Exit Strategies Insights

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

Acquire a Business Insights

Due Diligence: Essential Step in Every Successful Business Acquisition

When purchasing a business the due diligence stage allows the buyer to verify  information pertaining to the business in order to determine whether to proceed with the purchase. The due diligence period also permits the buyer to determine if there are any barriers or risks associated with the transaction. Accordingly, the transaction closing is usually conditioned upon the due diligence stage being completed successfully. While there are many operational, legal and financial components of due …

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Key Deal Terms – Fall 2020

GF Data collects and publishes proprietary business valuation, volume, leverage and key deal term data contributed by over 200 lower-middle market private equity groups and other M&A deal sponsors.  Two of the acquisition deal terms that they monitor are the survival period¹ on general reps and warranties and the cap on indemnification² against breaches of general reps and warranties.   The following table shows these limits for deals in the $10 million to $25 million enterprise …

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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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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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M&A Advisor Tip: COVID-19 Era Due Diligence, Part 4

M&A buyers are still active in the midst of this uncertain business environment. However, they are mindful of added risks caused by COVID-19. These are some financial questions that are likely to come up in future due diligence in light of COVID-19: Did the business utilize any government relief, debt deferrals, or rent reductions? In terms of government relief, was the business accurately entitled to that relief and did they meet requirements for debt forgiveness? …

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M&A Advisor Tip: COVID-19 Era Due Diligence, Part 3

M&A buyers are still active in the midst of this uncertain business environment. However, they are mindful of added risks caused by COVID-19. These are some contract-related questions that are likely to come up in future due diligence in light of COVID-19: Did the business default on any third-party agreements? What are the termination rights on key contracts? Are counterparties adhering to their contract obligationss? Were terms modified or waived in a way that would …

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M&A Advisor Tip: COVID-19 Era Due Diligence, Part 1

M&A buyers are still active in the midst of uncertainty. However, as you would expect, they are mindful of added risks caused by COVID-19. Talent-related questions that may come up in future due diligence due to COVID-19: Did layoffs or other cuts impact the business’s ability to retain key employees? Did the business comply with state and federal laws related to layoffs and furloughs? How is employee health and well-being managed? Are policies and practices …

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Methods of Selling Distressed Businesses

As most companies transition from survival to rebuild mode in the second half of this year, some will become financially distressed and the owners will want to move on. Fortunately, for the shareholders and creditors of these companies, there is an active market for distressed business assets. Distressed businesses can be attractive acquisition targets for strategic buyers, and sellers can optimize financial outcomes through a proactive M&A sale process. Financial distress is a term in …

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Business Values May Not Decline

A recent survey of M&A advisors and business brokers showed that of all small and medium businesses on the market at the end of Q1, about 35% had closed (temporarily at least), 40% were operating at partial capacity, 4% had benefited, and 21% remained unaffected by COVID-19. Not surprisingly, advisors indicated that 46% of lower middle market deals were delayed at the end of Q1 and 11% had been cancelled altogether. For deal cancellations, 25% …

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M&A Advisor Tip: SBA debt relief incentivizes buyers

SBA debt relief is is a big incentive for buyers to move ahead with small business acquisitions right now. The SBA will pay six months of principal, interest, and any associated fees that borrowers owe for all current … as well as new 7(a), 504, and microloans disbursed prior to September 27, 2020. As an added incentive, SBA lenders have the authority to defer loan payments for six months. That means some buyers could acquire …

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