Welcome to this issue of Capital Ideas, our
newsletter dedicated to business selling, business buying and
financial resources for mid-market companies.
Real Estate Sale – Leasebacks
Unlocking Valuable Capital
By Peter Moore , Principal
Portland, Maine Office, Corporate Finance Associates
& Mark Carroll , Vice President
STAG Capital Partners, Boston, MA
If your company owns its own real estate and it is not leveraged
up too much you are likely sitting
on some seriously under-utilized capital. Many companies own their own real estate and account for it as a depreciating asset on their balance sheet. A sale-leaseback allows the
company to sell its real property to a buyer who then leases it back to the company on a long term operating lease. There is no change of use, no disruption of business, but new
ownership of the asset and a landlord/tenant relationship. Most leases are “triple net” (NNN) with the tenant paying all the expenses of operating and using the property.
Reasons for Sale-Leaseback: Why do a sale leaseback? Here are two reasons: 1) If you can generate a better
rate of return deploying capital in the operating side of your business rather than using it to own real estate, you are often better off considering a sale-leaseback. 2) If you want
to maximize the return on... Read more »
What's It Worth? That Depends...
Grooming May Make a Difference
By Gary Roelke , Principal
New York Metro Region Office, Corporate Finance Associates
What is your company worth? That is a function of many factors, including historic and future financial performance, industry risks, market timing, method of sale and the nature of the
Value becomes an absolute only at the very instant a knowledgeable buyer under no compulsion to purchase,
authorizes the wire transfer of funds to the bank account of a knowledgeable seller under no compulsion to sell. Otherwise, different people with different needs, resources and
limitations will perceive value of the same asset in differing ways. As the business owner, you can use this knowledge to your benefit by specifically grooming the business to fit the
probable requirements of the eventual new owners.
A recently published graduate school text on private capital market theory1 postulates that, in the transfer of business ownership it is owner motives that determine...
Read more »
Feature Capital Placement
Situation: In 1991 Carol and Jim Townsend acquired a small employment agency and entered the world of entrepreneurs. Quickly, they moved into providing temporary employees and eventually built their business into a regional
powerhouse. Their company, Sunrise Enterprises, based in Dubuque, Iowa had 13 offices in a three-state area and billed over 2 million hours of work per year.
Solution: Based on a referral from their CPA, Carol and Jim retained CFA to sell their business to a buyer who would continue to develop Sunrise. Ultimately, CFA found a complementary, strategic buyer
who would not only acquire the business, but would, in turn, sell part of the company to Sunrise’s key executive. The sellers got the value they wanted for the business and achieved their retirement goal.
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