Exit Strategies Insights

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

Acquire a Business Insights

What is a Confidential Information Memorandum and why should I care?

There is a critical document in the M&A sale process known as the “Confidential Information Memorandum” or “CIM.” This document tells your company’s story, explains its value, and lays out important facts and figures for buyers. Other names for the CIM are pitch book, offering memorandum and confidential business review. Here at Exit Strategies we often refer to it as the “deal book.” This articles answer common questions about deal books and why they are …

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The Significance of Disclosure in a Business Transaction

Full disclosure by buyer and seller is a vital component in any successful business sale/purchase transaction.  In a small business transaction, buyer and seller disclosure statements are customarily exchanged and reviewed before or during the due diligence process. Hopefully there are no significant surprises at that point and the transaction proceeds smoothly. When the buyer is an individual, the buyer’s disclosure statement generally focuses on the buyer’s personal, professional, and financial background and reorganization plans. …

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SBA Loans: Capital for Small Business Acquisitions

So you’re thinking of selling your business and prefer to be cashed out rather than be paid in installments over time. Uncle Sam wants to see your business continue as a job creator, and hence, works with lenders to make attractive loan terms available to business buyers, on loans up to $5 million. US Small Business Administration (SBA) loans come in two types: business loans – type 7(a), and real estate loans – type 504. According to Bob Porter of …

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Marketing a Business: The Need for Confidentiality

Maintaining confidentiality during the M&A sale process is a critical factor in successful business transactions.  At the onset, during the marketing phase of a business sale, you are walking a tightrope between those you want to inform and those you don’t.  Confidential information is shared only with qualified buyers who have evidenced professional and financial capacity.   Information is withheld from those, who by virtue of their relationship with the seller’s business, could prove detrimental …

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Baseball and Business Acqusition Financing: Five Tools Scoring Matrix

The “Hot Stove League” is an expression that describes the six month hiatus from baseball, beginning the day after the final World Series game and extending through the cold winter months until Spring Training opens in March.  There is plenty of time and opportunity for baseball fans to roll up their general manager sleeves and discuss the relative merits of potential roster moves on and off their fantasy teams. And that is where the five …

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Small Business Transactions Up 18%, Sellers Earn Higher Sale Prices – According to Industry Report

It’s a very good time to be a seller. According to a report released on October 16, 2014, U.S. small business sale transaction levels are on pace for a record-breaking year. And while the post-recession market has generally favored buyers, a shift appears underway, with sellers now receiving higher selling prices, higher percentage of asking prices and improved cash flow multiples.  The full results are included in BizBuySell’s Q3 2014 Insight Report, which aggregates statistics from …

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A Sample Acquisition Due Diligence Checklist

In privately-held business acquisition transactions, as soon as a letter of intent or contingent purchase agreement has been negotiated, the buyer’s in-depth due diligence begins.  To kick-start this phase of the transaction, the buyer requests from the seller all of the information that they need to conduct their investigations. Once the buyer is satisfied, the transaction proceeds toward closing. Due diligence document requests vary greatly in length and content, depending on the type and complexity of …

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Escrows in California Business Sale Transactions

Business “Transaction Escrows” protect the interests of buyers and sellers, and are used extensively by transaction attorneys and brokers in California. Then there is what’s called a “Holdback Escrow” which secures post-closing obligations and adjustments. This blog introduces you to both types of escrows and how they facilitate business deals. What is a Business Transaction Escrow?  In California, for business sale-purchase transactions of all sizes and shapes, it is common to have an escrow agent serve …

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What is an Earn-out?

An earn-out is when part of the consideration received for a business is based on future sales or earnings. Earn-outs usually come in to play in business acquisitions when a business has high risk factors, or when non-linear growth is reasonably expected, or when there is a significant gap in the price expectations between the buyer and seller. In all cases the parties share the risk and reward of future performance. Bridging a Price Gap An …

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Why do business owners hire an M&A broker?

Recent clients “Jane and John Doe” were satisfied with the market value estimate of their manufacturing business, as determined by the independent valuation we prepared.  Armed with this essential piece of information, they were ready to sell the business they had founded and grown with much effort over many years. John thought they should try to sell the business themselves.  After all, weren’t they the best salespeople for their business? And why should they share …

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