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Goodwill hunting: How to build and finance this intangible asset
December 2, 2024 / in Business Strategy, Business Valuation, Sell a Business / by Al Statz
When it comes to selling a business, the term “goodwill” often arises. But what exactly is goodwill, and how does it impact the mergers and acquisitions (M&A) process? Goodwill is the value of a business that exceeds its tangible assets. It arises when a company is sold for more than the worth of its physical assets such as equipment, vehicles and inventory. Most successful companies have some level of goodwill, which is tied to cash …
From the M&A Glossary: Add-backs
November 20, 2024 / in Business Valuation, Exit Planning / by Al Statz
Add-backs are adjustments made to a company’s financial statements to more accurately reflect its true earning potential and “normalize” its financial performance. These adjustments are typically made to the target company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) to create a metric known as “Adjusted” or “Normalized” EBITDA. Add-backs to EBITDA are expenses or income items that are considered definitional, discretionary, non-recurring, one-time, or not essential to the company’s core operations. Common examples of …
Exit Strategies Group Advises Afineol in Sale to ITS
November 12, 2024 / in News, Sell a Business / by Roy Martinez
Exit Strategies Group recently served as financial advisor to the owners of Afineol IT Consulting, a Sacramento area-based managed IT service provider (MSP), on their sale to Intelligent Technical Solutions (ITS), a Tower Arch Capital portfolio company. The acquisition strengthens ITS’ geographic footprint and technical leadership position in the Sacramento region. Terms of the transaction were not disclosed. Afineol’s founder, Michael Strong, said, “We were looking for a strategic partner to build on Afineol’s decades …
What Does ChatGPT Think?
October 14, 2024 / in Business Strategy, Business Valuation / by Joe Orlando
This October, I will celebrate my 12th year as an Accredited Senior Appraiser (ASA) in Business Valuation with the American Society of Appraisers (also ASA). ASA members meet every year for an International Conference to discuss current topics and to share knowledge and best practices. I attended the most recent Conference in Portland, OR. A presentation entitled “The AI Revolution – Why it Matters to Appraisers & Application Strategies” by Greg Endicott of Strategic Value Group, …
How to Purchase the Company You Work For
October 13, 2024 / in Acquire a Business, Business Valuation / by Exit Strategies
For many C-Suite employees, owning the company they work for would be a dream come true. If you’ve been leading a successful private business or are a seasoned member of its executive team, acquiring that business may be a realistic goal. Secure Funding Typically, the biggest hurdle in buying a business is obtaining the cash/equity and securing the debt financing necessary to close the deal. The good news is that a healthy business is an …
From the M&A Glossary: Search Fund
October 10, 2024 / in Exit Planning, Sell a Business / by Exit Strategies
A search fund is an investment vehicle through which an entrepreneur raises capital from investors to fund the search for and eventually the acquisition of a privately-held company. The search fund model allows the entrepreneur to collect a salary while they search for a suitable target company and negotiate a letter of intent and perform due diligence. Once a target company is acquired, the entrepreneur usually takes an active role in managing and growing the business, …
Equity Rollover Benefits
October 8, 2024 / in Exit Planning, Sell a Business / by Exit Strategies
An equity rollover occurs when a business owner sells their company but chooses to reinvest, or “roll over,” a portion of the proceeds into the newly acquired business. An equity rollover allows a shareholder to benefit from any future growth and value creation. In a bolt-on acquisition or consolidation, the owner would likely receive equity in a larger, more diverse and less risky business enterprise. The benefits of an equity rollover for the shareholder include: …
From the M&A Glossary: Caps and Baskets
September 20, 2024 / in Acquire a Business, Sell a Business / by Exit Strategies
Indemnity caps and baskets are key terms in business purchase agreements that relate to the seller’s indemnification obligations for any breaches of representations and warranties made by the seller. Cap The cap is the maximum amount of damages that the seller will be obligated to pay to the buyer for breaches of reps and warranties. For example, if the purchase price is $40 million and the cap is set at 10%, the seller’s maximum indemnification …
Timing the Sale of Your Founder-Owned Enterprise
September 8, 2024 / in Exit Planning, Sell a Business / by Exit Strategies
For founder- and family-owned businesses, deciding to sell is much more than a financial decision. Its a pivotal moment that marks the culmination of years, often decades, of dedication and hard work. The timing decision involves personal and market factors that can significantly influence the outcome of a sale. Understanding the right moment to sell requires an appreciation of the market environment, the business’s lifecycle, and the personal readiness of the owners. Market Conditions The …
Add-On Acquisitions Continue Popularity
August 25, 2024 / in Exit Planning, Sell a Business / by Exit Strategies
PE firms are increasingly using strategic “add-on” (aka bolt-on) acquisitions to consolidate fragmented industries, particularly in sectors like healthcare and business services, where operational efficiencies and market share gains are achievable. This approach to growth allows firms to create more valuable and competitive entities more quickly than organic growth, usually with lower business and financial risk. These transactions often require less capital and can be financed through existing cash flows or smaller debt tranches, thus …
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