Capital Ideas for Middle Market Businesses

Welcome to this issue of Capital Ideas, our newsletter dedicated to business selling, business buying and financial resources for mid-market companies.

Get Ready for the Next M&A Wave

Six Value Builders

By Jay Carter, Principal
Charlotte Office, Corporate Finance Associates

Just twelve months ago, most owners of privately held businesses were feeling pretty upbeat. Many had enjoyed a record-breaking year in 2006, and 2007 was shaping up to be another high-water mark. One year ago (unless you were a sub-prime lender or starter-home track builder!) there was still plenty of money available to support merger and acquisition activity at valuation multiples that were at unprecedented levels.

Today, just twelve months later, many of these same successful business owners across the country are reeling from the combined effects of the expanding credit crunch and economic slowdown. Those who had “been thinking” about selling their companies and creating long-term financial security and more free time for themselves now feel trapped and unable to pursue their goals.

As a middle market investment banker and exit strategy advisor, I have observed many owners of privately held companies are now doing nothing to advance their goal of financial security and/or retirement. Instead, they have retreated to the “safety” of waiting until the next wave of M&A activity—the next valuation peak—when, presumably they will start thinking about selling their business again. The problem is... Read more »


Effective Business Plan for Raising Capital

A Prerequisite in Today's Market

By David DuWaldt, Principal
Los Angeles Office, Corporate Finance Associates

If you are trying to raise capital to expand your business or purchase capital assets then you better have a written business plan. An effective business plan is a document that conveys the growth potential and objectives of your company. It should be viewed as a marketing or promotional piece that can successfully sell your business model to providers of capital by emphasizing the strengths of your company but, at the same time, not hiding any of the obstacles.

When you prepare a business plan, special attention should be given to the following areas:

Executive Summary

This is the most important section of any business plan. Providers of capital typically read this part first in order to help them determine whether or not your company is creditworthy and if management appears to be realistic about where the company wants to be in the future.

One of the goals in writing an executive summary is to capture the... Read more »


Feature Acquisition

Situation: In 2001 CFA was engaged by Bronco Manufacturing, an oil rigs parts specialist, to prepare a business valuation and assist in evaluating unsolicited offers over the next couple of years. Bruce and Max, the firms partners, asked CFA to take Bronco to market in 2004. Bruce was 60 and ready to retire while Max was 50 and wanted to grow the company more aggressively.

Solution: We considered a leverage buyout for Max, but determined a re-cap with a private equity group was a better strategy for both owners. This journey took three years and we kissed a lot of frogs along the way. We contacted over 100 potential acquirers. Ninety percent were Private Equity firms. From start to finish, Bronco received 11 letters of intent and ultimately found the right partner. The long time line may lead one to think something was wrong with Bronco, but that is not the case. The client was very selective. The good news was that the value of the company quadrupled during that period. This transaction illustrates the importance of patience, persistence and tenacity, as well as a belief that there was a "right" buyer for Bronco.


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