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Sell a Business Insights
What are the benefits of a Confidential Information Memorandum?
May 6, 2016 / in Acquire a Business, Sell a Business / by Al Statz
One of the critical documents used in the business sale process is the Confidential Information Memorandum or “CIM.” Other names for this document are pitchbook, deal book, offering memorandum and confidential business review. A CIM tells the target company’s story and lays out important facts and figures for prospective buyers. This article answers common questions about CIM’s and explains how they improve sale process outcomes. Who receives the CIM and when? Buyers receive a CIM …
Welcome News for Business Owners: Five-Year Built-in Gains Tax Recognition Period Permanently Extended
March 2, 2016 / in Exit Planning, Sell a Business / by Al Statz
The Protecting Americans from Tax Hikes Act (PATH), enacted in December, makes selling a business easier for some. Since most sales of SME’s will be asset (versus stock) sales, double tax for C-corp owners and built-in gain tax (currently 35 percent federal) for owners of recently converted S-corps are very real impediments to selling a business. C-corporation owners face a “double tax”, where gains on a sale of assets are taxed at the corporate level …
Think Like a Buyer
February 24, 2016 / in Exit Planning, Sell a Business / by Roy Martinez
Entrepreneurs spend their entire career thinking like an owner. They don’t need to pay any attention to the value of their business. They may have a vague notion of its value based on anecdotal industry revenue or profit multiples that they heard bandied about at an industry conference they went to years ago in Orlando. But, at the end of the day, during the operating years, what is important to an entrepreneur is the bottom …
Build, Transfer, or Protect
February 4, 2016 / in Exit Planning, Sell a Business / by Exit Strategies
Research indicates that most business owners have 60-80% of their wealth tied up in their businesses. Yet in our experience few owners have a clear idea about the value of their business and few have done much thinking or strategizing about how to build, transfer, or protect years of hard-earned wealth. Let’s examine these options. Build means to invest for growth. This involves time and money. As you near retirement, it may be less prudent …
Good Exit Planning: First and Foremost, A Valuation of the Company
December 28, 2015 / in Business Strategy, Exit Planning, Sell a Business / by Bob Altieri
With the baby boomer generation retirement rush beginning to take hold, many business owners lack sufficient information about the value of their business for retirement planning purposes and don’t foresee the deal killers that await them. A Deal Killer is a condition that, if undetected and unresolved before the sale of a business, will kill the transaction. The purpose of pre-sale planning is to maximize sale proceeds (as well as to achieve other non-financial goals), …
Why M&A Deals Fail
December 21, 2015 / in Sell a Business / by Jim Leonhard
Companies that make multiple acquisitions are much more likely to have successful merger and acquisition (M&A) transactions than companies that have made one or less acquisitions in the past five years, according to a recent Boston Consulting Group (BCG) article. In fact, over 50 percent of all M&A transactions result in negative shareholder returns. The main culprits appear to be related to post-merger integration, especially: Poor integration of the target organization Higher complexity than anticipated …
2016 Promises to be a Banner Year for Mergers and Acquisitions
December 14, 2015 / in Sell a Business / by Al Statz
Deciding how and when to retire is one of the toughest decisions in a business owner’s life. Selling to a strategic buyer, investment group or management team represents the culmination of years of hard work and investment. Going to market when the owner is personally prepared, and the business is ready, and market conditions are conducive offers the best opportunity to maximize results. M&A activity in 2015 has been strong and 2016 market conditions look …
Defending Your Price
November 15, 2015 / in Sell a Business / by Don Ross
A critical component in any business transaction, whether it be a simple sale of a used car or a complex transfer of ownership of a business, is usually PRICE. The art of “the deal” is dependent upon the two parties arriving at a price they can both live with. In both cases, each party must persuasively defend their price. Market valuations are often based upon a multiple of past and future earnings. Multiples usually fall …
Where’s the Seller Tsunami?
October 27, 2015 / in Exit Planning, Sell a Business / by Al Statz
The Wall Street Journal published an article this month titled “The Missing Boom in Small-Business Sales — An expected rush in sales of small firms by the baby boomer generation has yet to materialize.” The article points out that despite predictions that a flood of private businesses would be coming up for sale as baby boomers reach retirement age, many of these owners are holding on longer than expected. We’re seeing the same thing here at Exit Strategies. …
The Significance of Disclosure in a Business Transaction
October 9, 2015 / in Acquire a Business, Sell a Business / by Don Ross
Full disclosure by buyer and seller is a vital component in any successful business sale/purchase transaction. In a small business transaction, buyer and seller disclosure statements are customarily exchanged and reviewed before or during the due diligence process. Hopefully there are no significant surprises at that point and the transaction proceeds smoothly. When the buyer is an individual, the buyer’s disclosure statement generally focuses on the buyer’s personal, professional, and financial background and reorganization plans. …