launch of ConArt, a manufacturer and erector of precast architectural and structural components, Mr. Lyle found himself seeking to sell his company during the height of one of the country’s worst economic and construction industry downturns in recent history.

Solution: Faced with an unusually difficult engagement, CFA prepared a detailed geographic and industry sector analysis, which was effective in presenting the fact that ConArt was not suffering from the effects of the construction industry downturn. Bolstered by the in-depth report, KT Capital Partners, a private equity fund, acquired a company that is strategically located and positioned to take advantage of a vast number of growth opportunities in Southeastern United States.

When selling a business there are many layers of confidentiality and they are all a major concern to business sellers. More often than not, when we hear a seller express concern about confidentiality they are primarily focused on the possible damage competitors might cause should they learn that the business is for sale. This is a real concern about which many articles have been written; however, another layer of confidentiality which has received less attention is that which relates to employees.

Sound working relations with employees are an important component of every business. While confidentiality can be a far greater perceived problem with regard to employees than an actual problem, with proper planning it is possible to minimize the risk of untimely disclosures. Read more »