An article was published recently in the Los Angeles Times that has remarkable implications for our economy. It caught my attention because the potential ramifications outlined regarding the growth of business startups during the past three decades were very surprising. Reporter Walter Hamilton explains:
OK, so the question on everyone’s mind now is what’s next? So post-midterm election, pollsters and pundits of both parties are making gleeful (Republican) and doom-and-gloom (Democrat) predictions regarding the next two years. With a majority in both houses, the Republican folks are expecting nirvana with a repeal of the Affordable Care Act, complete revamping of the corporate tax code, and an overall reduction in the business regulatory environment coming out of Washington. Democrat pundits are expecting two more years of partisan bickering, hoping that in 2016 the roles can be reversed.
“Company fundamentals have changed and mostly for the better. In general, corporations have improved their profit margins, have slightly less geared balance sheets, have increased their cash flow and are distributing a greater percentage of their cash flow back to investors via dividends and share repurchases.”
The most interesting findings to me revolved around key metrics from the income statement – profit margins and sales growth.
The old saying, “You never get a second chance to make a first impression,” applies to much in life but nothing more so than the investment “teaser” you are going to create to attract buyer interest in your business. Also known as the Confidential Business Profile or the Profile Letter, the document is vital to attracting and keeping the attention of a potential buyer. Recently, Axial, an online network that connects business owners with capital providers, did an overview of what they see as critical in creating an effective profile letter. Some of their ideas include:
There are a number of ways that the sale of a business can be structured. 100% all cash deals are rare. In most cases, deals are created where a combination of cash, financing, stock, and/or earn-outs are used. The key to any structure is ensuring that it protects your financial legacy and is set up so that you are able to close an optimal deal with a premium buyer. In this piece we will examine typical earn-outs and their features.
If you are a loyal reader of this online publication, you are aware that 2014 has turned out to be a banner year for dealmaking in North America. A combination of buyer confidence, low interest rates, available capital, and cash on corporate balance sheets has created a “perfect storm” of transactions and led to what many are calling a “sellers market.”
We have seen quite a bit of good news for owners of Canadian privately held companies during the past few months. As we examined earlier this year, Canadian merger and acquisition (M&A) activity has been nearly as hot, if not hotter, than activity surrounding U.S.-based businesses. According to several sources that have published articles focused on mergers and acquisitions in Canada, this trend should continue well into 2015.
A few weeks ago I came across interesting information comparing the growth of privately held companies vs. their larger brethren, publically held firms. Sageworks analyzed data from 2010 through 2014. For those of you unfamiliar with their model, Sageworks is a financial information company and the leader in the analysis of privately held companies. They have been compiling data on the realm of privately held businesses for years and years and have amassed more useful information on this key segment of our economy than any other firm.
What is the key to ensuring a successful sale of my business? Attendees at our exit planning workshops ask us this question quite often during the breaks between sessions. Since every business is unique and different, the answer to that question can be quite varied, and in reality, not until our full evaluation is completed 60-90 days hence can we really tell you what you need to do to ensure the successful sale of your business.
As with most segments of the capital markets industry this year, IPOs (initial public offerings) are experiencing a tremendous recovery from their recession year lows. This is how a recent article on themiddlemarket.com described the situation: