Exit and Growth Strategies for Middle Market Businesses

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News From the Healthcare Industry

By Peter Heydenrych | Feb 20, 2015

HealthcareHealthcare M&A activity for North American based target companies in the  sector for Q4 2014 included 94 closed deals (more than 300 announced), with an average enterprise value of $228 million. Full-year totals for 2014 broke previous records for the number of deals and the dollars spent. More than 1,200 healthcare industry transactions were announced last year, an increase of 26% over 2013’s total of 1,035 transactions. The previous record for most transactions in a year was set in 1997, at 1,287. Total deal value reached $387.4 billion in 2014, and an increase of 137% over 2013’s total of $163.7 billion. The pharmaceutical sector accounted for 55% of the year’s total spending ($213 billion) and 14% of the deal volume (188 transactions).

As for the 2015 M&A outlook in the sector, activity is likely to keep booming in the first half of 2015 as Americans continue to enroll in healthcare plans through the exchanges.

Total revenue for the US healthcare sector is forecast to grow at an annual compounded rate of 5 percent between 2014 and 2018. US consumer prices for medical care commodities, an indicator of healthcare costs, increased 4.8 percent in December 2014 compared to the same period in 2013. US consumer prices for medical care services, an indicator of profitability for healthcare services, rose 2.4 percent in December 2014 compared to the same month in 2013. Total US revenue for healthcare and social assistance rose 5.3 percent in the third quarter of 2014 compared to the previous year.

Posted by Peter Heydenrych.

Read the Entire Healthcare 1st Quarter Newsletter Here

Selling a Business – The Cost of Capital

By Peter Heydenrych | Jul 12, 2011

Whether you’re selling a business, buying a business or growing a business…securing affordable funding is an absolute must.  But, what’s affordable and available to one company may simply not be an option for others…depending on the circumstances.  Our July Middle-Market Pulse took a very quick look at the types of funding available to companies at different stages of development…and the costs associated with each funding type.

Woman with GraphOne thing to keep in mind when considering funding a purchase or planning for corporate growth…if you borrow it…you’re obligated to pay it back…whereas if you seek out investors, repayment need not be part of the game plan.  Please comment on your recent experiences obtaining funding.


Read the July Middle Market Pulse.

Posted by Peter Heydenrych.

Is It Time To Sell My Business?

By Peter Heydenrych | May 12, 2011

You may be asking yourself  “Is this the right time to sell my business?”  Well, the answer just may lie in the condition of the capital markets. When the capital markets dried up during 2008 and 2009, the percentage of equity in completed transactions hit levels not seen in years.

M & A Debt Multiples

In order to purchase good, quality companies, buyers were contributing more and more of their own cash to the deal.  In the second quarter of 2009 we saw average equity contributions reach near 60%.  The balance of the deal structure was usually a combination of senior and mezzanine debt.  These high levels of equity contributions were a direct result of the limited capital available in the market.  As lending has slowly improved, we are now seeing the blend of debt to equity more equally balanced.

The April Middle Market Pulse provides a great snapshot about how lending levels effect M&A deal flow, so read the entire article now.

Posted by Peter Heydenrych.

Do Your Diligence Before You Go To Market

By Peter Heydenrych | Mar 22, 2011

 As M&A activity continues to pick up in 2011, and as you enter the final push to get deals to the finish line, deal killers like “time” and “surprises” need to be avoided at all costs.  Jim Zipursky, of the CFA Omaha Office, does a great job in summarizing what can go wrong and how to avoid it.  The article is a must read and you can find it in its entirety here.

Posted by Peter Heydenrych.

Successfully Executing the Optimal Exit Strategy – Positioning Strategies

By Peter Heydenrych | Jan 20, 2010
Part 3 of 7

We have been looking at the two-fold challenge faced by Business Owners wishing to “extract themselves and their wealth” from their businesses in the next decade.  Firstly, that the economic recovery may be slow, and, secondly, that the retirement of the Baby Boomers will put “10 million” businesses on the market in this period.

From this perspective, we recognize that many companies will not sell without careful planning and preparation.  The point of considering possible “Positioning Strategies” is that most business are not being run with a mind to “selling”, and are typically not optimally prepared for an exit because:

  1. the ownership and management roles are not properly separated, and
  2. the key determinants of value, namely growth and risk, are not calibrated to the expectations and desires of market buyers (investors)

Exiting through a sale, recapitalization or merger generally involves investors and may involve lenders. Management is pivotal.  Exiting through a transfer of the business to family, management or employees, or through a gifting strategy, may or may not involve lenders but, once again, management is a pivotal issue.  Exiting through liquidation, on the other hand, does not depend on management to the same extent.

Generally, the different Exit Strategies depend on key considerations as follows: Read more »

Successfully Executing the Optimal Exit Strategy – The Solution

By Peter Heydenrych | Dec 07, 2009
Part 2 of 7: The Solution – Know the Endgame

The Issue is how to Extract yourself and your Wealth

We’re looking at how business owners can most successfully extract themselves and their wealth from the company they own and, typically, run, recognizing that the success of this critical process will have a direct and significant impact on their family, associates, employees and, of course, themselves. Business owners want to know that their legacy is assured and that a wealth transfer can be effected to assure their life-after-business goals, including the protection of their loved ones.

In Part 1 I noted that my Business Owner clients are encountering a challenging and demanding market, partly because credit has been tight, and partly because buyers are already anticipating the boomer exit era which will give them multiple acquisition options and the ability to be selective, pursuing only quality opportunities. I also noted that this “oversupply” does not appear to have an end in sight, which means that business owners expecting to exit in the next decade need to be systematic, employ a professional team, plan, prepare and execute a selected “optimal” exit strategy.

It will take a Military Campaign to engage and overcome this Market Condition

Not a single day goes by without someone in the media asking how it is that we’re engaged in Iraq or Afghanistan without an Exit Strategy. i.e. without knowing when, why and how we will ensure an endgame.

Don’t be reactive or opportunistic about selling your business! Be proactive, methodical and in control! Read more »

Successfully Executing the Optimal Exit Strategy – The Challenge

By Peter Heydenrych | Nov 19, 2009
Part 1 of 7: The Challenge

In advising business owners during this past year, I have seen, firsthand, how unforgiving the market has become. In one case, rather than wait to sign an LOI, a seller invested in audited financial statements simply to increase the odds of being shortlisted. In another, a business owner accepted the buyer’s premise that a full-price deal required that he stand behind his projections in the form of a significant contingent payment.

Is the “unforgiving market” just the recession, or a reflection of a long term reality?

Boom-er Bust

I read daily about the challenges facing boomer business owners expecting to sell in the coming years. Frankly, it’s not just boomer business owners, it’s ALL business owners who are affected by this extraordinary situation. My clients are finding that it takes perfect planning and execution to reach the finals of the beauty contest. Good enough just doesn’t cut it any more … and won’t, for the foreseeable future!

According to an article published by Robert Avery of Cornell University in February 2006, “the majority of boomer wealth is held in 12 million privately owned businesses, of which more than 70% are expected to change hands in the next 10 to 15 years.” Read more »

CFA Opens New Office in DC

By Peter Heydenrych | Apr 20, 2009


Press Release on PR Leap

Deal Volume & Valuations Steady in Q4

By Peter Heydenrych | Feb 26, 2009

A February 19th article in Private Equity Professional Digest titled The Resilient Middle Market Delivers Again: Deal Volume and Valuations Held Steady in Q4 points out that “middle market deal volume and valuations held steady from the third quarter to the fourth quarter of 2008, but the economic crisis severely impacted debt levels, which declined dramatically, according to GF Data Resources (GFDR), a proprietary database that collects data on private-equity transactions valued between $10 million and $250 million.”

In its Q4 report GFDR identified several trends regarding the current state of the market that lower middle-market business owners will want to take note of:

  1. Average multiples on buyout transactions dropped from the mid-6.0x range in the first half of 2007, and have remained in the 5.8x – 6.0x range since.  Valuations have held up particularly well in the $50 million – $100 million TEV tier, where companies appear to benefit from being large enough to mitigate at least some of the risks relating to scale, but still small enough to get financing in the current credit market.
  2. To measure the extent to which good companies have Read more »

When Will I Sell?

By Peter Heydenrych | Aug 13, 2008

“I will sell if I receive the right offer, but I don’t want to market the business!”

Despite its obvious flaws, the above statement reflects the position taken by a surprising number of business owners. In fairness, marketing your business is time consuming and may jeopardize a hard-earned market position if “word gets out”, so the position is understandable. It just doesn’t make a lot of sense!

The “strategy” is flawed because it results in a reactive positioning, yielding all control to the buyer. It suffers from two serious deficiencies: Read more »