Best Practices

The Case for Moving Forward With M&A


With travel restrictions, portfolio companies in crisis mode, and a very skittish global economy, now is certainly not the time for investors and acquirers to focus on M&A. …or is it? While the idea of doing deals right now might seem daunting, not to mention logistically challenging (how exactly do you conduct on-site diligence in a shutdown?), there’s an argument to be made for M&A to keep moving forward, despite the circumstances. Data from the global financial crisis (GFC) of 2007-2009 “shows that companies that made significant acquisitions during an economic downturn outperform those that did not,” argues a recent article [...]

The Case for Moving Forward With M&A2020-09-30T10:22:10-04:00

Three Types of Procrastination and How They Affect Your Work


There are three different types of procrastination that we see today.  First is classic procrastination which is the act of consciously delaying what we know we should be doing:   I come home from the office at night and I have a stack of bills on the kitchen counter that need to be paid. I’m tired and exhausted. Rather than paying the bills, I’m going to sit on the couch and zone out and watch Sports Center.  That’s the classic form of procrastination we are familiar with.  There is also another type of procrastination which I’ve coined a phrase for, instead of [...]

Three Types of Procrastination and How They Affect Your Work2020-09-01T17:05:16-04:00

Is Your Company Failing? You May Not Need Bankruptcy Law


Resolving business failures cheaply and rapidly has never been more important, with Covid-19 and the recession about to push record numbers of companies under. But consider what a small-business owner faces: Your company is on the brink, you can’t pay your employees or suppliers, and now you’re expected to master the complex vocabulary of federal bankruptcy law. There’s Chapter 11, Chapter 7, Chapter 13, Subchapter V, Section 363, and on and on. The process looks expensive and time-consuming, and the chance of emerging with a going concern seems slim. The Uniform Commercial Code, which traces its origins to 1892, just might be the answer. It’s [...]

Is Your Company Failing? You May Not Need Bankruptcy Law2020-09-01T16:51:03-04:00

The Impact of a PPP Loan on Recasting


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 Recasting2020-08-05T18:17:26-04:00

Diving into Diligence


“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 Diligence2020-06-30T13:57:49-04:00

Why Now is the Time to Buy a Business


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 Business2020-06-30T13:43:42-04:00

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


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 II2020-06-02T15:50:25-04:00

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


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 Deal2020-06-02T15:38:30-04:00

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


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 Practices2020-03-03T13:39:51-05:00

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


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 Conference2020-03-03T13:39:58-05:00