Capital Ideas | Corporate Finance Associates | Newsletter Q4 2016

 
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.


How Long Will it Take to Sell My Business?

By Jeremiah Hughes, Managing Director
Omaha Office
Corporate Finance Associates

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That’s perhaps one of the ‘top five’ most common questions business owners ask when considering a sale, yet, the most accurate way to respond is, “it depends.” There are many factors affecting how long the sale process takes; some, such as price expectations, can string out the process, and others, such as hiring an experienced M&A advisor, can help to expedite it.

Typically, the sale process is a six to 12 month endeavor. Oftentimes, advisors are approached in the second or third quarter of the year with expectations of closing a business sale before year-end. While it is possible for a deal to get done in three to four months, it is highly unlikely. The following is an overview of the sale process to better explain why it takes so much time to complete. For the sake of simplification, let’s break down the process into three parts: pre-marketing, marketing, and closing.

The pre-marketing phase is typically a one to two month process. This involves a lot of information dissemination and research. Information about the business is collected and articulated into marketing materials, which are reports and various other supporting documents instrumental in introducing and educating potential acquirers about the sale of a business. The research part of this process entails combing through lists of companies and investment firms in order to qualify them as potential buyers for the market outreach. The main factors affecting the timing of this part of the process include how organized the information about the business is and how quickly the information can be delivered.

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Growing Before Selling

 

By Patrick Powell, Managing Director
Lexington Office
Corporate Finance Associates

Every business owner eventually comes to a point in his or her life when it makes sense to convert the company they have created into liquid wealth and move on to the next phase of life after business. For those caught off-guard without a solid exit strategy, the net proceeds may fall short of expectations. But for those with time and a solid plan, the sale of a company at maximum value is a realistic goal. And yes, company size does make a difference. The larger the company, the more attractive it can be to both strategic and financial investors. So, how do you grow your company before a sale?

There are two main methods to grow a business. Organic growth is the most basic and fundamental avenue of growth. A company gradually expands its customer base, increases revenues and gains a larger share of the market. This process is financed purely through the reinvestment of the profits of the company by the owners and management. This process can often take years but allows the company to maintain its culture and levels of quality. There are plusses and minuses with this approach. A company that grows slowly and uses its internal resources wisely is committed to the success of the business model.

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Featured Transaction - CFA Chicago

The Situation:

Founded in 1937, Great Lakes Fasteners (GLF) is a Grand Rapids, Michigan based leading independent distributor of industrial fasteners, Class C components, and supplies to manufacturers. The company has a broad product portfolio consisting of more than 18,000 SKUs including anchors, bolts, clips, pins, screw machine products, washers, adhesives and more. GLF’s core focus is on application-specific, value-added solutions such as robust vendor managed inventory (VMI) offerings and specialty non-standard, highly engineered fasteners. They were interested in exploring a partnership which would provide a solid foundation for future growth.

The Solution:

Great Lakes Fasteners engaged the CFA Chicago team as their sole M&A advisor, led by Managing Director Anthony Contaldo. After careful consideration, GLF determined that All Integrated Solutions, a leading value-added distributor of industrial fasteners, was the perfect fit, both strategically and culturally. "GLF has an exceptional management team and it is going to be exciting to see the positive impact this transaction has on the companies' respective client bases," stated Anthony Contaldo.

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