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.

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Posted by Greg McKinley.

There are five deal factors so significant that they don’t just affect price, they affect the fundamental ability to sell your company and complete a deal.  For this reason, these are considered Deal Killers.   If a company has one or more of these attributes, it will be difficult to find any buyer.  Any buyer will very likely discount the value to accommodate the risk that these Deal Killers bring.

My first three blog posts in this series discussed Deal Killer #1, No Management Depth and Deal Killer # 2, Customer Concentration and Deal Killer #3, Inconsistent Financials.  This post will focus on another problem some sellers may face…environmental concerns.

Deal Killer #4 – The Environmental Factor Read more »

There are five deal factors so significant that they don’t just affect price, they affect the fundamental ability to sell your company and complete a deal.  For this reason, these are considered Deal Killers.   If a company has one or more of these attributes, it will be difficult to find any buyer.  Any buyer will very likely discount the value to accommodate the risk that these Deal Killers bring.

My first two blog posts in this series discussed Deal Killer #1  No Management Depth and Deal Killer #2 Customer Concentration.  This post will focus on a current problem for many companies…financial inconsistency.

Deal Killer #3 – Financial Inconsistency Read more »

As a middle market investment banker, I talk with business owners every day who are thinking about selling a company.  They proclaim that they are finally ready to move on to another chapter in their lives and it’s now time to sell the business that they have spent a lifetime building.  Interestingly, many of these business owners have done little or no planning for their business exit and although they may be ready to sell…their business isn’t.  Learn how to.. Read more »

There are five deal factors so significant that they don’t just affect price, they affect the fundamental ability to sell your company and complete a deal.  For this reason, these are considered Deal Killers.   If a company has one or more of these attributes, it will be difficult to find any buyer.  Any buyer will very likely discount the value to accommodate the risk that these Deal Killers bring.

My first blog post in this series discussed Deal Killer #1, No Management Depth.  The second deal killer focuses on the lifeline of a business…its customers. Read more »

The Numbers Tell The Story

Owners who are waiting for “market conditions” or “value multiples” to improve before they take action to sell their companies are missing one of the best “seller’s market” I have seen in many years of dealmaking.

This is clearly demonstrated by the numbers on a company that we are selling right now.  Two company owners engaged us to sell the company that they started 25 years ago.  It is a good stable manufacturing company.  The company has sales of around $15 million that had been flat for the last three years, and it has Adjusted EBITDA of about $2 million. Their company is very typical of the kinds of deals that CFA represents. Read more »

Company value is a function of the buyer’s expectation of future cash flow, factored for the buyer’s perceived risk of not achieving that cash flow.  There are many factors that will affect the buyers’ perceived risk.  These include things like whether the company’s industry has good growth prospects, whether the company’s products are proprietary or commodity, and how capital intensive the business is.  The buyer’s understanding of the effects of these factors is typically negotiated as a higher or lower valuation.

However, there are five factors that are so significant that they don’t affect price: they affect the fundamental ability to sell your company and complete a deal.  For this reason, these are considered Deal Killers.   If a company has one or more of these attributes, it will be difficult to find any buyer.  Any buyer will very likely discount the value to accommodate the risk that these Deal Killers bring.

Over the course of my next five blog posts, I will be discussing the five most significant Deal Killers, along with recommended antidotes to diminish the effect of these situations on the deal.

Deal Killer #1:

NO MANAGEMENT DEPTH.   This Deal Killer is the most common, the easiest to resolve, and the one that sellers resist the most.  Nothing will kill a deal faster than the buyer’s perception that the keys to the company’s success are locked inside one individual. Read more »

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

You’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 »

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 extremely 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.

Posted by Gerald Lindsay.

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

Selling Business Myths – Part 5

Confidentiality 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.