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M&A Deal Terms: Average Capital Structure
March 31, 2022 / in Business Strategy, Sell a Business / by Al Statz
The following chart from GF Data shows the average capital structure over the past 5 years for middle market business acquisitions. Equity contributions have varied only slightly over that time, in the range of 46% to 49%. Overall there was a slight rise during COVID, but nothing major. There are two different stories based on deal size however. In the $10-50 million total enterprise value (TEV) bracket, average equity contribution dropped. However, for deals in …
M&A in 2022: Is this the year to sell?
March 31, 2022 / in Business Strategy, Sell a Business / by Al Statz
If you’re a business owner, you’ve probably had a rough couple of years – and the challenges aren’t over. While COVID-19 may be weakening its grip, talent shortages, supply chain issues, and inflation are still very much at play. And yet, the economy is surging. Many of the business owners we talk to have all the work they can handle and strong balance sheets. So on the plus side, performance is good. On the negative, …
Rep and Warranty Insurance Now Available for Deals Under $10 Million
February 24, 2022 / in Acquire a Business, Sell a Business / by Exit Strategies
By Patrick Stroth In recent years, Representations and Warranty (R&W) insurance has become available to smaller and smaller deals. The eligible deal size dropped to under $20M… then under $15M. This is already quite a feat when you consider that the average transaction value (TV) for deals with R&W coverage in place is $500M. And to be honest, most insurers won’t go lower than $100M—Underwriters are already backed up on processing policies and insurance companies …
Tracking your Business Perks
February 18, 2022 / in Business Valuation, Sell a Business / by Al Statz
Perks is an abbreviation of perquisite, which means a benefit, incidental payment, or advantage over and above regular income, salary, or wages. Business owners take any number of perks from their business, from the standards like auto expenses, memberships, and insurance plans to extras like entertainment, vacations, or an additional family member on the books. Perks are a way for owners to be further compensated for their hard work. However, they can complicate valuing a …
M&A Advisor Tip: Avoid key-man risk
February 16, 2022 / in Exit Planning, Sell a Business / by Al Statz
Business owners should ask themselves, if I became incapacitated, could my business run without me? If the answer is no, buyers will be concerned about the business’s ability to operate when you’re gone. If you can’t get away for at least a week of vacation at a time… if you hold key customer relationships… if you’re solely responsible for an essential business function… buyers will see risk, and rightly so. To get the most value …
$1.1 Billion Sets New Record for C.I.A. Members
February 16, 2022 / in Exit Planning, News / by Al Statz
Cornerstone International Alliance (C.I.A.) members completed 146 business transactions in 2021, representing more than $1.1 billion in combined transaction value. Cornerstone International Alliance is comprised of 25 industry-leading M&A and investment banking firms in the U.S. and across the globe, focused exclusively on serving businesses in the lower middle market. Exit Strategies Group is a founding member of the Alliance and our CEO Al Statz serves on its board. “This is an incredible accomplishment and …
Understanding Discount Rates – Parts 1 through 5
February 2, 2022 / in Business Valuation / by Joe Orlando
The Risk Free Rate – Part 1 of 5 One of the most important inputs surrounding the valuation of the business is the discount rate that is used in the analysis. This discount rate is the expected rate of return on the subject interest which in most cases is the equity in the value of an operating business. Most often in our practice, this equity is attached to a private business that is owner operated. …
Understanding Discount Rates: The Cost of Debt and the Debt to Capital Ratio – Part 5 of 5
February 2, 2022 / in Business Valuation / by Joe Orlando
The first four parts of this five-part blog have dealt solely with the components of the buildup approach and the determination of a cost of equity. However, when determining a discount rate, it is important not to forget the ability to access debt. Each of the preceding parts of this discussion focuses on the cost of equity. This last part introduces the cost of debt and the debt to equity ratio in determining the weighted …
How Supply Chain Issues are Complicating M&A Dealmaking
February 2, 2022 / in Acquire a Business, Business Strategy, Sell a Business / by Al Statz
Many businesses are struggling with supply chain issues right now. After vaccine programs and government stimulus monies kicked in and economies roared back to life this past year, global supply chains came under immense strain as weaknesses were exposed. Though conditions have improved slightly in just the past few months, experts in most industries are forecasting that supply chain troubles will persist well into 2023. This article discusses some of the ways that supply chain …
M&A Advisor Tip: Perks & business value
February 2, 2022 / in Business Valuation, Exit Planning, Sell a Business / by Al Statz
Business owners take a number of perks from their business, from the standards like auto expenses, memberships, and insurance plans to extras like entertainment, vacations, or an additional family member on the books. Perks are a way for owners to be further compensated for their hard work. However, they can complicate valuing a business. When preparing your business for sale, your advisors will “normalize” your financials to account for these extras. Be aware of providing …
Exit Strategies Group, Inc. is a leading provider of business sales and acquisitions, business valuations, and exit planning services for family owned and closely-held companies since 2002.
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