So you’ve taken steps to ameliorate the risks buyers may perceive in your company and you've invested in fantastic documents that truly portray your company in the best light. Now you are ready for the most important step of all: identifying and reaching out to appropriate buyers.
This post is the second in our series designed to help business owners discover the key steps involved in successfully finding a buyer/investor. Earlier this week we looked at four risk areas that buyers focus on and provided ways to impact them, which would enhance the company’s valuation and sale-ability.
Today we look at a step that is often overlooked by sellers: creating key documents to protect the company and attract professional buyers.
Today we begin a three-part series on the steps you will need to take to effectively sell your company. Entitled “How Do I Sell My Business?” the series will look at the key components of closing a transaction with an optimal buyer. The first part, today, will examine perhaps the most important step of all in your process: prepping your company for sale.
The caliber of our deal makers is not only reflected in the significant number of deals they close annually and the industry accolades they win year after year but it is seen in their thought leadership and how they are sought after by a variety of leading industry publications on a regular basis for comments on trends and issues.
A perfect example of this was a recent article published in the online version of Security Info Watch Journal, a publication focusing on developments and concerns impacting the security industry. We had three deal makers quoted in the article, Your Business on the Block, that focuses on M&A activity in the security industry, specifically the proposed merger of ADT with Protection 1 via the equity firm of Apollo Global Management LLC.
Here are a few of the key ideas that our team shared in the article:
A few days ago we looked at interesting data based on surveys compiled by CMF Associates, a financial and operational consulting organization that works with equity firms. CMF Associates has begun conducting a survey they will do on a quarterly basis of sell-side investment banks and M&A advisory firms that specialize in working with companies valued up to $75 million.
The data echoed what we have been saying for years: Professional buyers love smaller companies. Today I wanted to take another look at their 1st quarter survey and determine who these buyers are.
My question: What types of buyers are actively acquiring smaller companies in 2016?
A few days ago we looked at PitchBook’s overall first quarter private equity (PE) activity report and found that smaller deals continue to be popular with this class of buyers. Recently the research firm did additional analysis to examine the data further, and released a report focusing on middle-market and, even more telling, lower middle-market PE activity. For a full definition of their terms, please see the footnote.
CMF Associates, a leading financial and operational consulting organization specializing in working with equity firms, has begun conducting a survey on a quarterly basis of sell-side investment banks and M&A advisory firms that specialize in working with companies valued below $75 million. Using these surveys, they plan to publish the results in a “Down Low” report. The first installment echoed what we have been saying for years: Professional buyers love smaller companies. This can be clearly seen in both revenue and EBITDA survey results shown below.
I recently had the opportunity to meet with Brad Whitlock, a mergers and acquisitions attorney with the Dallas-based law firm Scheef & Stone, LLP. Not only is Brad a talented attorney with over 25 years of experience specializing in M&A transactions, he has also worked on at least a dozen Generational Equity transactions over the years and has a unique perspective about the M&A process.
One of the important topics we covered in our discussion was the idea of creating an M&A team that works cohesively together to finalize your transaction.
This is a question that we get quite often at our exit planning seminars. It seems that most business owners are completely unaware of just how active professional buyers are right now, especially in what we define as the lower middle-market, which are generally deals valued below $150 million. As proof of this, I thought I would share a very interesting table that PitchBook, a leading VC and PE research firm, created a few weeks ago for their 1st quarter private equity analysis. Like I was, you will be very surprised to see just how active private equity buyers were in the 1st quarter.
Topics: private equity firms
Because the business press tends to focus on billion-dollar deals, usually because those provide a wealth of information regarding transaction size and multiples of earnings, most business owners are under the assumption that only really large companies are of interest to buyers. This is especially true when we begin to discuss private equity firms (PE) and their focus. Far too many business owners assume that these professional buyers are looking only for large businesses to invest in.
The good news, as we have discussed before, is that nothing could be further from the truth. PE groups know that it is far better to invest in smaller firms, since the integration of the acquired company into an existing portfolio is far smoother and the return on investment is far greater.
Topics: private equity firms