Exit Strategy News & Insights

Insights, knowledge base and announcements for business owners and professional advisors

It’s About Deal Structure in M&A

April 17, 2024 / in Exit Planning, Sell a Business / by Exit Strategies

Sometimes we work on the buy-side, helping strategic buyers and financial sponsors find and execute acquisitions. For one buy-side client, we approached a seller with what we thought was a fair offer, but the seller wanted more. We talked it over with our client and decided we could come close to the seller’s number, provided we got a specific deal structure. We arranged the deal with about 60 percent cash at close and 20 percent …

M&A Advisor Tip: Have the Discipline to Diversify

April 17, 2024 / in Business Strategy, Exit Planning, Sell a Business / by Exit Strategies

As a general rule, no single customer should account for more than 20-25% of your company’s revenue. While having major customers can be great for your bottom line, it represents substantial risk to you and the next owner. As you build your business, pay attention to what potential buyers will want. They’ll be looking for well-diversified customer base where the loss of one account won’t have a major impact on earnings. Do the hard work …

Exit Strategies Group Advises Leap Solutions Group on their Sale to George Petersen Insurance Agency

March 26, 2024 / in News, Sell a Business / by Roy Martinez

Exit Strategies Group, Inc., a California based mergers and acquisitions (M&A) brokerage and business valuation firm, recently advised the owners of Leap Solutions Group, Inc. of Santa Rosa on the sale of their business to George Petersen Insurance Agency. Leap Solutions Group is a business management consulting firm specializing in organizational development, human resources, executive search, and recruitment. Scott Ormerod, Leap Solutions co-owner, said, “Roy Martinez of Exit Strategies was our guide through this process, …

Is a Quality of Earnings (QoE) Analysis the Same as an Audit?

March 17, 2024 / in Acquire a Business, Exit Planning, Sell a Business / by Al Statz

Not exactly. A Quality of Earnings (commonly called a “QoE”) analysis used in mergers and acquisitions due diligence and a financial Audit serve distinct purposes. Here’s how they differ in terms of purpose, scope of work, timing and reporting: Purpose: QoE: The primary purpose of a QoE analysis is to assess the sustainability and reliability of a company’s earnings and cash flows. It aims to identify potential risks and irregularities in a company’s earnings that …

What’s behind the door for M&A in 2024?

March 14, 2024 / in Exit Planning, Sell a Business / by Exit Strategies

We’re coming off a recalibration year for M&A. While 2021 and 2022 saw record activity, the first half of 2023 was marked by significant declines. Inflation, interest rates, increased capital costs, and geopolitical uncertainty all made buyers wary, and the global market held back on deal making. Now we’re anticipating an uptick in 2024. This resurgence will be fueled by the continued presence of cash in the marketplace, corporate growth demands, and Baby Boomer …

What is an equity rollover when selling your business?

February 21, 2024 / in Exit Planning, Sell a Business / by Exit Strategies

In M&A, an equity rollover, or recapitalization (recap), occurs when a business owner sells their company but chooses to reinvest, or “roll over,” a portion of their proceeds into the newly acquired business. An equity rollover allows a shareholder to maintain an interest in the business and benefit from future growth and value creation. How an Equity Rollover Works When a business owner is selling, a potential buyer may propose a deal structure that includes …

M&A Glossary: Quality of Earnings (QofE) Report

February 21, 2024 / in Acquire a Business, Exit Planning, Sell a Business / by Exit Strategies

A Quality of Earnings (a.k.a. “QoE” and”QofE”) report is prepared by a CPA firm to provide a detailed analysis of a target company’s revenue, expenses, working capital, EBITDA adjustments, etc. While not an Audit, a QoE provides buyers with important assurances on cash flows and risk. When buyers do this work internally its often just called “financial due diligence”, and when they outsource it, it’s called Quality of Earnings. See this post comparing a QoE …

Time to Close

February 21, 2024 / in Exit Planning, Sell a Business / by Exit Strategies

Median time to close remains somewhat consistent year-over-year, with businesses generally selling within one year of a listing engagement. Main Street deals typically close faster due to reduced due diligence demands. Follow these links for more information on Exit Planning Benefits, common Exit Options, and the Exit Planning Process. About the Market Pulse Survey — Each quarter, the M&A Source and IBBA, in partnership with Pepperdine University’s Private Capital Markets Project, survey North American lower middle market …

Why Some Testing, Inspection and Certification Companies Sell for More than Others.

February 5, 2024 / in Exit Planning, Sell a Business / by Adam Wiskind

Testing, Inspection, Certification (TIC) companies play a crucial role in various industries, from agriculture to manufacturing to construction, by providing services that verify adherence to standards, regulations, and specifications. TIC services are typically nondiscretionary, regulation driven, recession resistant, and predictable, which makes businesses in this sector a priority investment opportunity for private capital and strategic investors. However, owners of TIC companies that are preparing to sell should know that in the eyes of an investor, …

Will your business survive losing you?

February 2, 2024 / in Buy-Sell Agreements, Exit Planning / by Al Statz

Most entrepreneurs are a rare breed — full of optimism and confidence. But that faith and certainty can also make them feel invincible. Every business downturn will be the last, every new year will be another record, and every good leader retires happily with their family. Unfortunately, none of us are invincible. And if you’re like many business owners, a significant portion of your wealth — and your family’s income — is derived from your …