Exit Strategies Insights

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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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Market Pulse Survey: Deal Cancellations due to COVID-19

M&A advisors saw many of their business sale/acquisition deals delayed, put on hold or cancelled in March 2020 as a result of the COVID-19 Pandemic.  Who was cancelling these deals?  The following chart shows the results of this survey question from the latest Market Pulse Survey. Presented by IBBA, M&A Source & in partnership with Pepperdine University “Deal activity is always expected to constrict during times of uncertainty. Both sellers and buyers are being conservative …

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Valuing a Business in Bankruptcy

According to data collected by the U.S. Bankruptcy Courts, business bankruptcies declined from 60,750 (or 4% of total filings) in 2009, just after the 2008 financial meltdown to approximately 22,750 in 2019 (or approximately 3%).[1]  With overwhelming challenges ahead as a result of the Coronavirus Pandemic, the question is not if these filings will go up over the next 12 months but by how much. Before I dig into valuing a business in bankruptcy, let’s …

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The Value of a Sell-Side M&A Advisor to Buyers

Strategic and financial buyers often tell me how they appreciate the value that experienced, ethical and professional sell-side M&A advisors (a.k.a. business intermediaries, investment bankers, or business brokers) bring to a deal; even when that advisor represents the seller! As a buyer, you can expect a sell-side M&A advisor to help by compiling, analyzing and serving up relevant business information, by bringing transparency to the process, by facilitating the process, by introducing funding sources and …

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‘No Shop’ Protects Buyer Investment in M&A

A no shop provision is an important part of M&A transactions. Also known as an exclusivity clause, a no shop clause prohibits the seller from sharing information or negotiating with other would-be buyers for a specified time frame. Prior to this, the seller is negotiating with several buyers. The goal is to entertain multiple offers and figure out which buyer will ultimately provide the best deal for the seller. Once the seller has identified their …

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