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Why Do Buyers Take the Mergers and Acquisitions Route?

A merger is very similar to a marriage and, like every long-term relationship, it is imperative that mergers happen for the right reasons. Like many things in life, there is no secret recipe for a successful transaction. While the strategy behind most mergers is very important to obtain the maximum value for a business, finding the right reason to execute a merger could determine the success post-acquisition.

When two companies hold a strong position in their respective areas, a merger targeted to enhance their position in the market, or capture a larger market share, makes perfect sense. One of the most common goals for transactions is to achieve or enhance value; however, buyers have different reasons for considering an acquisition and each entity looks at a new opportunity differently. The following points summarize some of the primary reasons that entities choose the mergers and acquisition route.

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  1. Increased capacity

When entertaining an acquisition opportunity, buyers tend to focus on the increased capacity the target business will provide when combined with the acquiring company. For example, a company in the manufacturing space could be interested in acquiring a business to leverage the expensive manufacturing operations.  Another great example are companies wanting to procure a unique technology platform instead of building it on their own.

  1. Competitive Edge

Business owners are constantly looking to remain competitive. Many have realized that, without adequate strategies in place, their companies cannot survive the ever-changing innovations in the market. Therefore, business owners are taking the merger route to expand their footprints and capabilities. For example, a buyer can focus on opportunities that will allow their business to expand into a new market where the partnering company already has a strong presence, and leverage their experience to quickly gain additional market share.

  1. Diversification

Diversification is key to remain successful and competitive in the business world. Buyers understand that by combining their products and services with other companies, they may gain a competitive edge over others. Buyers tend to look for companies that offer other products or services that complement the buyer’s current operations. An example is the recent acquisition of Aetna by CVS Health. With this acquisition, CVS pharmacy locations are able to include additional services previously not available to its customers. 

  1. Cost Savings

Most business owners are constantly looking for ways to increase profitability. For most businesses, economies of scale is a great way to increase profits. When two companies are in the same line of business or produce similar goods or services, it makes sense for them to merge together and combine locations, or reduce operating costs by integrating and streamlining support functions. Buyers understand this concept and seek to acquire businesses where the total cost of production is lowered with increasing volume, and total profits are maximized.

The above points are merely four of the most common reasons buyers seek to acquire a new business. Even if the acquirer is a financial buyer, they still have a strategic reason for considering the opportunity.

Author:
Fernanda Ospina
Senior Associate
Benchmark International

T: +1 (813) 313 6150
E: opsina@benchmarkcorporate.com

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Best Practices When Preparing Your Business for Sale

The decision to sell your business can be incredibly difficult. In addition to the financial capital you have invested in your company, you have incurred an intangible amount of “sweat equity, through the hard work spent building your business and the natural emotional investment made in the company. That’s why, once the decision to sell has been made, it is imperative that proper preparation is put in place  to ensure your goals are met once your company is brought to market. Owners who approach exit planning systematically and methodically are more likely to maximize the value of their business and sell on their own terms.

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Financial Preparations

The primary factor influencing a company’s value is its earnings. It is essential  that the company’s financials present potential buyers with a clear story, allowing them to fully evaluate the company’s production. Presenting your business as efficient, with solid cash flows, a clean balance sheet, and low expense requirements, will position it as an attractive acquisition. There are several steps a business owner can take when reassessing their financials.

First, small private companies’ income statements are typically geared towards minimizing the company’s taxable net income. Although beneficial to the business owner, this approach is counterproductive in the context of a sale. As such, discretionary expenses that are not critical to operations and have not, or will not, impact revenues should be identified and eliminated. This could include owner/shareholder expenses, family-member salaries, fringe benefits or exorbitant perks, and extraordinary one-time expenses. Not only will this exercise maximize net income, but it will also present a normalized picture of the business to acquirers.

Second, organizing your balance sheet is key in preparing for a transaction. Sellers should remove all assets unrelated to their business from the balance sheet, as well as identify excess assets that could be converted to cash without adversely impacting the business. A buyer will not be interested in paying for excess inventory and, as such, this presents an opportunity for the seller to increase the total yield from the sale.

Third, it is important that a seller fully understands the company’s working capital before engaging a buyer. Working capital is often a point of negotiation between the buyer and seller. Buyers expect to receive a “normal” level, and often use low amounts of working capital to drive down the total cash paid at close. Managing working capital requires both time and effort, but it can result in greater efficiency and can lower the total level of working capital buyers expect to have delivered.

Lastly, the reliability of a company’s financial statements is critical in influencing a buyer’s decision. It is recommended that, before going to market, a seller contracts an independent accounting firm to review or audit their company’s financial statements. This will ensure the company is presented in an accurate manner, and will instill a sense of confidence in potential buyers, resulting in a greater level of trust and better valuations.

Operational Preparations

A company’s operations are just as important as financials. Potential buyers will seek to comprehensively understand the business practices behind a company’s earnings. A well-run business, with efficient operations, and good growth prospects will appear more attractive to any buyer. Unfortunately, businesses often have operational issues that could jeopardize a transaction. It is necessary for sellers to identify these issues before going to market and, in any case where the issue cannot be resolved, prepare to address it in a forthright manner.

For example, although a company’s clientele is not directly reflected in its financial statements, a company’s book of clients is a critical point of examination for a buyer. An ideal business has a broad customer base with little customer concentration. Dependency on a limited number of large customers could significantly reduce the marketability of a company. In these cases, it is important that the seller address this issue head on by either diversifying the company’s clientele before going to market, or developing a narrative to mitigate this issue and reassure buyers.

Additionally, a business owner’s level of involvement in the company is an important factor to buyers. They are acquiring the business, not the seller. As such, buyers will want to see a strong supporting management team, indicating the business will continue to be successful long after the owner has left. As a business owner prepares to go to market, it is key that they evaluate their role in business operations and implement a succession plan. 

Lastly, it is imperative that a business owner continues to grow revenues, as well as develop a realistic growth strategy. Buyers are purchasing the current and future cash flows of the business; historical growth, as well as a growth strategy with expansion opportunities, provides a blueprint for what’s to come. Presenting buyers with growth plans that are reasonable and achievable validates the credibility of management, and demonstrating that credibility through continued revenue growth illustrates the quality of the business.

For many business owners, selling a business happens once in a lifetime. When dealing with such a monumental event, a little more preparation today is certainly worth the added value tomorrow. Proper planning and advanced preparation is critical in order to maximize the value of your business and the probability of closing a transaction. Additionally, advice from seasoned professionals can provide you with savings and add significant value. At Benchmark International, we are proud to provide world-class mergers and acquisitions services, and we work hard to ensure your company’s value is maximized and your business is sold on your terms.  

Author:
Theodore Pince
Associate
Benchmark International

T: +1 (813) 898 23557
E: pince@benchmarkcorporate.com

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Benchmark International Facilitated the sale of AVIS Forklifts (Pty) Ltd (AVIS) toSky Investment Holdings (Pty) Ltd through its subsidiary Tailifts South Africa (Pty) Ltd (Tailifts)

Benchmark International is pleased to announce the sale of AVIS Forklifts (Pty) Ltd (AVIS) to Sky Investment Holdings (Pty) Ltd through its subsidiary Tailifts South Africa (Pty) Ltd (Tailifts).

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Benchmark International has Successfully Facilitated the Sale of Insitas Research Limited to HPS Group Limited

Posted on October 17, 2018 By in UK M&A

Benchmark International is delighted to announce the sale of Maidenhead-based market research company, Insitas, to marketing firm HPS, based in Marlow.

Insitas is an independent market research consultant, providing strategic business insights to a client base of blue chip, multi-national commercial organisations in the UK. It utilises quantitative and qualitative research methods, including surveys, focus groups and interviews to identify potential solutions to problems centred around the areas of brand development, brand strategy and consumer behaviour.

HPS consists of specialist teams adept at data interrogation; consumer research; creative content; brand partnerships and PR; in-store promotion; and video and animation. It offers end-to-end marketing solutions, using insight and other skill sets to bring brands closer to customers.

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Tags: UK M&A

The Benefits of Vertical Integration As Evidenced by Apple's Intent to Purchase Assets from Dialog

Apple has agreed a deal to acquire the assets of its long-time supplier, Dialog Semiconductor, which include 300 employees and patents in a $600 million deal, which is expected to close in the first half of 2019, subject to regulatory approval.

Dialog supplies power management circuits to Apple, which help to extend the battery life of its iPhones and iPads. The move comes after Apple announced last November that it was planning to phase out the use of Dialog’s products as Apple stated it would be using chips from another supplier.

This was believed to be Apple itself and, with the acquisition of Dialog’s assets, this allows Apple to bring the development of chips in-house.

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Benchmark International's Team to Blanket ACG Capital Connection

On November 12th, 2018, capital providers from across the country will be attending the Association for Corporate Growth Capital Connection in St. Petersburg, Florida. In addition to manning its exhibit table, the Benchmark International team in attendance will be holding one-on-one meetings with over sixty different strategic and financial acquirers.

“Our energetic participation in these conferences benefits our clients not only because of the occasional new acquirer that we meet but also, and probably more importantly, because it keeps our clients in the front of these active buyers’ minds. It’s one of the main reasons they come to Benchmark International first when they have a new investment plan. It’s also one of the ways we ensure these busy professionals will take our calls every time we have a new opportunity to put in front of them,” mused Benchmark’ Managing Director Clinton Johnston

The St. Petersburg Conference will be Benchmark International's fifth US Capital Connection exhibition of the year. If you’ve been unable to schedule a one-on-one with our team, Benchmark International’s booth will be in the exhibitors hall and manned from three hours before the conference starts until three hours after it ends. You can also call +1 813 898 2350 to schedule an appointment.

With 2018 soon drawing to a close, you may have begun considering your exit or growth plans for your business for the year ahead. Would you like to be showcased to leading dealmakers with strong, acquisitive appetites? Naturally, we present only a select number of companies for each event, so we would encourage you to contact us now to ensure your business is included.

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What is included in the M&A due diligence?

The due diligence process is one of the final steps in an M&A transaction where the potential buyer does its obligation to best confirm and verify the seller's company data and relevant information. This information typically includes but not limited to: financials, IT, operations, legal & compliance, insurance, corporate bylaws, contracts, customers, among other important information. Typically, the due diligence process follows the execution of a letter of intent (LOI), a non-binding document outlining the intent of both parties to commit to the transaction.

Once the LOI has been executed, the buyer will request a list of items to be shared by the seller with the intention of disclosing the selling company’s key details that could uncover risk buyer. As mentioned before, items can range all the way from financials to operations to insurance to contracts, among others. In cases where the seller owns the real estate, additional documents pertaining to the real estate, such as: deeds, mortgages, tax documents, owners’ insurance, etc. will need to be provided. Given today’s advancements in technology, once the due diligence request list has been sent to the seller, the team leading the deal will proceed to open what we call in the M&A world a “virtual data room” or a “data room.” These two terms are referred to as online portals that hold and store the information requested by the buyer with high levels of security only available for certain parties, including: buyer, seller, M&A attorneys, CPAs, advisors, among others. The data room allows activity within the room to be tracked and archived so there is a file of the information exchange after closing should any issues arise.

Once the due diligence starts, it is highly recommended for the buyer to hold, at the very least, weekly meetings or calls with the seller to discuss outstanding items or any questions that may have arisen from the process. As the due diligence process progresses, the buyer will become more familiar with the seller’s company. For an instance, should the buyer find any items that may play against the seller in the due diligence process, the buyer may use this to lower the valuation of the business which may ultimately result in a lower offer price.

In addition, this process can result as a discovery of potential opportunity to better structure the deal, find real synergies among parties, review any benefits and challenges for potential system integrations, and any associated risks that may arise from the result of this potential acquisition. 

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Benchmark International has successfully facilitated the sale of ME Interests LP, DBA First Service Technology to Restoration Risk Management.

Benchmark International has successfully facilitated the sale of ME Interests LP, DBA First Service Technology to Restoration Risk Management. First Service Technology is a professional services company that offers IT and physical security integration consulting, network audits, project management, implementation, and installation for the Texas market.

First Service Technology serves the State, Local, and Public Education markets (SLED). These include Texas K-12 school districts and city and county government entities. The company also serves the commercial market. Ownership consisted of two partners looking to sell the company to de-risk and facilitate growth. Both partners were open to various deal structures and willing to stay with the company on a long term basis.

Restoration Risk Management is a Wyoming based entity with partners in several international locations such as Thailand, United Kingdom and the United Arab Emirates. The acquisition of First Service Technology will facilitateRestoration Risk Management’s entrance into the Texas market.

Benchmark International Transaction Director, Luis Vinals, mentioned “The Central Texas Market is primed for growth across a variety of industries. The consolidation of the IT Services and IT Security sectors prove that now is the time to sell. Currently, buyers are paying sellers historically high multiples for their businesses in this space. In addition, Benchmark International’s Austin office, through its team of Analysits, Associates and Directors were able to uncover an international buyer based in Thailand and the UK with sufficient experience to run and grow First Service Technology. This is testament of Benchmark International’s market reach and understanding across all sectors.

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Benchmark International Has Successfully Facilitated the Sale Between West Sands Advisory Limited and Sibylline Limited

Posted on October 4, 2018 By in UK M&A + UK Deal Making

Benchmark International is delighted to announce the sale of West Sands Advisory to Sibylline.

Established in 2006, West Sands Advisory is a strategic intelligence and advisory firm that helps clients confidently navigate complex markets and commercial situations. It is a leading supplier of market entry, expansion and risk mitigation services with a particular focus on understanding and communicating the connection between politics, crime and business in emerging markets.

The company is an ideal partner to Sibylline, as a strategic risk and threat advisory firm that supports businesses, governments and NGOs through high quality risk and due diligence services. West Sands Advisory, therefore, adds significant expertise to Sibylline’s operations, as well as helps to increase its core geopolitical insight through its expanded and highly connected global network.

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Benchmark International has Facilitated the Acquisition of Paragon Plastics, Inc. by Ashley Industrial Molding, Inc.

Benchmark International has successfully facilitated the acquisition of Paragon Plastics, Inc. (“Paragon”) by Ashley Industrial Molding, Inc. (“AIM”). Paragon is an original equipment manufacturing company using thermoforming technology to produce custom plastic products for marine, industrial, busing, and aerospace industries.

Paragon was founded in 1993 by David Trout. The company produces high quality OEM components and offers a full range of services including CAD design, pattern milling, plastic forming, assembly, and finishing. The company’s proven track record, commitment to high-quality, professional work, combined with its advanced technology has enabled Paragon to establish a stellar reputation and build long-lasting client relationships.

AIM, headquartered in Ashley Indiana, is a leading manufacturer of quality custom molded and painted plastic products and assemblies. AIM has manufacturing processes which encompasses capabilities in SMC Compression Molding, Reaction Injection Molding and Thermoforming. The primary marketplaces it services are the agricultural, industrial, construction, forestry and military markets. The company continues to expand its product capability and nationwide footprint through acquisitions. The Paragon opportunity became a good strategic fit for AIM’s growth.

David Trout, president and owner of Paragon stated, “The Benchmark team, with their knowledge and experience in M&A transactions far surpassed my expectations. After owning my business for 25 years, Benchmark found the perfect buyer to continue the Legacy. Thanks for all your help through this transaction.”

Regarding the deal, Transaction Director Leo VanderSchuur at Benchmark International stated, “It was a pleasure to represent Paragon in this strategic transaction. On behalf of Benchmark International, we wish both companies continued success.” Senior Associate, Sunny Garten, added, “David and his team were wonderful to work with. They were engaging and always responsive to diligence requests. We’re excited to see that their legacy will be preserved and enhanced through this transaction with AIM.”

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Global Mergers and Acquisitions Have Hit New Highs Due to North American Cross-Border Deals

Global mergers and acquisitions have hit the headlines of late due to the value of transactions increasing by a staggering amount – H1 figures by Thomson Reuters revealed that the value of transactions rose by 64 per cent to $2.5 trillion, compared with the same period in 2017, and was the strongest year-to-date period since records began in 1980.

This has since grown to $3.2 trillion so far this year, bolstered last week by spending from North American companies. Such domestic deals included SiriusXM’s $3.5bn deal for digital music provider Pandora Media but its cross-border deals, such as Michael Kors’ acquisition of Versace for $2.2 billion, are proving to be the stars of the catwalk.

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Benchmark International successfully facilitated the acquisition of Bean, Whitaker, Lutz & Kareh, Inc. to CES inc.

Benchmark International has successfully facilitated the acquisition of Bean, Whitaker, Lutz & Kareh, Inc.Bean, Whitaker, Lutz & Kareh, Inc. (BWLK) by CES, Inc. BWLK provides land surveying, mapping, civil engineering, and land planning services in Florida.

BWLK has been in the land surveying, planning, and engineering services business since 1987. The company’s proven track record, commitment to high-quality, professional work, combined with its advanced engineering and surveying technology has enabled BWLK to establish a solid reputation and build long-lasting client relationships.

CES, Inc., a Maine-based firm of engineers, environmental scientists, and land surveyors is expanding its footprint to the Southeast. Denis St. Peter, President and CEO of CES, commented, “CES, Inc. has been utilizing M&A as one of our strategies to help achieve our growth goals over the past several years. By working with Sunny Garten, Leo Vanderschuur, and their team at Benchmark International to acquire Bean, Whitaker, Lutz & Kareh, Inc., we were able to identify and perform preliminary evaluations of several companies quickly and accurately within our targeted geographic area. Benchmark represented several prospective sellers that fit our criteria, and the responsiveness and quality of their initial teaser summaries and more detailed confidential information memorandums allowed us to optimize our search efforts to end up with the best company for CES, Inc. Their significant knowledge of the acquisition process, the sophistication of their systems (e.g., online data exchange), and their willingness to communicate deal structures based on their past experiences were all valuable to the success of our acquisition.”  

Scott Whitaker, president and one of BWLK’s owners stated, “On behalf of everyone at BWLK, we are delighted to join the CES team. The more we learned about CES’ approach to its employees and clients, including its Best Places to Work recognition and past project awards, the more we grew excited about our partnership. By joining our professionals with theirs, we will offer new opportunities to our employees and continue our dedication to our clients and provide them the same high-quality services they enjoy.”

“I am honored to join CES as a Shareholder and to help be the link between Maine and Florida,” said Ahmad Kareh, also an owner of BWLK. “CES’ depth of engineering and environmental experts means that we will be able to collaborate with shared expertise to provide our clients with additional capabilities to reach their project’s goals.”

Regarding the deal, Transaction Director Leo VanderSchuur at Benchmark International stated, “It was a pleasure to represent BWLK in this strategic transaction. On behalf of Benchmark International, we wish both companies continued success.” Senior Associate, Sunny Garten, added, “Scott, Ahmad and their team were wonderful to work with. They were engaging and always responsive to diligence requests. We’re excited to see that their legacy will be preserved and enhanced through this transaction with CES.”

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Benchmark International Completes the Sale of Imscan Systems Limited to Charles Street Solutions Limited

Posted on September 27, 2018 By in UK M&A + UK Deals

Benchmark International is pleased to announce the sale of Imscan Systems to Charles Street Solutions.

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Tags: UK M&A, UK Deals

Benchmark International Has Successfully Facilitated the Transaction Between Imscan Document Services Limited and First Solutions Services Limited

Posted on September 27, 2018 By in UK M&A + UK Deal Making

Benchmark International is delighted to announce the sale of Imscan Document Services to First Solutions Services. The acquisition represents the second deal that Benchmark International has facilitated for the target.

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To PE or Not to PE – Is a Private Equity Firm the Right Type of Buyer for My Company?

Posted on September 24, 2018 By in Private Equity

If you are considering the sale of your company, then you may have also thought about what type of acquirer you would like to approach. You may have considered a private equity firm (PE firm) as an attractive prospect, as there are a range of benefits from partnering with PE firms such as the amount of funding available, their active involvement in the company and their expertise in creating value.

There are, however, certain criteria that PE firms look for when sourcing acquisition targets and the following tend to be what they will look for in a portfolio company:

 

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Register for our webinar: Multiples. Multiples of What? Fixing the Other Half of the Equation to Maximize Your Valuation

Date:
Thursday, October 11th at 10:00am EST

Register for Webinar 

Details:
It seems that almost every business owner understands how the concept of a business valuation based on “multiples” works. But it also seems that they focused on the multiples side of the equation to the detriment of the other side. 

EBITDA x a multiple = Enterprise Value 

With just a bit more attention on that EBITDA piece of the equation, values can sky rocket. With a better understanding of that side of the equation, surprises can be avoided. And with some preparation, business owners can capture the value their multiple deserves. 

Please join the conversation between our Managing Director Clinton Johnston and our Senior Associate Fernanda Ospina as they discuss both the big picture and a handful of details that are essential to understanding the first, and too often overlooked, part of this equation. Fernanda joins our frequent host to bring her insights into the financial nuances of the dozens of transactions for which she has provided her accounting and financial expertise in recent years. Some of the points they will cover include: 

  • What games do buyers play with defining EBITDA? 
  • What period of EBITDA matters the most? 
  • How do we present the financial history of the company in the best possible light? 
  • What are considered legitimate “add backs” to EBITDA? 
  • How do you defend add-backs? 
  • What do I need to do to prepare for the buyer’s “quality of earnings” analysis?
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Is Your Business Killing You? Signs it Might Be Time to Exit …

Posted on September 17, 2018 By in Business Tips + financial + exit strategy

The dream of running your own business was once a thrill that filled you with excitement. Perhaps, it was the idea of being your own boss fueled the passion behind your drive, or the prospect of providing a new product to a targeted market. Whatever the case may be, you’ve made it to this point in time right now because something is different (hence, why you are reading this article).

Maybe business is great, you’ve reached a plateau or your company is in decline.  Irrelevant of the situation you aren’t fired up about your company like you used to be and you no longer have the same passion for your company that used to be there or, in the worst case, you feel like it is killing you!  Your dedication to your business seems to be affecting your personal life and your health, whether it be mental or physical, in a negative way. Going to work each day is getting tougher and tougher, a dreaded obligation, and you feel like your tank is running on empty.

When your personal life and your health are in decline, it’s probably time to explore your exit strategy options. The first step you need to take when you reach this point is to open up conversations with a sell-side mergers and acquisitions team who can help you determine what those options are.  Starting the discussion now will allow you to have a better “diagnosis”, but here are some flags to look for if you aren’t sure if now is the time to contemplate an exit:

1)    You’re spending too much time on back-office and administrative tasks– Most business owners who find themselves in this situation have driven their company to success and have a very nice company, having it from nothing at all.  The reality is that owners do this as the primary visionary who pushes business development and sales.  Truthfully, there is seldom an employee who can deliver the passion and expertise for your company than you can.  Over time as a company grows, many owners fall prey to becoming employees themselves who are constantly focused on obligations such as managing people, processing payroll, dealing with HR issues, keeping up with regulations, etc. which confines them to an internal office desk job.  If you are finding yourself in a this situation or similar, you aren’t the only one and there are many ways to revive your daily routine that a mergers and acquisitions team can share with you.

2)     You feel like you’re “married” to your business and are contemplating a divorce – Starting a business that you expect to last for the long run is a commitment. You have to be prepared for ups and downs all along the way. As the saying goes, the only constant in life is change.  As your business will change, so will your personal life, your priorities and your focus.It can be hard to take a step back from the business because it  requires so much of your time and attention. You don’t want your business to fail, but you also don’t want your personal life to suffer at its expense. Having a family, or missing out on life’s small moments repeatedly, can make you reevaluate your priorities. If you find yourself being at the business more than at your home, it’s probably time to start the exit conversation and learn more about your options. 

3)    Your Business has Grown Substantially and You Can’t Keep Up with the Demand – This appears to be a good problem to have, but in reality, if you can’t keep up with your business, then the business is walking a thin line between failure and success. Likewise, you are probably coming to your maximum height of stress too. So, what do you do? Being able to understand that you don’t know what you don’t know is key to catapulting your business further into success. Any one person can only do so much. At some point, you need to assess how you can be of more value to your business. If your value lies in innovation and new ideas related to the service you provide or expanding your footprint, but you can’t produce your products or deliver your services fast enough, or if you aren’t spending enough time on innovation because you’re busy on making sure your current client pool is satisfied … you are losing money, and your business will decline. The business you have grown from the ground up deserves to reach its full potential and there are many paths there.

4)    You Daydream About the Day When You Won’t Have to Work Anymore – Running your business has become a chore. You are constantly one foot in the door, even when you’re home. You’ve reached that point where it just feels like your life is your business, and retirement on white sandy beaches sounds more and more intriguing. Being a business owner isn’t a walk in the park, and you need a plan in place, so when those retirement dreams start flooding your mind, you can put your plan into motion.

If you have come to a point in your business where you feel like it is constant stress and you have no relief, then it’s probably time to sit down with a sell-side mergers and acquisitions specialist like Benchmark International and discuss your exit strategy options. There are a vastly more avenues you can explore that will relieve you from the status quo that will allow you to continue pursuing your personal and financial goals while ensuring the legacy of your company remains intact and that your employees will continue to be taken care of.

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Webinar Video: Now that the Valuation is Set, Here’s Where You will Win or Lose the Deal Part II

 

 

If you joined us for part one of this webinar last month, you already understand why coming up with the valuation is only one of many key deal points you will need to secure in order make your exit a success. In part two we examined another six key issues, this time focusing in on those that come even later in the process; after deal fatigue has set in and you feel like you can’t possibly have anything left to fight about or give away. 

1. Winning the net working capital fight 
2. Your indemnification of the acquirer 
3. How the disclosure schedules protect you 
4. Can reps and warranties insurance assist you? 
5. The inevitable non-competes 
6. Meet the Grim Reaper of your sale process - Delays 

If you missed part I, it can be found here (http://bit.ly/2nTsPk7) and we encourage you to take an hour to get caught up to ensure you get the most out of part II. 

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Strategic Vs. Financial Buyers

Posted on September 11, 2018 By in Business Tips + buyers + financial + strategic

If you are considering selling your business, it is important to dedicate some thought to the type of sale that best allows you achieve your goals. Do you believe a full sale where you walk away from the company after closing is best for you?  Are you the type of person who would work well with a strategic partner that, together, will allow for accelerated company growth?  Is there an amount of time you would like to continue working after the transaction with a plan to slowly exit over time?  Determining the type of sale that appears the most attractive (I only say ‘appears’ because many owners change their mind after learning what the market has to offer and will find a more attractive sale type than what was initially assumed to be the ‘best’) will also allow you to gain an understanding for the most likely type of buyer.

When selling your business, buyers typically fall into two main categories: strategic buyers and financial buyers. The best type of buyer for your business depends on personal goals you hope to achieve from the sale.

Strategic Buyer:

This type of buyer is more likely to pay a premium for a business because their reason for the acquisition is to add to their already existing business. A strategic buyer can be a competitor, supplier or vendor in the same industry.  A strategic buyer can also be a focused on businesses of similar model that service the same sector.  These attributes are commonly referred to as vertical and horizontal markets, respectively.  Using what your company has to offer can help them either expand their footprint or break into a new market.

They are looking for synergies in a prospective merger or acquisition. Synergies are characteristics of the two companies that compliment each other, so that when they are put together, the sum equals more than the two parts individually. In other words, a strategic buyer wants to have a relationship that makes the resulting business more valuable than the two businesses when they stand on their own.

Finding a strategic buyer to work with your business will give you more options in a sale. You can decide to stay on with your business for a transition period, while the new company takes over and for an integration period, eventually allowing you to exit completely, or you can negotiate your continued role in the business as a key player in its continued development.

A strategic buyer can often outbid a financial buyer because of the synergistic relationship they are looking to create in your business. Your businesses together yield increased value, sometimes exponentially, in one way or another.

Financial Buyer:

A financial buyer is looking to invest capital to get a return on their investment. Basically, they want to buy your business outright, make profits from it, and then sell it again to create liquidity. For this reason, a financial buyer is not typically willing to invest the same amount of capital they can invest into your business because they are not adding your business to an already existing company of theirs. Instead, they are buying your company as a whole and working with what you have in place already.

A financial buyer doesn’t have the ability to cut on backend costs that a strategic buyer does. They will need to buy a company with a good working structure and management team in place, since they may not be bringing a team of their own to take over all areas of the business. This allows owners to stay involved with their business to help it grow until the financial buyer decides it’s time to sell again.

The benefit to using a financial buyer is knowing that there is a high growth model in place for your business, and you will most likely play a role in its realized potential before it is sold again. This is a great option for a business owner who is looking for an eventual complete exit from his business.

Choosing the Best Fit

Now, there are some exceptions and looking at different buyers from a less seasoned perspective can make it difficult to understand exactly what type of buyer you are actually facing.  For example, a financial buyer may have a portfolio of business that compliments yours which can allow for a synergistic fit, thereby allowing you to enjoy some of the benefits a strategic buyer brings to the table.  It could also be that a financial buyer recognizes inefficiencies or ‘areas of improvement’ that will allow them to immediately increase the company’s profitability following an acquisition.  On the other hand, a strategic buyer may only want to buyer your business to eliminate a competitor and has no real intention of growing your business after the transaction takes place.  Simply put, they may just want to prevent your business from continuing to eat up market share whether that be by forcing the company to remain static or by closing the doors.When it comes to selling your business, it is important to consider all your options in a sale. You need to find a buyer that will bring what you are looking for to a sale. Selling your business for a high value is important, but is it worth compromising the culture of your business or your employees? You need to decide what is most important to you and let those values be driving factors in your decisions in a sale.

It is tough to find the best fit for your business on your own. That’s why using a sell side mergers and acquisitions firm like Benchmark International is essential. You will have someone on your side who can help you find the right buyer for your needs. You can also learn more about what you can negotiate in a sale and you can discuss what’s most important to you to make sure those needs are met in a sale.

If you are thinking of selling your business, Benchmark International is dedicated to helping business owners like you achieve what they are looking for in a sale.

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Benchmark International Sponsors The Florida Rush Girls 04

Benchmark International is proud to be the Sponsors of the Florida Rush Girls 04. 

The Florida Rush Girls 04 have been selected to participate in the National League this year, which is an amazing achievement. This will involve the girls attending National events and competing against many of the top teams in the nation. 

To assist the team with the cost of participation, Benchmark International sponsored the team to help with the cost of participation. If you would like to also donate to help the team, you can visit their Go Fund Me page: https://www.gofundme.com/florida-rush-2004-girls

We wish the girls the best of luck in their 2018-2019 season!


Please show your support and follow the team on social media:

Twitter: https://twitter.com/FLRush04Girls
Instagram:https://www.instagram.com/flrush04girls/
 

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