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Exit Planning Insights
Is Your Company an Employee Stock Ownership Plan (ESOP) Candidate?
February 10, 2018 / in Exit Planning, Sell a Business / by Al Statz
Employee Stock Ownership Plans (ESOPs) have compelling competitive, financial and legacy benefits. For business owners weighing their exit options, a leveraged ESOP may be feasible if the owner, company and employees possess certain attributes: Owner Attributes Owns 30% or more of corporate stock Has a low basis in the stock Looking to reduce involvement in the company long term (5+ years) or shorter term if successor(s) are in place to take over Concerned with employee welfare …
Does My Buy-Sell Agreement Establish Value for Estate Purposes?
December 20, 2017 / in Business Valuation, Buy-Sell Agreements, Exit Planning / by Al Statz
Buy-sell agreements that contain a clause that values stock at less than fair market value can be disregarded for tax purposes. It is important to consider the requirements of Internal Revenue Code (IRC) Section 2703 when developing an estate plan involving business interests in which 50% or more of the stock is family owned. Section 2703(a) states that a shareholder agreement (entered into after October 8, 1990) that allows for the acquisition or transfer of …
How Would Your Company Survive Without You?
November 1, 2017 / in Business Valuation, Exit Planning / by Exit Strategies
If you are like many business owners, you tend to get caught up in the daily demands of your business: managing sales and production, costs, and the bottom line. What about preservation and protection? Perish the thought, but what would happen to your company if it was unable to carry on due to your death or disability? These concerns may seem like, and may in fact be, remote possibilities. However, by putting them off, you …
When is the Right Time to Sell My Business?
October 11, 2017 / in Exit Planning, Sell a Business / by Al Statz
BOOK REVIEW — I don’t recall the last time I recommended a book, but today I feel compelled to tell business owners about an excellent new book titled, “When is the Right Time to Sell My Business?” This book not only helps you decide when to sell your business, but will also help you understand its value from the perspective of willing buyers, increase its value and marketability, and choose and plan your best exit …
Forbes Article: Which Is Better, A Financial Buyer Or A Strategic Buyer?
October 4, 2017 / in Exit Planning, Sell a Business / by Al Statz
I thought would share this brief Forbes article that came across my transom early this morning. I generally agree with author John Warrillow’s comments on Strategic versus Financial buyers. If your goal is to maximize value and liquidity today, and you’re not looking for an equity partner to help you build longer term enterprise value, a strategic buyer generally produces the best outcome. Having multiple strategic buyers at the negotiating table as a result of …
Exit Planning: Meaning and purpose drives sustainable business growth
September 26, 2017 / in Business Strategy, Exit Planning / by Al Statz
Several years ago I had the opportunity to work on an acquisition assignment for Mitsubishi Electric, one of the multinational business units of the Mitsubishi group of companies. While doing research to better understand my client’s organization, I found an inspiring article that quoted Tachi Kiuchi, Mitsubishi Electric’s managing director at that time… “Are the needs of the corporation and the world in conflict? In the long run, they can’t be. Today, 600 million of the Earth’s …
Preparing to sell? Why clean financial records are important.
September 20, 2017 / in Exit Planning / by Exit Strategies
Most business owners don’t like to spend any more time on financial statements than they have to. Trust me, I was one of them! But, when it comes time to prepare a business for a potential sale, owners need to get serious because having clean financial records is one of the most important factors in concluding a successful business sale or merger. What do I mean by clean financial statements? First, all relevant business transactions …
Is Private Equity the Right Solution for Your Exit?
September 13, 2017 / in Exit Planning, Sell a Business / by Al Statz
Is Private Equity the Right Solution for Your Exit? Private Equity Groups (PEGs) are disciplined buyers of lower middle-market companies. Most have cash funds and lender relationships in place for the right acquisition opportunities. PEGs often recapitalize a company, where they purchase a majority or minority interest. They bring growth capital and business acumen to unleash the company’s full potential. A recapitalization gives the owner substantial liquidity now, and a second hopefully larger bite of …
Six Reasons NOT to Skim
August 9, 2017 / in Business Strategy, Exit Planning, Sell a Business / by Don Ross
Pulling unreported cash receipts out of a business is indefensible and unwise under any circumstances, but particularly if the owner expects to exit in the next 3-5 years. All of us during our childhood were offered the parental edict: “Don’t do it, you are only hurting yourself.” So “why”, you may ask . . . now that you are a grown adult, “should I not skim?” Many reasons immediately come to mind and I am certain …
Buy Low, Sell High
June 13, 2017 / in Exit Planning, Sell a Business / by Exit Strategies
Timing is everything. Almost everyone is familiar with the world’s greatest tip to stock investors, “buy low, sell high.” These simple words of wisdom are equally useful to private business owners; however, sage advice is not always easy to follow in the same moment you’re reaping the benefits of high profitability. With the current bull market in its eighth year, the lower middle market is economically healthy across many industries. I talk to business owners …