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 »

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.

In the best of times it’s still challenging to access growth capital for small and lower middle market sized companies.  Other than bank loans and economic development agencies there are few substantial sources of organized capital available for early and growth stage companies. However, some often overlooked sources of funding are the investment accounts of Self-Directed IRA and 401(K) retirement accounts.

Millions of Americans hold hundreds of billions of dollars in their IRA and 401(K) plan accounts. Many are disappointed in the performance and seek alternatives to try and improve on their results as they continue to fund these accounts with regular periodic contributions.

Under the IRS tax code certain private investment transactions are permitted within the investment guidelines for IRA and 401(K) retirement plan accounts. (See you tax and retirement specialist for details) They include private equity investments, commercial real estate, loans to businesses and much more. Read more »

Overseas Investors See Value in US Middle-Market Businesses

In an earlier blog, I made the suggestion to look beyond our borders for possible acquisition targets, specifically in Brazil, where capital from the US as well as from European and Asian nations had been flowing at increasing rates over the recent years. This time, I would like to call your attention to the opposite phenomenon, one that has already been tagged by some investment bankers as a type of “reverse colonialism”.

While the economies of the developed world are still weak after the 2008 banking crisis in the US and the debt crisis that started in Europe in 2010, the emerging economies have been thriving, blessed with a continuous rise in commodity prices and their surprisingly sound fiscal condition.  This has created an unusual appetite for acquisition in the US and Europe by investors from countries such as Brazil, India, or Mexico among others. In fact, according to the World Bank the US and Britain alone were the destination of over $320 billion in emerging-market acquisitions between 2000 and 2010. Read more »

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.