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Exit Planning Insights
20 Exit Planning Questions that Every Business Owner Should Ask Themselves
July 17, 2023 / in Exit Planning, Sell a Business / by Al Statz
Eventually every business owner will retire and hand over the keys, and in my experience, the farther ahead owners plan for their exit the happier they’ll be with their exit. While there are many things to consider when planning an exit, particularly for owner-operators of businesses, here is a list of twenty questions that business owners should be able to answer with clarity and confidence. Twenty Questions that Every Business Owner Should Ask When do …
M&A Glossary: Virtual Deal Room
June 29, 2023 / in Exit Planning / by Exit Strategies
A deal room is a secure, virtual space where buyers and sellers can share and exchange confidential information related to a potential transaction. Information is typically stored and accessed through a secure online platform that allows users to view, download, and upload documents and other information as needed. The use of a deal room is essential in M&A transactions because it allows buyers to perform their due diligence in a secure and confidential manner. …
Questions to ask when hiring an M&A advisor
June 29, 2023 / in Exit Planning, Sell a Business / by Exit Strategies
When it comes time to sell your company, the right M&A firm or investment bank can make all the difference. From preparing a stellar offering memorandum, to running a well-organized process, to generating multiple offers, to negotiating the best possible deal for you, your advisor needs to bring the right mix of transactional skill, processes, resources, and chemistry to the table. This article presents several questions that you should be asking as you search for …
Market Pulse – Seller Market Sentiment
June 29, 2023 / in Exit Planning, Sell a Business / by Exit Strategies
Lower middle market M&A is experiencing a dip in seller market sentiment, marking the lowest levels seen since early in the pandemic and resembling figures observed during the recovery from the Great Recession. In a seller’s market, buyers typically compete for deals, leading to increased values and more favorable deal terms for sellers. However, this recent slide in sentiment signifies a change in market dynamics, where sellers may still receive strong valuations, but buyers may …
Representation and Warranty Insurance in M&A
June 6, 2023 / in Acquire a Business, Exit Planning, Sell a Business / by Exit Strategies
When selling your business, you make a set of promises to the buyer. You “represent and warrant” certain facts about the business. Essentially, you’re certifying that you provided accurate information and there are no known issues pending (e.g., financial, legal, tax, compliance, etc.). If it turns out those promises are false, the buyer has the right to recoup a percentage of the purchase price. Non-fundamental reps and warranties (typically all items aside from key …
M&A Glossary: Confidential Information Memorandum
June 6, 2023 / in Exit Planning / 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 …
Selling your business should not be a 50/50 coin flip
May 30, 2023 / in Exit Planning, Sell a Business / by Exit Strategies
So, you’re ready to sell your business. You have an M&A advisor helping you, your numbers are in order, and you’re feeling confident. But did you know that only half of businesses will successfully sell—and that’s with a qualified advisor? For years, member advisors of the International Business Brokers Association and the M&A Source have been reporting their quarterly closing rates in the Market Pulse Report. Every quarter, roughly 50% of deals terminate without a …
M&A Glossary: SDE vs. Normalized EBITDA
May 30, 2023 / in Exit Planning / 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 …
Instead of selling, they’re growing
April 4, 2023 / in Business Strategy, Exit Planning / by Al Statz
If it’s a bad time to sell your business, consider growing instead. That’s the takeaway from one contractor whose plans to sell their business got squashed by inflation and supply chain issues in 2022. Pre-pandemic the business had been doing about $50 million in sales with $6 million in EBITDA (earnings before interest, taxes, and depreciation). In most markets, that would have made this business a highly attractive acquisition target. But problems started when the …
How to Divest Part of a Company
March 7, 2023 / in Business Strategy, Exit Planning, Sell a Business / by Al Statz
Selling a division or line of business is often more complex than selling an entire company. If you’re like most private business owners, you have never sold a business, let alone carved out and divested part of one. This article shares some of what I’ve learned about planning and executing a successful divestiture during my 20+ years of investment banking. In my experience, most divestitures are intentional efforts to generate liquidity or streamline and strengthen …
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