Tag Archives: Planning

New Series on The Inner Workings of a Deal

I am working with Middle Market Executive to publish a new monthly series entitled "The Inner Workings of a Deal: Tips for a Successful Transaction." As the title suggests, I will over the course of nine articles go through the planning and execution of a middle market transaction, and provide ideas on how to think through your goals, and help form expectations for your "deal." This month, the series launches with a discussion of the sorts of "deals" that are common in the middle market, Read More [...]

New Articles

Last week, I had two articles released by leading publications. First, Middle Market Executive published "Increasing Your Company's Value by Streamlining the Black Box." Generally, the main takeaway from the article is that you should review your balance sheet to ensure that you are deriving as much value from it as possible. While it is possible to get value from excess capital present on your balance sheet during a transaction, it is much easier to streamline your balance sheet and extract Read More [...]

Should You Tell Your Staff of Your Plans to Sell?

Whether to include your senior staff in the M&A process is always a tough question. Ultimately, the answer depends on the type of transaction you expect to complete. There are countervailing reasons to include or not to include them.  On the plus side, you'll need help to get through a sale of your company.  There is simply going to be a lot of work to do providing the due diligence information that a buyer is going to want to see prior to a transaction.  Unless you can provide detailed Read More [...]

The Value of Having a Management Team in Place for a Sale

Recent data suggests that ensuring that your company has adequate management in place that will continue downstream of a sale transaction can be worth a significant amount of money to you as a seller. GF Data, one of the firms that aggregates data on private equity transactions in the middle market, recently published an article entitled "Where have all the Sellers Gone?"  As part of their analysis of 2013 data, the firm analyzed 50 transactions where PE firms acquired companies from individual/family Read More [...]

Buyers Are All About Metrics

Last week, Middle Market Executive published an article I wrote entitled Knowing Your Financial Metrics Can Increase Your Company's Value to Buyers (and Make It Easier to Manage Along the Way). While I won't repeat the whole article here, I wanted to draw your attention to a couple of key points. First, while many middle market owners may feel comfortable managing their companies by "gut feel," buyers expect and want more.  Inevitably, buyers (whether financial or strategic) will feel compelled Read More [...]

Consider an S Corp Election

A surprising number of my clients continue to be organized as C corporations, and have not taken advantage of making an S Corp election.  This can be a potentially costly oversight if the company's owners are looking to sell at some point in the future, particularly since in many cases, there are no significant disadvantages to making the S Corp election. The key reason to make an S Corp election is to avoid the double taxation that is inherent in the C Corp structure.  When a C Corp makes money, Read More [...]

Tip for Sellers: Adopt an Appropriate Revenue Recognition Policy

Although "revenue recognition" sounds like an arcane topic (and it is), selling business owners should beware, as the timing of costs and revenues repeatedly causes troubles for middle market transactions.  Because of the complexity of the accounting rules around this topic, many deals struggle to get through economic due diligence due to sellers' lack of understanding of this issue.  The result is often that after an external review, buyer's accountants appropriately (but unexpectedly to the seller) Read More [...]

Why Sell? No Need to Go it Alone.

"Why do you need to wreck this company?  - Bud Fox "Because it's WRECKABLE, all right? - Gordon Gekko A common misconception among entrepreneurs (and the public) is that buyers of businesses channel Gordon Gekko on a regular basis, looking to destroy rather than build. Nothing could be further from the truth.  Buyers can often provide middle market business owners the opportunity to increase their wealth by collaborating on accelerating growth. Buyers, whether financial or strategic, Read More [...]

Calculating your Company’s True Profitability: What Adjustments to EBITDA are Appropriate?

While hardly the only option, it has become fairly routine for middle market transactions to use EBITDA as the measure of value.  EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization.  So, it is effectively a company's net profit plus any expenses incurred for interest, taxes, depreciation and amortization. Despite sounding like a relatively straightforward calculation, it is important to carefully analyze this number along with the company's financial statements Read More [...]

How Long Will it Take to Sell My Company?

Often, one of the first questions I get asked by clients is "how long do you expect a transaction to take?"  While I would love to be able to tell them that it is going to be quick and easy, the real answer is that is probably going to take nine to 12 months to get through a transaction. I try to divide the process into four stages for my clients: Preparation:  From the time I am retained, preparing a client for sale can take as little as one month, but sometimes can take much longer than Read More [...]