Exit Strategies Insights

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

Private Equity Fact and Fiction

Private equity groups are active acquirers of closely-held lower middle market companies here in California. Private equity consists of individuals, families and institutional investors that make passive minority investments in partnerships that invest in, provide debt financing for, and operate private companies. Republican presidential candidate Mitt Romney’s run for the presidency in 2012 brought sudden attention to the private equity world. Romney, who had been the founder and CEO of private equity firm Bain Capital, didn’t go …

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Is it Better to Own or Lease your Business Facility?

For some businesses, specialized building construction is required — hotels, car washes, wineries, some food processing facilities, etc. — making the business and real estate nearly inseparable, and making owning the real estate almost mandatory. However most enterprises need a more generic commercial, industrial or retail property to support business operations, and the decision to own or lease real property is more elective. Companies that lease their facilities avoid the sizable cash investment associated with …

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Upcoming Event on Valuation of Ag and Food Businesses

Al Statz of Exit Strategies Group will be a panelist for the American Society of Appraisers (ASA) Northern California workshop —Working with a Going Concern: Valuation Issues Related to Ag-Food Processing Facilities, on Saturday, May 31, 2014, in Fairfield, California. A Message From Al: My passion is helping baby boomer business owners exit right and retire well. My background as a valuation and M&A professional, business owner and corporate development executive allows me to bring a wealth of knowledge …

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Is it too early to have my business valued?

A potential client has been dragging his feet on having a business valuation done. Most recently, he asked, “Is it too early to have my business valued?” A better question may be, is it too late? This baby boomer wants to exit his business and retire in the next 2-5 years. He said, if the business isn’t worth much, he would probably hold on to it and transition management of the business to a group …

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Why do business owners hire an M&A broker?

Recent clients “Jane and John Doe” were satisfied with the market value estimate of their manufacturing business, as determined by the independent valuation we prepared.  Armed with this essential piece of information, they were ready to sell the business they had founded and grown with much effort over many years. John thought they should try to sell the business themselves.  After all, weren’t they the best salespeople for their business? And why should they share …

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What is Fair Market Value?

You’ve heard the term Fair Market Value many times. Fair Market Value is indeed the most common standard of value used in business valuations, but what does it actually mean? Fair Market Value is typically defined as “the price at which the property would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both …

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Why Should I Only Retain a Certified Valuation Expert?

If you’re thinking of using a non-certified or non-credentialed individual to value a business, consider the following recent judicial ruling. The United States Tax Court ruled on February 11, 2014** that a valuation conducted by a non-valuation credentialed individual used for an estate tax filing was materially deficient.  The individual who prepared the valuation was both a CPA and a CFP (certified financial planner), had written 10-20 valuation reports, and had testified in court.  However, …

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Why Should I get My Business Valued?

I received a call the other day from a friend who owns a publishing company. I was telling him about the types of valuation projects I was working on, and he asked, “I’m not in the middle of selling my business or transferring it to my children; why would I want to have my business valued? Besides, I know the rules of thumb for my industry.” The answer I gave him was essentially the following. First …

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Increase Business Value with Agreements

I recently completed an exit planning valuation of a business that enjoyed a very favorable discount on purchases of a key component used in the assembly of its products. The discount, negotiated many years ago, was a handshake deal between the founder of the company and his former employer who manufactured the component.  This large discount enables the business to be significantly more profitable that it would be otherwise.  Any investor or buyer for this business …

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For Historic Mountain Lodge, It’s Not the End of the Rainbow

The historic Rainbow Lodge in Soda Springs, California, which was in receivership and non-operational for almost a year, has been acquired. This 33-room lodge on the Sierra’s western slope near Hwy 80 was originally built as a stagecoach stop in the 1800’s. In the 1990’s, the owner of the nearby Royal Gorge Cross Country Ski Resort bought it with the intention of providing lodging for skiers. The building is currently undergoing substantial renovations and the business is expected to re-open …

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