This week’s digest covers expert advice on [Read more…]timing from a business and 2013 M&A activity projects, as well as data that is further proof of the private equity industry’s concentration on smaller, more strategic deals.
Today’s M&A digest covers the value of a limited auction when you’re selling a business and the risks you face when delaying your [Read more…]plan.
Our M&A Weekly Digest, which brings you M&A news and tips each Friday, has articles providing a list of possible intangible assets that your company might have; why you must have more than one buyer interested in your business and how to do it; the two key issues that any [Read more…]plan should cover; why knowing the motivation behind an acquisition is important to getting the maximum value for your company; and why you should avoid anyone that uses a “one size fits all” approach to valuing companies.
I frequently encounter small business owners who tell me that they plan ontheir business when the “time is right.” When I ask them when that will be, they invariably indicate that the right time to enter the process will be at the peak of the next M&A cycle. When asked about how they will know when the peak has arrived, I usually get blank stares or they say they will hear about it in the media or better yet, from their Uncle Larry, the part-time business broker-pool man.
The fact is no one can accurately predict the peak of the next M&A cycle. We are really good at predicting two things: when the cycle has turned up (which it did starting mid-2010) and when we are past the peak and the market is declining (hopefully that won’t be for awhile). History tells us that the optimal time to find a premium buyer for your business is at the beginning of the M&A recovery cycle. That is typically when buyers are most active and good deals are relatively scarce, which can contribute to favorable valuations. [Read more…]
You’ve heard it said: “The only sure things in life are death and taxes.”
A truthful addendum to this for the private business owner that is equally sure is that at some point you will beyour business.
No matter how much you love your business, there will come a time where the game will change.
Some willbased on retirement or medical issues. Some will notice changes in the market or industry that will begin to take their toll. Some will pass the business along to a family member or a loved one. No matter the specific circumstance that will motivate the exit, the business owner must be ready when the time comes.
In the same manner that you keep your receipts when preparing to file for taxes, you must also prepare in advance foryour business.
In order to help you prepare, we’ve listed five fundamental steps to preparing your exit strategy:
(1) Define Post-Business Objective
The first step of exit planning is a definition of your objective. What are your plans once your business has sold? This objective will drive the exit planning process.
The owner will need to decide how much profit he or she needs to make out of the sale of the business in order to achieve an ideal outcome.
(2) Financial Planning
Once you have determined your primary objective, you are ready to begin to plan the financials for the future sale. During this portion, the owner and professional advisors will begin to look at the cash flow and profitability of the business.
The current value of the business will be assessed including all assets. Once the financials of the business have been assessed, there will be a thorough review conducted of the business, and of its value drivers. The question of what portion of the business “leverage value and reduce risk” are addressed.
As this is assessed you will be able to make a better effort to make the most of your time as you are preparing to meet your exit planning objectives.
(3) Management Transition
Whether or not you are planning to sell to a third party or to an insider will determine how you manage the transition in your exit planning process.
Is it transferred to a third party or to an insider? This will determine how to plan for their exit. Often times if an owner is planning to sell to an insider who may not come to the sale with substantial personal capital, the owner will need to plan for this in order to still receive maximum value during the transition.
(4) Contingency Plan
With every good exit plan, there needs to be a well thought out contingency plan. Risks must be assessed. Some risks include: potential litigation, large portions of revenue in the hands of a few clients, liabilities, employee risks and others.
(5) Personal Estate Planning
The final stage of an exit planning process is your personal estate planning. This is certainly not the most exciting portion of the process, but critical to a successful plan is planning where your money and assets will go if something were to happen and you were to pass away earlier than expected. SmartMoney offers helpful solutions personal estate planning.
An exit plan is critical and hiring a professional as an advisor during the process will increase the accuracy of your plan.
© 2011All Rights Reserved