Exit Strategies Insights

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

Exit Planning Insights

Private Equity is Open for Business

We stay in regular contact with  private equity groups from around the country to monitor M&A market activity. Currently, the message we are hearing is that these firms are “open for business.” Private equity firms are in the business of buying, building and selling businesses. It’s how they deliver investor returns. They don’t have time to sit back and wait things out. The clock is ticking as they work to meet investor expectations within fund …

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Gifting Window for 2020 May Be Closing

With a Global pandemic and prospects of a sustained recession with double digit unemployment coupled with West Coast wildfires and East Coast hurricanes, I would say that everyone in these United States is looking forward to ringing in the New Year on January 1st. But before the ball drops on a socially distanced crowd in Time Square, you should think about other changes that may occur as we put 2020 in our rear-view mirrors. Specifically …

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Assignment for the Benefit of Creditors: Alternative to a Bankruptcy Sale

When the goal of a financially distressed business owner is to sell with minimum publicity, free of unsecured debt and potential liability for directors and management, the most advantageous exit path may be an Assignment for the Benefit of Creditors (ABC). Most buyers won’t acquire the assets of an insolvent entity unless the assets are “cleansed” through an ABC or bankruptcy process. Typically, the board of the troubled entity has decided that a rapid sale …

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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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Recapitalization Pros and Cons

When we talk about recapitalization, we’re talking about a partial sale of a company that allows the owner to liquidate some of the value they have in their business. Typically, this involves selling a part of your equity (usually 70-80%) to a third-party, however some business owners do sell just a minority stake. Recapitalizations are a standard investment tool for private equity firms. They have investor dollars they need to put to work and a …

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M&A Advisor Tip: COVID-19 Era Due Diligence, Part 2

M&A buyers are still active in the midst of our uncertain environment. However, they are mindful of added risks caused by COVID-19. These are some technology-related questions that are likely to come up in future due diligence due to COVID-19: Do employees have the ability to work remotely – without frustrating workarounds? Does the IT system have sufficient capacity to support remote operations? Are further developments necessary to sustain a long-term virtual environment? Are security …

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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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Use Equity Incentive Plans to Boost Exit Value

Closely-held business owners often use equity and equity-like programs to attract, retain and incentivize key employees to boost profits and build enterprise value. These plans provide value to the employees through current profit sharing and/or future equity appreciation. I am a big believer in utilizing these types of incentives as part of an exit strategy. Let’s break this down. Why profit sharing for key contributors? Sharing company profits with key employees incentivizes them to put …

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Selling to Competitor Not Only Option

Many business owners have preconceived ideas about who will buy their business. A lot of owners think their most likely buyer is the competitor down the street. Maybe that was true, once upon a time. But the M&A world has changed dramatically-and continues to evolve. Today, when we talk about selling your business, we’re really talking about a wide breadth of options. This is not an all or nothing scenario — you can sell all …

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M&A Advisor Tip: Management Cross-Training

Management Cross-training and Succession Planning  A strong and committed management team has long been one of the attributes buyers look for in a business. And now, in the era of COVID-19, buyers will be increasingly interested in issues of cross-training, management succession, and leadership development. Buyers will be looking at how the business could be impacted if health issues or quarantine requirements prevent certain team members from working. Review your management succession plans, leadership development …

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