InSight

Exit and Growth Strategies for Middle Market Businesses

Author Archive

Energy Sector News

By Roy Graham | Feb 27, 2015

Energy Sector NewsAccording to First Research’s energy sector news,  the recent drop in crude oil prices is putting pressure on larger US producers to scale back on fracking operations. Fracking has been a huge boon to US oil production in recent years, but as prices fall, costs remain high, and the return on investment has diminished. ConocoPhillips recently announced it will cut back drilling operations and exploration spending. Shell also plans to reduce spending and cut employment. Smaller oil companies with lower cost structures are continuing to profit from fracking, but margins may be squeezed if oil prices continue downward, a scenario some experts say is likely given Saudi Arabia’s plan to keep production high. Unlike US producers, Saudi Arabia is able to profit from oil even if prices reach $30 per barrel, according to Forbes.

New Canadian rules for rail transport of oil and ethanol could boost operating costs for oil producers. Tighter regulation came nearly a year after a train derailment in Quebec killed 47 people, prompting regulators in Canada and the US to pursue tighter regulation of oil tank cars. The new Canadian rules, issued in April 2014, call for railroads to develop emergency plans for responding to explosions; the rules also fast-track the retirement of older tank cars and require the adoption of stronger tank cars within the next three years. Prompted by Canada’s moves, regulators in the US are working to update their tanker rules, which have been in dispute for years. US regulations are likely to call for stronger tank cars, reduced speeds for trains carrying oil or ethanol, and safer routes for trains carrying more than 20 tank cars.

Posted by Roy Graham.

Read the Entire Energy M&A 1st Quarter Newsletter Here


How Does FINRA Relate to Selling or Buying a Business?

By Roy Graham | Aug 11, 2014

finraMany business owners are not familiar with FINRA or how it relates to buying or selling a business.  FINRA (Financial Industry Regulatory Authority, Inc.) is an independent, not-for-profit organization authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly.

FINRA’s oversight of interstate securities activities includes not only publicly traded securities but also private securities of any size company including the one you may be buying or selling.  If you are buying or selling a business, FINRA is providing oversight of those FINRA licensed broker-dealers and representatives who may be working on your deal.

FINRA oversight begins with the licensing process.  Every applicant must be sponsored by a FINRA licensed broker-dealer and complete a detailed application.  This application is submitted to FINRA along with the applicant’s finger prints which are sent to the FBI as part of a criminal background check.  After an application is approved there is an examination to establish core level of expertise.  M&A activities require passing the Series 79 examination to secure an “Investment Banking Representative” license.  Certain types of private placements and other types of securities require the Series 7 “General Securities Representative” examination.  Representatives will also take a Series 63 “Uniform Securities Agent State Law” examination.

Once an individual is licensed his or her activities are monitored both by the sponsoring broker-dealer and by FINRA.  FINRA regularly examines broker-dealers and their representatives for compliance with FINRA rules and may bring disciplinary actions and fines against registered brokers and firms for violations.  It may refer particularly egregious cases to the SEC or other agencies for litigation and/or prosecution.

You may wish to check a firm and or broker you are considering.  FINRA provides convenient public access to their “BrokerCheck” feature via their website www.finra.org.  BrokerCheck includes current licensing status and history, employment history and, if any, reported regulatory, customer dispute, criminal and other matters. FINRA recommends that it be the first resource investors turn to when choosing whether to do business or continue to do business with a particular firm or individual.

Posted by Roy Graham.


A Window of Cross Border M&A Opportunity?

By Roy Graham | Aug 15, 2013

With the value of worldwide M&A deals as reported by Thomson Reuters down 13% during the first half of 2013 compared to the prior year and cross border deals off 34%, it might seem strange to be cautiously optimistic about international acquisitions.  A look at what has been unfolding in recent weeks however indicates there may be a window of opportunity in Europe for U.S. companies that will not soon return.

 Cross Border

Source: Thomson Reuters (For full size graph, click here.)

 U.S. Acquirers Poised for International Acquisitions 

U.S. companies are positioned to go on the hunt.  A recent report by KMPG found that, “U.S. companies have more capacity than their global counterparts…”.  “Relatively easy access to capital, elevated cash levels on corporate balance sheets, and low interest rates in the U.S. translates into high transaction capacity…”.  While the US economy is still not generating the desired growth in jobs and regional weaknesses persist, sectors like energy are doing quite well and others like real estate and manufacturing are beginning to show very positive trends. Read more »


GrowthEconomy.org – Private vs. Public Capital

By Roy Graham | May 18, 2012

Middle Market PulseWe touched briefly on the unveiling of the new website, growtheconomy.org in May’s edition of our monthly brief, The Middle Market Pulse. The new site, growtheconomy.org, combines two independent databases, PitchBook (directory of over 16,500 establishments supported by private capital) and NETS (National Establishment Time Series, a collaboration with Dun and Bradstreet, NETS is a time-series database of 44 million U.S. business establishments) allowing users to compare the performance of private capital-backed companies to the general U.S. economy from 2009 going back to 1995 by state and MSA.  It will be interesting to see the addition of 2010 and 2011 data into the mix, both from a short term timeline and long term results. 

My guess is that the additional two years of data will simply be putting an exclamation point on the fact that over time, private capital returns have solidly outperformed those in the public domain.  It’s great to have a tool like this which focuses solidly on middle-market transactions and validates the performance of private capital at work. 

Posted by Roy Graham.


Taxes – The Key to Keeping More In The Sale of Your Business

By Roy Graham | Jan 12, 2012

Money BlocksThey say nothing’s certain but death and taxes…but I’m not quite sure how certain taxes really are.  Don’t get me wrong.  I know they’ll always exist.  But tax laws are constantly changing.  And, taxes become very relevant when we contemplate large life events – like selling one’s business.

One of my colleagues, David DuWaldt, wrote a great piece about how taxes and M&A deal structure work hand in hand.  David does a great job explaining why the tax interests of the buyer and those of the seller are often at odds with one another and how a resourcefully structured transaction can bridge the gap between the two.  I suggest you read David’s full article here.

Because the laws are constantly changing, it’s important to work with a trusted team of advisors including your accountant, lawyer, financial planner and investment banker to design the M&A deal structure that provides the best liquidity outcome for you.  Remember…it’s what you keep that counts.

Posted by Roy Graham.


Why Work With a Private Equity Firm For Recapitalization?

By Roy Graham | Jul 08, 2011

The private equity firms really don’t want to run a business.  They want you to do that.  They will provide guidance and support, and at a board level provide you resourcesMoney that you probably don’t have today.  The object of the game is that with their help you can build the company to a much greater value and size.

Generally speaking, private equity groups, over a period of 3-7 years, want to accomplish that goal and make a second sale.  When they cash out, you’ll also cash out and it’s very probable that your second check could be much larger than your first check.

Watch the full video interview on “Why Work With a Private Equity Firm for Recapitalization?”

Find out more about raising capital for your business.

Posted by Roy Graham.

 

 


The Energy Markets – Heating Up

By Roy Graham | Jun 08, 2011

2010 was a difficult year for the oil and gas industry, but if we’ve learned anything about the resiliency and adaptability of the industry is that 2011 could very well signal a reversal of fortune.  M&A activity in Q1 of 2011 has heated up, the global energy markets are expanding and a new oil superpower is on the horizon.  Read the entire Q1 Energy Newsletter authored by CFA’s Bud Boles and the Energy Industry Practice group for an in depth analysis.

Worldwide E&P Spending

To subscribe to CFA’s Energy Newsletter and to download past issues, please click here.

Posted by Roy Graham.


Constant Change in Energy Markets

By Roy Graham | Mar 04, 2011

Energy markets are in constant flux with sometimes sharp and abrupt spikes occurring while simultaneous long-term trends are evolving on an underlying plane.  The nature of these markets makes it imperative to stay abreast of energy news and to understand the multi-dimensional dynamics of the markets and their affects on the economy and your business growth strategies.  Corporate Finance Associates’ Energy Practice Group is dedicated to staying current on the changes in the Energy Markets and to identifying long-term trends.  Led by Chairman Bud Boles, an industry veteran with more than 50 years of global experience, the CFA Energy Practice Group publishes a quarterly newsletter that reports and analyzes these changes.

Some recent headlines: Crude oil prices were propelled higher at the end of January 2011 due to political unrest in Egypt and the Middle East.  According to the International Energy Agency Oil Market Report, global oil product demand has been revised up by 120 kb/d.  IEA reported that, at 87.8 mb/d in 2010, global oil demand rose by 2.8 mb/d year-on-year, and should reach 89.3 mb/d in 2011 (+1.5 mb/d year on-year).  There are many significant uncertainties that could push oil prices higher or lower than current expectations. 

Among the uncertainties are decisions by key OPEC member countries regarding their production response to the global recovery in oil demand; the rate of economic recovery, both domestically and globally; fiscal issues facing national and sub-national governments; and China’s efforts to address concerns regarding its growth and inflation rates.  In addition, even though Egypt is not a major supplier of crude oil or natural gas to world markets, the recent unrest in that country which has spread throughout the region raises concerns over world energy supplies.   Key transit routes for energy and other goods could be disrupted, while pipelines and ports could become targets for warring factions.

To read the 2010 Q4 Energy Newsletter for more Energy Market information click here.

Posted by Roy Graham.


Data Suggests Upward M&A Trend in 2011

By Roy Graham | Jan 18, 2011

All markets go through peaks and troughs and the middle market mergers and acquisition industry is no exception.  What’s on the horizon for 2011? Important developments in the lower middle market likely signal the acceleration of an upward trend in deal flow and more importantly for sellers, a trend in higher valuations.  For a more in depth look at how historical data trends point to increased M&A activity in 2011, check out the executive briefing “Middle Market Pulse” January edition.

Posted by Roy Graham.


Funding Your Transition From Executive to Owner

By Roy Graham | Aug 11, 2010

You are an accomplished senior level executive with a strong record of success in corporate America but you want more. You understand your industry as well as anyone and you want to capitalize on that knowledge by acquiring a company that you can grow to build wealth. How do you get started? What is the process? Is it doable?

You may want to start by asking yourself if you would want to acquire the company that you are currently working. If the answer is yes and you believe ownership might be receptive, a management buyout may be a great place to start. After all, you already know your own company so you probably know of any skeletons that may be hidden away as well as the kinds of opportunity that exist. Your due diligence should be easier and you’ll have little, if any, learning curve.

Perhaps your company isn’t available, it’s not attractive or you have an alternative strategy and wish to focus on acquiring another company or a buildup of companies. These are all viable options for which there will likely be multiple sources of funding if you are well prepared and understand the process.

There are many investment groups that will fall over each other in their rush for the opportunity to back a strong management team and a good target company. You can reach out directly to private equity groups and try to handle the process yourself but you may find it frustrating as you navigate a myriad of hurdles. Read more »