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Six Benefits of Monitoring Company Value
January 4, 2021 / in Business Strategy, Business Valuation / by Al Statz
Even if your business is not for sale, monitoring its market value can be incredibly helpful. This article describes six ways that understanding value over the life of a closely held business benefits shareholders, directors and managers. 1. Value Report Card Like financial statements, an annual independent business valuation is a type of report card on company health. CEO’s can use this report card to educate, align and focus executive teams on maximizing enterprise value. …
Due Diligence: Essential Step in Every Successful Business Acquisition
December 28, 2020 / in Acquire a Business / by Exit Strategies
When purchasing a business the due diligence stage allows the buyer to verify information pertaining to the business in order to determine whether to proceed with the purchase. The due diligence period also permits the buyer to determine if there are any barriers or risks associated with the transaction. Accordingly, the transaction closing is usually conditioned upon the due diligence stage being completed successfully. While there are many operational, legal and financial components of due …
Key Deal Terms – Fall 2020
December 18, 2020 / in Acquire a Business, Sell a Business / by Al Statz
GF Data collects and publishes proprietary business valuation, volume, leverage and key deal term data contributed by over 200 lower-middle market private equity groups and other M&A deal sponsors. Two of the acquisition deal terms that they monitor are the survival period¹ on general reps and warranties and the cap on indemnification² against breaches of general reps and warranties. The following table shows these limits for deals in the $10 million to $25 million enterprise …
M&A Advisor Tip: Be able to articulate your growth story.
December 18, 2020 / in Exit Planning, Sell a Business / by Al Statz
Buyers want to acquire businesses with profit AND growth potential. Where is your business headed? Will it still be relevant in 5 years? Where will growth come from? How will it outperform its industry peers? If you don’t have an expansion strategy at the ready, talk to an M&A advisor or an exit planner. We can uncover which parts of your business are most attractive to buyers. Then we can help you plan to increase …
M&A Advisor Tip: How you know when it is time to sell
December 1, 2020 / in Exit Planning, Sell a Business / by Al Statz
It may be time time to sell your business when … Revenue has plateaued and you no longer see how to grow the business. You’re not sure how to reach the next level on your own. Your industry is consolidating around you. The current probable selling price of your business will satisfy your personal financial goals and a major economic or political shift could erode value. You’d like to diversify your assets and are ready take …
Better to sell early in consolidation. Here’s why.
November 11, 2020 / in Exit Planning, Sell a Business / by Al Statz
Consolidation is inevitable in maturing industries. As an M&A advisor working with owners of private wholesale distribution and manufacturing companies, one of the questions I get asked is whether it is better from a valuation perspective to sell early in a consolidation phase, or hold off. My answer is always case-specific, but generally earlier is better, all else being equal. Before I explain why, I want to point out that industry consolidation is not always …
Discover Exit Strategies’ New Checklist of COVID-Era Normalization Adjustments
November 5, 2020 / in Business Valuation, News, Sell a Business / by Al Statz
For most of us, 2020 has been one of the most challenging years of our lives. The pandemic has affected business performance both negatively and positively, temporarily and structurally. It will permanently reshape the global economy in several ways, most of which we are just beginning to understand. Change and uncertainty makes the job of valuing and appraising businesses and business assets more challenging. At the core of every business valuation analysis is the process …
Plan Your 2021 Comeback with a Strategic Acquisition
November 3, 2020 / in Acquire a Business, Business Strategy / by Al Statz
Business owners tend to think more seriously about selling when things aren’t as much fun as they used to be. Running a business in the COVID era is anything but fun, and owners are being particularly responsive to acquisition inquiries right now. Proactive Acquisition Searches When growing through acquisition, companies can be reactive or proactive. In a reactive strategy, the buyer takes phone calls and watches open market listings for appropriate opportunities to appear. This …
M&A Advisor Tip: Finish Strong
November 3, 2020 / in Business Strategy, Exit Planning, Sell a Business / by Al Statz
Begin the sale process while your business is on an upward trend. Buyers pay a premium for businesses with well-defined opportunities and a strong growth story. Too many business owners get tired or complacent and psychologically retire early, before the sale. In fact, after retirement, burnout is the number two reason business owners sell. Unfortunately, burnout usually leads to declining revenues and reduced leverage in the sale process. Stay focused until the end and sell …
Lopsided Market Drives M&A Values in Pandemic
October 22, 2020 / in Exit Planning, News, Sell a Business / by Al Statz
With all the upheaval in the world right now, you’d expect M&A deal values to take a dip. But recent market analysis shows that’s anything but the case. According to GF Data [1], companies with an enterprise value of $10 million to $25 million sold at an average multiple of 5.9 times EBITDA in the first two quarters, versus a 5.7 average from 2003 to present. Similarly, business sales with a transaction value of $25 …
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