Best Practices Archives - The M&A Source

The Impact of a PPP Loan on Recasting
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The Impact of a PPP Loan on Recasting

Sarah Pinkowski2020-08-05T18:17:26-04:00

A key point regarding a PPP Loan is that it is a loan. When the Borrower receives the loan, the proceeds should be recorded on the Balance Sheet as a Note Payable which is a liability. The loan proceeds should not be posted on the Income Statement as income. If the loan ends up being forgiven, it should be handled for income reporting as follows: Financial Statements (specifically the Income Statement) – The forgiven loan amount is an elimination of an obligation to pay a debt. An appropriate reporting of this elimination is for it to be presented as [...]

The Impact of a PPP Loan on RecastingSarah Pinkowski2020-08-05T18:17:26-04:00

Diving into Diligence
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Diving into Diligence

Sarah Pinkowski2020-06-30T13:57:49-04:00

“Financial Due Diligence” (FDD) and “Quality of Earnings” (QoE) are often bandied around during a transaction —sometimes used interchangeably— but what’s the difference? In this post, I explore the key differences between typical FDD and QoE, including when each term applies and what they tell us. Being Diligent FDD and QoE are both exercises in diligence, but they serve different purposes – and sometimes at the same time. On the buy- and sell-side of a transaction, owner-operators, lenders, investors, and, at times, regulators will request that FDD or QoE is performed so that relevant stakeholders can gain assurance and mitigate their risk. From an owner’s perspective, [...]

Diving into DiligenceSarah Pinkowski2020-06-30T13:57:49-04:00

Why Now is the Time to Buy a Business
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Why Now is the Time to Buy a Business

Sarah Pinkowski2020-06-30T13:43:42-04:00

Many small businesses have closed, severely reduced output, or are slowly reopening during the COVID-19 pandemic.  So why would a business buyer consider moving forward with a transaction in such a dismal environment? This is why: Business Owners are Motivated to Sell A large percentage of small business owners are Baby Boomers that have survived 9/11 and the Great Recession. These owners are near retirement, yet they have been on the fence about selling and have had a difficult time walking away from the steady profits they have received from the recent strong economy. Now, COVID-19 is changing their outlook and many are ready [...]

Why Now is the Time to Buy a BusinessSarah Pinkowski2020-06-30T13:43:42-04:00

Revenue Recognition and Private Equity: Are You Paying Attention? Part II
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Revenue Recognition and Private Equity: Are You Paying Attention? Part II

Sarah Pinkowski2020-06-02T15:50:25-04:00

In our previous article, we broke down one of the most considerably penetrating compliance changes in over a decade (Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09)) and its significant impact on private equity groups. Between May 2014 and today, amendments and implementation guidance for both companies and practitioners have been released; meaning, PEGs should prepare to be well versed on the standard and how it will impact portfolio companies, recent acquisitions, acquisition targets, and even exit strategies. The following is part two in a two-part article series. PRE-TRANSACTION CONSIDERATIONS Are you currently evaluating potential [...]

Revenue Recognition and Private Equity: Are You Paying Attention? Part IISarah Pinkowski2020-06-02T15:50:25-04:00

The 4 Types of Family Office Investors and Which Are Likely to Close a Deal
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The 4 Types of Family Office Investors and Which Are Likely to Close a Deal

Sarah Pinkowski2020-06-02T15:38:30-04:00

Doing business with a single-family office (SFO) is not an easy proposition, even finding contact information for an office principal can be a daunting feat. There is a tension in how you think about family offices. Like Willie Sutton remarked about banks, you cannot disregard them entirely simply because “that's where the money is.” But at the same time, their reclusive and nebulous nature makes dealing with them even more challenging. What I would like to do today is review the family office marketplace in aggregate, and then offer you a framework for how to think about the various types [...]

The 4 Types of Family Office Investors and Which Are Likely to Close a DealSarah Pinkowski2020-06-02T15:38:30-04:00

Closing is Just the Beginning – Post-Merger Integration Plan Best Practices
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Closing is Just the Beginning – Post-Merger Integration Plan Best Practices

Sarah Pinkowski2020-03-03T13:39:51-05:00

Growth by acquisition can be a risky proposition, but it carries less risk when compared with organic growth. In theory, you are paying market value for a book of business that will immediately begin generating cash flow. If the valuation is reasonable, then the deal should be appealing to shareholders. In contrast, organic growth or investment in new growth areas doesn’t always materialize. Acquisitions are the preferred choice for many companies looking to grow on a retracted timetable, and the process is an exciting one. When it comes to acquisitions, the “closing date” is often seen as the crescendo of a [...]

Closing is Just the Beginning – Post-Merger Integration Plan Best PracticesSarah Pinkowski2020-03-03T13:39:51-05:00

3 Takeaways From Harvard Business School’s 2019 Search Fund Conference
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3 Takeaways From Harvard Business School’s 2019 Search Fund Conference

Sarah Pinkowski2020-03-03T13:39:58-05:00

Though search funds still make up a relatively small percentage of lower middle market investors, this investment model continues to gain prominence. In December 2019, I had the pleasure of attending the HBS Entrepreneurship Through Acquisition (ETA) conference for my third consecutive year. It’s been incredible to see firsthand the search fund community gaining prominence. I’d like to sincerely thank Harvard Business School and the ETA Club at HBS for producing the incredible event. For those unfamiliar with ETA, it is a career path in which professionals (often after an MBA program) acquire a profitable lower middle market business and assume [...]

3 Takeaways From Harvard Business School’s 2019 Search Fund ConferenceSarah Pinkowski2020-03-03T13:39:58-05:00

Value Rises, When There are No Surprises!
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Value Rises, When There are No Surprises!

Sarah Pinkowski2020-02-05T09:38:00-05:00

How to protect your client’s business value from unplanned, chance events. As we all know, there are rarely good surprises in business. Record concurrent years of positive economic growth are behind us, with an unclear future. Risk exposures beyond our control loom daily -- tariffs, trade wars, industry slowdowns, recession, partisan politics or international crisis. Of equal concern, internal operating risks abound -- increasing pay rates, hiring difficulties, technology edge and compliance requirements to name a few. Most business owners want to enjoy the value that took years to develop. So how can we help them protect and grow that same [...]

Value Rises, When There are No Surprises!Sarah Pinkowski2020-02-05T09:38:00-05:00

A Business Valuation is Not Just In the Numbers: Part Two

Laura Wright2020-02-05T09:37:47-05:00

A Business Valuation is Not Just In the Numbers Leadership & Culture The culture of an enterprise may be hard to measure, but it nevertheless very important to the worth and value of a business. Employee retention and turnover is one important variable that appraisers will want to understand, as well as some of the underlying drivers. Companies with weaker benefits and compensation programs will likely face more competitive employment pressures and increased turnover, which in turn creates increased discounts to value when analyzed by a qualified appraiser. Another issue many businesses face is key person risk. We have enjoyed a [...]

A Business Valuation is Not Just In the Numbers: Part TwoLaura Wright2020-02-05T09:37:47-05:00

A Business Valuation is Not Just In the Numbers: Part One

Laura Wright2020-01-07T12:34:11-05:00

A Business Valuation is Not Just In the Numbers As a professional business appraiser, we are called to provide our best estimate of fair value. On its face, it would seem relatively straightforward to assume that most of it has to do with the financial well-being of the company, which it does. However, it is also very easy to overlook some of the more salient issues in the ongoing operations of a business which subtract meaningful dollars from its value. In our experience, the issues most prevalent impacting potential valuations can be found in the following areas: financial operations, sales function, [...]

A Business Valuation is Not Just In the Numbers: Part OneLaura Wright2020-01-07T12:34:11-05:00