Exit Strategy News & Insights

Insights, knowledge base and announcements for business owners and professional advisors

What is the purpose of a letter of intent (LOI) in a business sale?

February 16, 2025 / in Exit Planning, Sell a Business / by Al Statz

A Letter of Intent (LOI) in a business acquisition serves as a blueprint for the deal by establishing key terms, as well as process and timeline, before moving into due diligence and final agreements. It signals serious intent, based on what is known today, without final commitment. It helps both parties align their expectations and minimize wasted time and costs. Key Purposes of an LOI in Business Acquisitions 1. Establishes Key Deal Terms Defines the …

Beyond price: What matters most when selling your company

January 28, 2025 / in Exit Planning, Sell a Business / by Al Statz

Most of our seller clients go into a sale thinking their highest priority is getting top dollar. And sure, price matters—it’s your financial reward for years of hard work. But many clients learn along the way, that other factors often carry just as much weight—sometimes more. If you want a successful and satisfying sale, look beyond the headline sale price. Strategic Fit: Will the Buyer Honor Your Legacy? The right buyer isn’t just the one …

U.S. Private Equity M&A Activity and 2025 Outlook

January 28, 2025 / in Exit Planning, Sell a Business / by Al Statz

Exit Strategies Group sees 2024 as a turning point for U.S. acquisitions by private equity groups, for both new platform and strategic add-on acquisitions, and we’re optimistic that market conditions will continue to improve in 2025. U.S. M&A activity, particularly in private equity (PE), rebounded strongly in 2024, with deal value rising 19.3% and deal count up 12.8%; fueled by stabilizing inflation, improved credit access, and a more favorable interest rate environment. The hottest sectors …

How important is the management team when selling a business?

January 20, 2025 / in Exit Planning, Sell a Business / by Al Statz

Selling a lower middle-market business involves various factors that can impact the price buyers are willing to pay, the cash amount they offer, and the likelihood of a successful sale. One of the most crucial elements is the strength and stability of the management team and key contributors within the organization. Continuity and Stability A strong management team is essential for ensuring continuity and stability, which are highly attractive to buyers. Investors are more inclined …

A Definitive Approach to Life Insurance and Share Redemption in the Valuation of Family-Owned Businesses

January 20, 2025 / in Business Valuation, News / by Pete Wilson

In June 2024, the US Supreme Court, in a unanimous decision, ruled that proceeds from a corporate (or key person) life insurance should be added to the value of a business. Simple, right? So why is the decision in Connelly v. United States sending shockwaves through the valuation and estate planning exercises that go into an estate valuation? Let’s dive into the case and talk through its impact. Facts: The case involved two brothers, Michael …

Give Yourself the Gift of a Valuation This Holiday Season?

December 14, 2024 / in Business Strategy, Business Valuation / by Al Statz

As the year winds down, there’s a gift every business owner should consider—a current valuation of your business. Knowing the true value of your business is a gift that keeps on giving. Here’s why. Estate Planning One of the key benefits of a valuation is that it sets the groundwork for smart estate planning. If the unforeseen happens, knowing your business’s worth simplifies the inheritance process for your heirs and ensures they receive what you …

M&A Glossary: No-Shop Clause

December 2, 2024 / in Exit Planning, Sell a Business / by Al Statz

Many M&A negotiations include a no-shop clause. This is a period of exclusivity when the seller cannot solicit offers from other parties. The due diligence process is expensive for buyers, so sellers sign these agreements as an act of good faith. Typically, a no-shop clause has a near-term expiration date and is only in effect for a couple of months (45—90 days). Buyers with a lot of leverage, and those working with inexperienced sellers trying …

Scaling for Sale: Growth Strategies that Double as Exit Plans

December 2, 2024 / in Business Strategy, Exit Planning, Sell a Business / by Al Statz

As a business owner, you’re likely consumed with the daily challenges of building and growing your business. The question of selling might seem like a distant concern—something to worry about years down the road. But the reality is that planning your exit and growing your business are two sides of the same coin. We’ve been conditioned to think about entrepreneurship in distinct phases: First, you build; then, you grow; finally, you sell or pass it …

Goodwill hunting: How to build and finance this intangible asset

December 2, 2024 / in Business Strategy, Business Valuation, Sell a Business / by Al Statz

When it comes to selling a business, the term “goodwill” often arises. But what exactly is goodwill, and how does it impact the mergers and acquisitions (M&A) process? Goodwill is the value of a business that exceeds its tangible assets. It arises when a company is sold for more than the worth of its physical assets such as equipment, vehicles and inventory. Most successful companies have some level of goodwill, which is tied to cash …

From the M&A Glossary: Add-backs

November 20, 2024 / in Business Valuation, Exit Planning / by Al Statz

Add-backs are adjustments made to a company’s financial statements to more accurately reflect its true earning potential and “normalize” its financial performance. These adjustments are typically made to the target company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) to create a metric known as “Adjusted” or “Normalized” EBITDA. Add-backs to EBITDA are expenses or income items that are considered definitional, discretionary, non-recurring, one-time, or not essential to the company’s core operations. Common examples of …