Recently Inc.com interviewed Basil Peters, a serial entrepreneur and specialist in helping business owners exit their businesses at the optimal time for a premium. He nearly failed in the sale of his first business because instead of exiting early, he held on and circumstances beyond his control negatively affected his company and he nearly lost everything. His point to entrepreneurs: Exit EARLY rather than later. And the best time to do that is when we are in a seller’s market like we are now.
Recently, Billy Fink, Editor of the Axial Forum, penned an article on the psychology of negotiations. In it he covered some of the common pitfalls that can trip up deals and completed transactions. He also gave advice on how to avoid them. You can read his entire piece here:
It is time once again to turn our eyes to our neighbors to the north and take a close look at private equity (PE) activity in Canada. As we have examined in past articles, despite its relative small size compared to the U.S., Canada continues to be a very attractive market to PE investors, as well as business buyers in general. Toward the end of last year, PitchBook (a research firm focusing on professional investors like PE firms) did a nice analysis of PE activity north of the border. What they found was quite interesting:
Selling a privately held business can be an incredibly complex process. Some of you have already embarked on this journey and you are probably nodding your heads in agreement. Others have already found a buyer and closed a deal and are experiencing the relief that many feel when the process is over. For those of you that have yet to begin and are marketing your company on your own, this article is for you!
Like most industries, the M&A community has done a great job of creating industry jargon, much of it confusing to laymen and business owners. In fact, to help the uninitiated out, we have actually created an M&A glossary of terms that you can download to help you gain a better understanding of the terms you will hear from investment bankers and M&A consultants.
One issue that most entrepreneurs overlook is the fact that a buyer ready company will be comprised of an executive team that is strong, flexible, and goal oriented, and achieves great things. The reality is in most cases after a transition phase, you will no longer be responsible for the day to day operations of your company; the executives you have hired, groomed, and developed will be.
Buyers look for companies that are not owner dependent and that have created a mid-level team that can make good decisions and motivate associates to achieve lofty goals. Unfortunately, from a buyer’s perspective, this is often lacking in lower middle-market companies. In fact, according to several sources:
The longevity of most family-owned and -operated businesses hinges on one key component: having a plan in place that clearly outlines who will take the leadership role and when the succession will take place. Far too many entrepreneurs are under the misguided assumption that their children or other relatives will be taking over the reins eventually.
If this intention is not documented in writing, then you really don’t have a succession plan.
Several times during the past year we have examined the recent phenomenon of the explosion in “family offices” as business buyers. As you may recall, we suggested that if you are looking for buyers for your business that you be sure to include this group in your buyer list.
Recently, UPS (United Parcel Service) released their annual “State of Small Business Report.” The findings were quite interesting, indicating that economic data is certainly holding up with this group because a vast majority is expecting 2015 to be a great year. Here are some of the findings in their survey:
Quite a few of the business owners that attend our exit planning workshops are not there to sell 100% of their companies. Many are there because they need capital for growth and are interested in learning about some of their options for doing so. Essentially each owner wants to attract investors to acquire a percentage of his or her company’s stock and re-capitalize the business for expansion.
Although Generational Equity generally focuses on finding buyers that want 100% of a target’s business, we do provide partial sale services. This is where a buyer acquires 51% (or more) of our client’s stock and retains existing management to help grow the business. Normally the types of buyers who create these deal structures are private equity firms.