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Exit Planning Insights
What is an equity rollover when selling your business?
February 21, 2024 / in Exit Planning, Sell a Business / by Exit Strategies
In M&A, an equity rollover, or recapitalization (recap), occurs when a business owner sells their company but chooses to reinvest, or “roll over,” a portion of their proceeds into the newly acquired business. An equity rollover allows a shareholder to maintain an interest in the business and benefit from future growth and value creation. How an Equity Rollover Works When a business owner is selling, a potential buyer may propose a deal structure that includes …
M&A Glossary: Quality of Earnings (QofE) Report
February 21, 2024 / in Acquire a Business, Exit Planning, Sell a Business / by Exit Strategies
A Quality of Earnings (a.k.a. “QoE” and”QofE”) report is prepared by a CPA firm to provide a detailed analysis of a target company’s revenue, expenses, working capital, EBITDA adjustments, etc. While not an Audit, a QoE provides buyers with important assurances on cash flows and risk. When buyers do this work internally its often just called “financial due diligence”, and when they outsource it, it’s called Quality of Earnings. See this post comparing a QoE …
Time to Close
February 21, 2024 / in Exit Planning, Sell a Business / by Exit Strategies
Median time to close remains somewhat consistent year-over-year, with businesses generally selling within one year of a listing engagement. Main Street deals typically close faster due to reduced due diligence demands. Follow these links for more information on Exit Planning Benefits, common Exit Options, and the Exit Planning Process. About the Market Pulse Survey — Each quarter, the M&A Source and IBBA, in partnership with Pepperdine University’s Private Capital Markets Project, survey North American lower middle market …
Why Some Testing, Inspection and Certification Companies Sell for More than Others.
February 5, 2024 / in Exit Planning, Sell a Business / by Adam Wiskind
Testing, Inspection, Certification (TIC) companies play a crucial role in various industries, from agriculture to manufacturing to construction, by providing services that verify adherence to standards, regulations, and specifications. TIC services are typically nondiscretionary, regulation driven, recession resistant, and predictable, which makes businesses in this sector a priority investment opportunity for private capital and strategic investors. However, owners of TIC companies that are preparing to sell should know that in the eyes of an investor, …
Will your business survive losing you?
February 2, 2024 / in Buy-Sell Agreements, Exit Planning / by Al Statz
Most entrepreneurs are a rare breed — full of optimism and confidence. But that faith and certainty can also make them feel invincible. Every business downturn will be the last, every new year will be another record, and every good leader retires happily with their family. Unfortunately, none of us are invincible. And if you’re like many business owners, a significant portion of your wealth — and your family’s income — is derived from your …
Exiting Without a Plan
February 2, 2024 / in Exit Planning, Sell a Business / by Exit Strategies
Even though retirement is far and away the biggest reason that business owners sell, many owners are doing little to no exit planning before going to market. The above chart shows that the smaller the business, the less likely owners are to plan. Of those owners who did plan, most started less than a year before putting their business on the market. Follow these links for more information on Exit Planning Benefits, common Exit Options, and …
Seller Sentiment Declined in 2023
January 17, 2024 / in Acquire a Business, Exit Planning, Sell a Business / by Exit Strategies
A seller’s market is when sellers feel they have an advantage or it’s a good time to sell, for instance when demand exceeds supply and there are more interested, active buyers than there are quality deals on the market. In a seller’s market, buyers compete in order to win deals. This typically translates to increased values and more favorable deal terms for the seller. The results of the latest Market Pulse Survey (Q3 2023) show …
Expect M&A to Recover in 2024
December 19, 2023 / in Exit Planning, Sell a Business / by Al Statz
Global M&A deal value nearly reached a 10-year low in Q3 2023 (Q2 2020 excepted). Deal count and total deal values both declined, as shown in this graph produced by Pitchbook. And these declines were evident across almost all most industry sectors and among all types of acquirers and sellers. However, several factors are pointing to a recovery in M&A activity in 2024. The global total of $1.4 trillion in unspent PE dry powder is …
North American M&A Activity
December 15, 2023 / in Exit Planning, Sell a Business / by Ignacio Ochoa
As business owners continue to toggle with the idea of selling their business, they often ask us, when is the perfect time to sell? Are current market conditions going to give me the return I am looking for? The graphic above shows M&A activity over the past decade. As you can see, the amount of deals performed each year have remained flat for most of this time period. Instead of attempting to time the market …
M&A Glossary: Multiple
December 15, 2023 / in Exit Planning, Sell a Business / by Exit Strategies
A multiple is a way to measure how much a company is worth. If a company has $2 million in EBITDA and it sells for $10 million, we say it sold at a “5 multiple.” Multiples are used as a valuation tool by analyzing the multiple similar companies obtained in a sale. For example, if a similar business sold in your industry for 6x EBITDA, valuation analysts will use that as an indicator in predicting …
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