Buying and Selling

Making Intangibles Tangible: The Benefits of Measuring Intangible Assets If you have trouble understanding intangible assets, don’t worry – you’re not alone. Any discussion around intangibles can get complex due to accounting rules that are hard to explain, let alone understand. There are certain basic concepts, such as intangible assets, that as a manager you should know well. Why? Because intangibles are meaningful and material to your business at many different levels, and yet you cannot rely on accounting to help manage them because intangibles are not on your company’s balance sheet unless they have been acquired. And, in another strange [...]

Restrictive Covenants in M&A Transactions As most, if not all, M&A advisors have likely noticed, restrictive covenants, primarily in the form of non-competition and non-solicitation agreements or provisions, are customarily included in M&A transactions. The main purpose of including restrictive covenants in an M&A transaction is to safeguard the buyer’s value in the purchased business. By restricting the seller’s ability to compete with the purchased business, for a certain period of time following the closing of the transaction, the buyer is looking to ensure that the business that the buyer just acquired does not lose value due to the seller competing [...]

Earnouts Don't Deserve A Bad Reputation By Scott Bushkie, CBI, M&AMI When selling a business, an earnout is basically a commitment by the buyer to pay the seller a certain amount of money tied to future performance after a sale. While earnouts are a great way to boost the value of your company, they can be a dicey proposition for a seller. Even if you stay on with the business, you don't have complete control over how new ownership runs the company. If the business does well, you get paid. If business drops, you don't. Most times in the M&A world, [...]

Risk Of Recession: Should I Sell My Business Now Many economists are suggesting that the U.S. is heading towards an economic recession. BBVA projections indicate a 60% probability that a recession will begin in the next 24 months, and Deliotte points out that a slowdown is “increasingly likely.” As a business owner, a looming recession can be difficult and strenuous. Should you hunker down and try to weather the storm, or should you jump ship now before the going gets tough?  As with most complex business topics, the answer isn’t an easy one. There are several things to consider, and your [...]

Success to Significance: Starting a New Future after the Business Exit By Laura Malone, CAP®, CEPA, VP-Corporate/Complex Giving American Endowment Foundation The scenario may be familiar. A business owner arrives at their financial advisor’s office looking to exit their business, but unsure how to get the most financial benefit from that exit. A topic that both the business owner and financial advisor often miss out on is an understanding of how a charitable plan can help the owner build something of significance beyond their business while enjoying tax savings and preserving their wealth. What many financial advisors don’t realize about their [...]

Is your client’s company one of the many in the United States that is experiencing a rapid increase of exported goods? Exporting creates an opportunity to use a tax savings strategy by creating an Interest Charge – Domestic International Sales Corporation (IC-DISC). Not just for large C-Corporations, an IC-DISC applies to small/medium pass-through entities as well. If your client’s company’s export revenue averages $1 million per year and/or is projected to be growing in the future, they should explore how an IC-DISC can result in a significantly lower tax bill for your client’s organization. What is an IC-DISC? An IC-DISC is a [...]

Secrets of Market Multiples in Valuation Ever wondered why two seemingly similar companies sell at significantly different multiples? What are buyers considering in ostensibly comparable companies that cause sale price differences? Let's discuss five key secrets of market multiples: 1. Revenue/Earnings Growth Potential Buyers are willing to pay more for companies with high growth potential than companies perceived as having low growth potential. The reasons are those high-growth-potential companies: • create exceptional customer value; • exploit high-growth market segments; • are innovative; • have a strong brand identity; • create service differentiation; and • invest in the development and delivery of [...]

Why “One (Buyer) Is the Loneliest Number” You own a successful business that you’ve grown through the years.   You’ve just recently thought about selling.  Lo and behold, another business in your industry approaches you to see if you’d like to sell.  What great timing and what an opportunity, right?  Wrong!  If you are serious about selling your business, you need to go to market and not settle for one buyer. If you focus on just one buyer, you’ll be going down a path with no leverage. Here are 4 reasons why you do not want to talk to only one buyer [...]

Takeaway: A seller who is looking for capital and expertise to continue growing the business may want to consider being part of a roll-up. Creating value when acquiring and combining companies is not easy. In theory, the sum of the parts will be more valuable than each part individually. However, there needs to be some cohesion to a roll-up. Alternatively, you end up with a disjointed company that does not command a valuation premium, but rather should be discounted to its peers. How do financial buyers generate additional value when they combine companies? Here are some value creation techniques used in roll-ups. As a seller, you [...]

Takeaway: We all have to exit our companies someday, but whether we do it well or poorly can be decided by some good planning. We understand that business owners are so busy addressing today’s economic challenges that they can overlook the critical task of exit planning. We also understand that, at some point, all owners exit their businesses. When that day arrives, owners want to exit on their terms, the most important of which are financial independenceand choosing the person or entity that will receive or buy the business. Designing a Good Exit Plan Designing a comprehensive exit plan — which is both based on your [...]