Exit Strategies Insights

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

Sell a Business Insights

Increase Business Value with Recurring Revenue

Businesses with a higher percentage of recurring revenue generally sell for higher prices. Recurring revenue business models are highly sought after by strategic and private equity buyers because they are perceived as less risky. Future revenue is more predictable and requires less ongoing sales effort and reinvestment. Companies like Salesforce.com pioneered recurring revenue in the software world, creating the Software as a Service (or SaaS) model. SaaS turned the traditional software licensing model on its …

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Early-Stage Tech Company Exits

You’ve built a world-class software solution, delivered to customers as a SaaS application or web service.  You’ve recruited a team and created intellectual property. Customer retention is strong and the buzz is growing in your vertical market. Each new customer acquisition represents incremental recurring revenue that falls directly to your bottom line – and the company is closing in on cash flow positive territory. Could this be the right time to sell the company? You may be thinking, I’ve barely …

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Don’t Forget the Net Investment Income Tax when Selling a Business

The Net Investment Income Tax, which our friends at the IRS put into effect in 2013, takes an extra toll on business owners who sell their businesses; and for that matter, on most higher income taxpayers and any moderate income taxpayer whose income increases suddenly in a given tax year. What is the Net Investment Income Tax? The Net Investment Income Tax (“NIIT”) is a 3.8 percent federal tax on certain income of individuals, estates …

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Selling an Ecommerce Business in the Lower Middle Market

With continuing growth in consumer online spending and many high-profile public acquisitions this year, it seems like a great time to sell your online retail business. But things are never quite as simple as they appear. Over the past few months, several impressive acquisitions have been announced in the public markets. Walmart has purchased Jet.com at a jaw dropping $3.3 billion; a move that is presumably Walmart’s effort to narrow Amazon’s ever-increasing dominance. Consumer brands company, …

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Recent Trends in the M&A Market

Pepperdine University, of Malibu, California, in conjunction with the International Business Brokers Association and M&A Source, publishes a quarterly Market Pulse Survey of business brokers that provides useful information concerning the market for Main Street ($0-$2M sales price) and lower middle market ($2-$50M sales price) businesses. Highlights from their most recent report for Q1 2016, include: 50% of all business sell Retirement is still the prime motivating factor for sellers followed by burnout. The strongest growth …

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Using Retention Bonuses to Enable an M&A Transaction

Assurance of business continuity is essential to most business acquisitions, and for small to mid-size companies, this often translates to retaining key employees. This blog looks at using a simple tool, called a stay bonus or retention bonus, to keep your key people on board through a sale or merger of your company. Bonuses are commonly used in business to reward employees for performance, such as hitting a sales target, implementing a new system, or boosting manufacturing productivity. …

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Can You Sell a Contracting Business to a Buyer Without a License?

Solar Installers, General Contractors, Electricians and Plumbers in California have something in common when it comes to selling their businesses. All of these businesses require a Contractors State Licensing Board (CSLB) license to operate. This can be an additional burden to the process of transitioning a business to a new owner. What if a potential buyer doesn’t have the necessary licenses? The easiest solution to this issue is to target investors that already have the Licenses …

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Add-On Acquisitions are on the Rise

When developing an exit strategy for your company, we will consider whether Private Equity Groups (PEG’s) would want to acquire it as either a new platform company or as an add-on (also “bolt-on”) to one of their existing portfolio companies. Most small companies are too small or don’t have strong enough management teams to be attractive platform opportunities, however many are strong add-on candidates. According to PitchBook, which tracks the PEG M&A activity in the middle market, the number of add-ons as a percentage of …

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Exit Strategies Represents Axis Systems in Sale to H&P Technologies

Exit Strategies serves as M&A advisor in industrial automation distributor merger-acquisition. Exit Strategies, Group Inc. is pleased to announce that H&P Technologies and its wholly owned subsidiary Behco, Inc. (www.behco.com) has acquired Xanthus, Inc., doing business as Axis Systems (www.axis-systems.com ) of Auburn Hills, Michigan. Exit Strategies served as exclusive M&A advisor to Axis Systems for this transaction. Established in 1976 by Tim Kline, Axis Systems is a leading supplier of quality automation technology solutions …

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The Federal Reserve and Interest Rates

The Federal Reserve controls the three tools of monetary policy — open market operations, the discount rate, and reserve requirements. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, …

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