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M&A Glossary: Confidential Information Memorandum
June 6, 2023 / in Acquire a Business, Business Valuation / by Exit Strategies
A Confidential Information Memorandum (CIM) is a summary of your business used to help pre-screened buyers determine their interest. A CIM contains overview information about your operations, financials, industry trends, and growth prospects. As your investment bank, we’ll prepare the CIM for you, with your cooperation and review. You approve all material before it’s presented to a buyer. The CIM is only distributed to a select group of vetted, qualified buyers who have signed a …
M&A Glossary: SDE vs. Normalized EBITDA
May 30, 2023 / in Acquire a Business, Business Valuation / by Exit Strategies
M&A Glossary: SDE vs. Normalized EBITDA Seller discretionary earnings (SDE) and normalized EBITDA are two common measures used to assess the profitability of a business. While they are both used to determine a business’s value, they differ in the expenses and adjustments made in their calculations. Seller discretionary earnings (SDE) is a measure of the business’s cash flow that includes the owner’s compensation and benefits, as well as perks and discretionary expenses that are not …
Rep and Warranty Insurance Now Available for Deals Under $10 Million
February 24, 2022 / in Acquire a Business, Sell a Business / by Exit Strategies
By Patrick Stroth In recent years, Representations and Warranty (R&W) insurance has become available to smaller and smaller deals. The eligible deal size dropped to under $20M… then under $15M. This is already quite a feat when you consider that the average transaction value (TV) for deals with R&W coverage in place is $500M. And to be honest, most insurers won’t go lower than $100M—Underwriters are already backed up on processing policies and insurance companies …
How Supply Chain Issues are Complicating M&A Dealmaking
February 2, 2022 / in Acquire a Business, Business Strategy, Sell a Business / by Al Statz
Many businesses are struggling with supply chain issues right now. After vaccine programs and government stimulus monies kicked in and economies roared back to life this past year, global supply chains came under immense strain as weaknesses were exposed. Though conditions have improved slightly in just the past few months, experts in most industries are forecasting that supply chain troubles will persist well into 2023. This article discusses some of the ways that supply chain …
M&A Advisor Tip – Know Your Priorities
October 26, 2021 / in Acquire a Business, Buy-Sell Agreements / by Al Statz
The market is still strong, and sellers are receiving multiple offers, but the buyers they choose aren’t always the ones with the biggest checks. Would you take a lower price to ensure that the buyer’s culture fits yours? How about a million-dollar price cut if it meant getting all cash at close and avoiding years of seller financing? Or trading $100,000 in salary to for an extra $1 million in sale price? Sellers face these …
M&A Deal Terms: Fall 2021
September 21, 2021 / in Acquire a Business, Sell a Business / by Al Statz
You may have heard – it’s a bifurcated market. Declining caps on general indemnification against breaches of representations & warranties [1] had been a feature of the seller’s market for lower middle market businesses, going back well before the pandemic. Average caps have remained in the range of 15-16% of Total Enterprise Value (TEV) since the fall of 2020, according to GF Data’s semi-annual report on key deal terms, covering transactions by 243 active private …
M&A Advisor Tip: Expand the moat, reshape the hourglass
July 6, 2021 / in Acquire a Business / by Al Statz
Acquisitions work best when they accomplish one of two goals: expand the moat or reshape the hourglass. Expanding the moat means leveraging your core advantage. The more you can strengthen that advantage, the wider the moat around your company, protecting it from competitive forces. As for the hourglass, its narrowest point is your company’s primary weakness or limiting factor. If you can find a company that does that thing well, and acquire and integrate it …
How to Buy a Small Tech Company
May 7, 2021 / in Acquire a Business / by Exit Strategies
There are thousands of small tech companies for sale at any time they are often websites that take 1 or 2 people to run. There are listed for sale on bizbuysell.com, Flippa.com and similar sites. They can be run from home. Sometimes they require a particular expertise but other times they can be managed by the owner and technical or time-consuming work can be done by contractors, often offshore. Some examples are Amazon reseller businesses, …
M&A Financing During the Pandemic
February 16, 2021 / in Acquire a Business, News, Sell a Business / by Al Statz
The pandemic has put lower middle market business sales and acquisitions on somewhat of a roller coaster ride. Deal volume declined sharply in Q2-Q3 and came back strong in Q4. Valuations have remained strong throughout the pandemic, at least for COVID-resistant businesses. Though there was a slight Covid-effect in Q2-3. In terms of M&A financing, capital structures shifted to slightly more less debt during 2020, before edging back up to pre-pandemic levels in Q4. To …
Market Pulse Survey: Still a Seller’s Market
February 16, 2021 / in Acquire a Business, News, Sell a Business / by Al Statz
Despite the effects of the pandemic, we continued to experience a seller’s market in the fourth quarter of 2020, for businesses with enterprise values over $2 million. Presented by IBBA & M&A Source For further information on M&A market conditions, or to discuss a current business sale, acquisition or valuation need, contact Al Statz, 707-781-8580 or alstatz@exitstrategiesgroup.com.
Exit Strategies Group, Inc. is a leading provider of business sales and acquisitions, business valuations, and exit planning services for family owned and closely-held companies since 2002.
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