The question arises with nearly every potential client we meet with: Why do I need an M&A advisor to sell my business? Can’t I just do it myself and save a significant amount of money in fees? How hard can it be to close a deal with a buyer? I negotiate contracts all the time with my clients and vendors.
Topics: selling a business
The statistics are pretty alarming if you are planning to sell your business in 10 years:
“With an estimated 76 million baby boomers in the pipeline turning 65 at a rate of 10,000 per day for the next 15 years, according to Pew Research Center, many businesses owned by people in their 60s will be changing hands. The 2011 U.S. Census reported there were 7.4 million small businesses — firms with 500 employees or less — in the country providing jobs for 113 million workers.”
With my never-ending goal of finding relevant information for our faithful readers, I sat in on a PricewaterhouseCoopers (PwC) webinar recently entitled “Successful M&A Integration: Looking Beyond the Here and Now.” As the title implies, the webinar focused on issues and challenges with successfully closing deals in today’s environment. And as with all of PwC’s webinars, research, and whitepapers, it was full of interesting analysis of successful dealmaking.
To obtain the data for their analysis, PwC surveyed senior management from Fortune 1000 companies that had closed at least one deal in the prior three years. They ended up with 106 respondents. Of this group, 46% were CEO, president, COO, CFO, EVP, and SVP, and the others were vice presidents.
This is a question that merger and acquisition analysts are asking these days. As we have discussed, M&A activity in 2014 should reach levels not seen in quite some time. The real question on every business owner’s mind, though, should be: How long with this continue? If it is a seller’s market now, what about a year or two from now?
We often hear and read about high tech deals and the tremendous valuations that these companies get while generating little profit in many cases. What is often assumed is that the owners of these high tech entities are extremely savvy dealmakers and that is why they are getting such tremendous deals for their companies.
By many expert predictions, we are sitting on the cusp of the next M&A up cycle. The numbers so far this year, based on a variety of sources, are all pointing to the same thing: The next 18-24 months could outpace the prior merger and acquisition spikes prior to the Great Recession.
I recently read an interesting article outlining five mistakes to avoid if you own a small business and want it to grow. It was on Inc.com, a great source of good information for business owners, and was written by an entrepreneur for entrepreneurs to use to ensure the growth and success of their businesses.
More and more economic analysts worldwide are sounding the early alarm that we may be heading for another potential economic crisis given the rapid increase in asset valuations during the past few years. Now, of course, given the massive contraction from 2007-2009, their caution could be an overreaction to events that many did not foresee occurring. Or they may be right.
Topics: sellers market
One of the biggest barriers you will encounter while in due diligence with any buyer is the topic of human resources and the need to clearly give the buyer confidence in the ongoing health of the organization. Let’s face it; people are the lifeblood of any business no matter what industry you are in or your size. Without skilled, well trained, knowledgeable associates, your business will be less than buyer ready.
But beyond just your people, your HR processes/procedures will also be closely examined. Based on our years of experience, this is one area that most lower middle-market business owners pay far too little attention to before sitting down and negotiating a deal with a buyer.
Throughout the years Intralinks, “a leading, global SaaS provider of content management and collaboration solutions” and a leading provider of virtual data rooms (VDRs) for merger and acquisition transactions, has developed a very accurate research tool to gauge future M&A activity.
Essentially, the more VDRs being opened in a particular quarter has naturally led to future deal closings. So when the Intralinks Deal Flow Indicator (DFI) declines in a given quarter, deals will most likely do so in six months or so. Conversely, if VDR activity is up, future closings will be as well. Based on their latest research, the latter is occurring right now: