My Business is Having a Soft 2020 due to COVID, But I’m Ready to Sell. Should I Test the Market?
Yes, especially if you believe your business will rebound in the next 1-2 years to pre-2020 revenue and EBITDA levels. Private equity firms exist to deploy capital and acquire and grow companies, and they begun to embrace alternative approaches to valuing businesses. Some are valuing businesses based on 2019 performance. Others are agreeing to contingent […]
How is the Purchase Price Determined?
While not universal, the most common practice is to take a target company’s EBITDA (which may be an adjusted number) or its EBITDA less CAPEX (in the case of businesses that require meaningful CAPEX each year) and multiply that number by some multiple. In the earliest days of private equity investing, multiples were often in […]
What Is A “Strategic” Buyer As Compared To A “Financial” Buyer? Does It Matter?
A strategic buyer is an operating company that wants to add your business to its business to drive its strategic objectives. A “financial” buyer is a venture capitalist, private equity fund or family office (an investment vehicle for wealthy families). What looks to be a “strategic” buyer may well be an operating business owned by […]
Asset Versus Stock Deals – The Lurking Business Risk
Private equity will often prefer to buy all of the assets of the business (and assume its operating liabilities) rather than buy its capital stock. Often the buyer will agree to cover any incremental taxes being borne by the seller (since the buyer is taking all of the acquired company’s assets, income tax may be […]
How An External Sales Force Can Help
Many – if not most – smaller manufacturing companies have a small or nonexistent sales force. Some hire manufacturers representatives on a commission basis – our experience is that these relationships are spotty at best. Representatives chase work from OEMs – and We’re manufacturer’s reps, too, but we take a different approach. We focus on […]
When Is The Right Time To Sell To Maximize Your Return?
If you’ve read other posts, you’ve come to realize that your cash flow – or your EBITDA – is the most critical measure determining how much your business is worth. While there are many approaches, the most critical period is the twelve months leading up to the sale of your company. That EBITDA – your […]
Before You Make a Major Equipment Purchase
If you don’t have work for the machine immediately, and you plan on selling the business in the next 1-2 years, you may want to defer the purchase. If the machine is replacing a worn-out machine, you’ll need to replace it (or buyers will reduce your purchase price in order to replace worn out equipment), […]
Determining What The Right Type Of Buyer Means For You
If we market your business successfully, you’ll have several potential offers to choose from. Which offer and which buyer you should choose will depend on your objectives in the sale. Are you solely concerned with maximizing value, or are you interested in finding a buyer that will invest in your business and protect your employees? […]
Planning The Future State For You (The Seller)
We’ve seen too many instances where sellers hoped to stay with the business after its sale, but their employment was ultimately terminated by the buyer. Any buyer – strategic or financial – will have systems, processes and policies that will be implemented within your business – and staying with the company means – perhaps for […]
If I Believe My Business Will Grow In The Next Few Years, Should I Hold Off On a Sale?
Not necessarily. Acquisitions often include additional purchase price – known as an “earnout” – paid to sellers if the acquired business grows in the future, meaning you may still capture all of the value created by your growing business. Careful thought should also be given to the state of debt markets – if those markets […]