Exit Strategies Insights

Industry insights, knowledge base and announcements for business owners and professional advisors

Better to sell early in consolidation. Here’s why.

Consolidation is inevitable in maturing industries.  As an M&A advisor working with owners of private wholesale distribution and manufacturing companies, I often get asked whether selling early or late in a consolidation phase is better from a valuation perspective.  My answer is always case-specific, but generally earlier is better. Before I explain why, I want to point out that industry consolidation is not always at the top of a seller’s list of sale timing considerations. …

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Discover Exit Strategies’ New Checklist of COVID-Era Normalization Adjustments

For most of us, 2020 has been one of the most challenging years of our lives. The pandemic has affected business performance both negatively and positively, temporarily and structurally.  It will permanently reshape the global economy in several ways, most of which we are just beginning to understand. Change and uncertainty makes the job of valuing and appraising businesses and business assets more challenging. At the core of every business valuation analysis is the process …

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Plan Your 2021 Comeback with a Strategic Acquisition

Business owners tend to think more seriously about selling when things aren’t as much fun as they used to be. Running a business in the COVID era is anything but fun, and owners are being particularly responsive to acquisition inquiries right now. Proactive Acquisition Searches When growing through acquisition, companies can be reactive or proactive. In a reactive strategy, the buyer takes phone calls and watches open market listings for appropriate opportunities to appear. This …

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M&A Advisor Tip: Finish Strong

Begin the sale process while your business is on an upward trend. Buyers pay a premium for businesses with well-defined opportunities and a strong growth story. Too many business owners get tired or complacent and psychologically retire early, before the sale. In fact, after retirement, burnout is the number two reason business owners sell. Unfortunately, burnout usually leads to declining revenues and reduced leverage in the sale process. Stay focused until the end and sell …

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Lopsided Market Drives M&A Values in Pandemic

With all the upheaval in the world right now, you’d expect M&A deal values to take a dip. But recent market analysis shows that’s anything but the case. According to GF Data [1], companies with an enterprise value of $10 million to $25 million sold at an average multiple of 5.9 times EBITDA in the first two quarters, versus a 5.7 average from 2003 to present. Similarly, business sales with a transaction value of $25 …

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Selling Your Business in the Covid-19 Era

Business owners contemplating a sale may be asking the question: Is this a good time to sell my business or do I need to wait until the Covid-19 economic disruption is over? Let’s explore three interrelated factors to help an owner answer that question for their situation. Market Conditions Are their buyers for my business during this pandemic?  Yes, there is no shortage of buyers for well-run companies. That statement was true before Covid-19 and …

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M&A Advisor Tip: Work Yourself Out of a Job

The more your business revolves around you, the more risk buyers see. To increase business value and marketability, build a strong management team. Work yourself out of the business by developing an experienced, empowered management team. The less the business is dependent on you and your knowledge or relationships, the less risk buyers face in a transition. And less risk translates to a higher sale price. Also, more buyers will be able to buy your company …

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Ten Key Drivers of Company Value

In our current time of economic recession, social unrest and political partisanship, simple questions rarely have simple answers. For an owner operator of a small- to mid-size business, the question of business value in today’s market is increasingly difficult. It is at these times that the team here at Exit Strategies Group (ESGI) feels the need to simplify the process down to the basic premise of what drives value. In explaining value, ESGI default to …

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Get to know your buyer: Conducting Seller Due Diligence

As a business owner selling your company, prospective buyers will perform due diligence on you and your company.  But you should also conduct thorough due diligence on the prospective buyer. When a buyer conducts due diligence on a company, they want to know that the company’s operations, finances, HR, environmental and legal matters (etc., etc.) are in order. When a seller of a small business conducts due diligence on a buyer, they want to know …

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Pros & Cons of Selling Your Company to a Strategic Buyer

When it’s time to sell your business, you will likely have multiple buyer types to choose from. You could receive offers from strategic, financial, and individual buyers. As you start thinking about selling your business, think about what’s most important to you in a sale. Different buyer groups tend to operate by different playbooks. Understanding what each group typically has to offer can help us target the buyers who are the best fit for your …

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