Exit Strategies Insights

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

Sell a Business Insights

Want a successful merger or acquisitions? Put an M&A advisor on your board.

Companies planning a merger or acquisition would do well to have an investment banker (M&A advisor) on their board of directors. A new study from the University of Iowa found that firms with an investment banker on their boards of directors pursue mergers and acquisitions more often. Moreover, those firms perform better after the acquisition has been completed than firms that don’t have investment bankers on their boards. Read the full article.

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Thinking of Selling Your Business? Don’t Let Built-In Gains Tax Surprise You.

I was recently asked by “Chester” to help him sell the $10 million service company he founded 24 years ago. Chester, who is 65 years old, has had some health concerns and wants to travel the world with his wife Margie. Two of his competitors have been acquired in the past 3 years by strategic buyers. His business is doing well and he thinks the time is right to sell. In Chester’s industry, almost all …

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Do Strategic Buyers Share Synergies with Sellers?

In successful M&A deals involving substantial synergies, the deal price usually falls in the range between the standalone fair market value of the target business and that value plus the full value of potential synergies. Value of potential synergies? Increased value (over and above fair market value) to a strategic buyer, involves synergies between the acquired and acquiring firm and the additional financial returns and therefore value created by those synergies . There is a “1+1=3” …

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Exit Fundamentals: Two ways to Sell a Business

This article introduces the two fundamental methods of transferring a 100% interest in a private business, a) an “Asset Sale” and b) a “Stock Sale”. Asset Sales account for more than 90% of small business transactions. By small I am thinking of businesses with up to $10 million in revenue. Asset Sales In an Asset Sale the seller sells all of the tangible and intangible assets of the business, and ends up retaining the legal …

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“If you don’t know where you are going, any road will get you there.”

I’m amazed at how many business owners think about exiting all the time but never do any real exit planning. The most successful business owners I know have an exit plan on the day they open their doors. Their business decisions are synonymous with the plan. To navigate without a destination is like “trying to hold the wind up with the sail,” as Willie Nelson once sang. As you go through the years in your business, …

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Transaction brokers create competition. Why is this so important?

The critical first step in selling a business is to properly analyze and value it to establish a price. In the case of an undervaluation, when the business is sold the result is obvious; the owner receives less. Conversely, businesses that are overvalued and overpriced usually do not sell. The reason for this is because of the principle of alternative investments, which states that rational buyers will act on some alternative business investment where they expect …

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Goodwill Part II: Goodwill vs. Goodwill Value

All businesses have goodwill; however, not all businesses have goodwill value! Goodwill, which is usually the largest portion of the purchase price of a business, is the sum of intangibles such as having a good location and trade dress, a negotiated lease in place, trained employees, a website, customers, etc. Not all businesses have goodwill value, which is measured by the amount of earnings the business produces adjusted for the risk of earnings continuing to …

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Goodwill Part I: Personal versus Enterprise Goodwill

Goodwill can exist in two different forms: Personal Goodwill, which is defined as an intangible asset that is attached to a person; and enterprise Goodwill, also an intangible asset that is attached to the business enterprise. If goodwill is attached to an individual, it is non-severable since the person to which it is attached is not being sold. This also implies that the asset is non-transferrable. Of course brokers often make contractual arrangements between the …

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Insightful Article on Selling Your Company

Here is a link to a recent Inc. Magazine article titled “Selling Your Company: 7 Things You Need to Know”, written by a middle-market investment banker. A quick read, the article provides practical insights into the business sale process.

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October 25th Seminar: Maximizing the Value of Your Business

In this fast-paced workshop, business owners learn … Valuation basics Factors that increase enterprise value and marketability Steps to developing your exit strategy Steps in a proven M&A selling process Current market conditions and trends Tax implications and impending changes Answers to many common questions that owners have This is essential information for private business owners who wish to sell in the next 1-5 years.  It is not too early to plan the successful exit …

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