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How Seller Due Diligence Maximizes Business Value

Selling a company is a momentous life event for any business owner. You have worked hard to build it and want to achieve the highest acquisition value possible when you are ready to sell. To do this, you should be fully prepared for any prospective buyer to conduct rigorous due diligence, which means you should be prepared to do your own.

What is due diligence? A comprehensive appraisal of your business to establish its assets and liabilities and evaluate its commercial potential. 

If you carry out thorough due diligence before putting your company on the market, it will be primed and ready for the buyer to conduct their due diligence process. By being sufficiently prepared, your business is going to appear more attractive to buyers.

Planning Ahead is Crucial

First things first: plan ahead and plan early. Give yourself enough time to optimize the company’s value before putting it on the market. A carefully planned sales strategy is sure to garner better value than what appears to be a hasty fire sale. It is best to wait to sell until you have done everything that you can to maximize your company valuation. When you take the time to position your business attractively for the marketplace, it reduces the odds of a negative outcome.

Start by identifying the key value drivers for your business and how they can be improved. This will help you find obstacles to a sale before a buyer does, and give you time to address any issues. These drivers include:
• Skilled, motivated workforce
• Talented management team
• Strong financials and profitability
• Access to capital
• Loyal and growing customer base
• Economy of scale
• Favorable market share
• Strong products/services and mix of offerings
• Solid vendor relationships and supplier options
• Sound marketing strategy
• Product differentiation and innovation
• Up-to-date technology and workflow systems
• Strong company culture
• Research and development
• Protected intellectual property
• Long-term vision

It is common for buyers to be especially concerned with company culture and existing customer relationships. Make sure your employees and your customers know what to expect and share your vision. If there is misalignment in these areas, it can unfavorably impact the post-sale performance of the company.

Ready to explore your exit and growth options?
Why Documentation Matters

Having all your documentation in order, ensuring its accuracy, and putting it all on the table is going to make you a more trusted seller and increase the value of the business. It will also help you avoid constant back-and-forth requests from a buyer, which can be a distraction for you while you’re trying to run a business.

Creating a secure and efficient virtual data room (VDR) for storage and review of documents offers major advantages. A VDR is a secure online document repository that enables efficient collaboration between parties in any location so they may share information at any time during the pre-deal phase. A VDR also makes it easier to compile and verify every document internally and avoid duplicating efforts. Plus, it offers exceptional security to safeguard against confidential information ending up in the wrong hands. Once you have your VDR completed and vetted internally, you can open the files up to outside partners. Overall, the VDR is your secret weapon in making sure all of your documentation is centralized and that you are presenting your company in the very best light.

You can learn more about the documentation you will need to compile here.

Timing is Everything

You want to sell at the right time based on the market, which is always changing. Being adequately prepared to sell means being ready to act when the time is right. And selling at the right time means getting more value for your business.

Something else you must consider is if you are truly ready to sell. This is not the time to be emotional. Once you’ve initiated the sales process, the last thing you want to do is change your mind when buyers are already involved in the conversation. This will give you a reputation of being disingenuous and not being a serious seller, scaring off potential buyers in the future and devaluing your company.

Professional Help is Key

If it sounds like preparing for the sale of your company is an exhaustive undertaking, that’s because it is. But you do not have to do it alone. If you enlist the expertise of a reputable mergers and acquisitions firm, they can lead the way and help you get the most value for your company. A good M&A Advisor will know better than anyone how to steer you through the due diligence process.

They will also know when the market is in the right place for a sale, and give you access to quality buyers that you can trust. It is also important to note that buyers are going to take you much more seriously when you have partnered with a highly regarded M&A firm.

At Benchmark International, we’re here for you. Our experts are ready to partner with you to exceed your expectations and make great things happen.

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The Global Logistics Market and M&A

The global logistics market is anticipated to register a CAGR of 3.48% from 2017 to 2022 to attain a market size of around $12.256 billion by 2022. These statistics are extremely encouraging for the longevity in relation to value in global logistics. Reasons for such financial increase has been pointed towards the increase of the technology sector and related systems, helping logistics to be more streamlined and efficient. Perhaps the biggest reason for growth is the increase in international trade agreements and policies which directly affect the industry, with these new trade agreements this gives existing vendors more room for expansion and also benefit from less restrictions geographically allowing for increased capacities.

Another reason for the growth concerning the logistics trade is the increase in the E-commerce industry. E-Commerce Logistics Market is expected to reach $535.895 million by 2022, supported by a CAGR of 21.2% a staggering projection about the importance of E-commerce to the logistics sector. With highly popular online retailers and stores such as Amazon, eBay, and clothing outlets bringing in high volumes of buyers thus increasing the movement of goods. This looks like the biggest global logistics markets revenue, with the increase of demand from E-commerce this will allow the logistics market to expand and continue to develop more efficient systems to increase productivity.

Logistics trends expected to transform global logistics:

  • Blockchain technology is enabling logistics companies to failsafe digital contracts, the technology allows to seamlessly track logistics, assets, and merge all documents related to the logistics of the company
  • Digitalization of the logistics industry, this is expected to reduce procurement and supply chain costs. The more complex the digital channels become and the more people who are aware of these channels, this is expected to result in a more efficient logistics
  • Emergence of 3PL (Third-party logistics) and 5PL (fifth part logistics), these services offered to consumers has increased logistics contribution on a global scale. Projections in terms of value of these kinds of services are also expected to increase until 2025 by 7%
  • Recent years in logistics have seen a trend on using data to anticipate busy periods, supply shortages and other insights to allow the business to make better decisions and run more efficiently

A big challenge for logistics in recent years is the political effect of Brexit, specifically the trade agreements between the UK and Europe. However, this will affect the sector in multiple countries. As a result, with the uncertainty of such political matters the coming years will tell how this affects logistics. Statistics show Brexit is already affecting trade flow between the UK and Europe, resulting in less movement of goods and as a result directly effecting the logistics. When trading with other countries outside Europe (America) this could result in further bottlenecks about outdated trade deals, directly the affecting the logistics industry.

We Are Ready When You Are.

Call Benchmark International today and speak with one of our analyst about your company's exit or growth strategies.

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The 12 Best M&A Twitter Accounts To Follow

PitchBook Data| @PitchBook

PitchBook is a financial data, research, and technology provider that covers global venture capital, private equity, and M&A transactions. Here you will find comprehensive news and analysis, as well as deep-dive info on individual business sectors.

Mergers&Acquisitions| @TheMiddleMarket 

See what is happening in private equity and get a healthy dose of all things related to M&A, including in-depth analysis, articles, and commentary in the middle market from an array of sources.

Benchmark International | @benchmarkgroup

As one of the most powerful M&A firms in the world, this list would not be complete without including our very own Benchmark International Twitter account. Get the latest news and industry insights, and see how our Benchmark team stays dynamic on the world stage.

The M&A Advisor| @themaadvisor

The M&A Advisor is the premier network of M&A, turnaround, and finance professionals. Read great industry articles, and get access to information regarding conferences, awards, and meetings.

The Deal@TheDealNewsroom

The Deal has served investors, advisors, and dealmakers with high-level analysis of “the deal economy.” Their Twitter account is an excellent extension of a news source that started as a print newspaper in the 1990s and has grown into a sophisticated M&A information tool.

WSJ Private Equity| @WSJPE

The official Twitter account for the Wall Street Journal PRO's is where you will hear from their global team of editors and reporters covering all topics related to private equity worldwide.

 

Ready to explore your exit and growth options?

 

Flipidea| @Flipidea_AI

Flipidea uses machine learning to discover insights from failed businesses and predict failure from startups. While the account does not have many followers, the account’s timeline of tweets reveals an interesting compilation of information that can be of value to entrepreneurs, including an array of interesting retweets. 

Buyouts| @Buyouts

Buyouts Insider offers industry intelligence and is a handy source of news, data, and analysis of trends in the leveraged buyout and private equity industries.

Mergermarket| @Mergermarket

Mergermarket provides M&A intelligence, data, and research designed to give subscribers an edge. It is a robust Twitter account for anyone interested in M&A, and can sometimes be a source for finding out about unannounced deals.

M&A Critique| @mnacritique

The social media arm of this India-based magazine gives insight regarding deals related to M&A, restructuring, insolvency, takeovers, and joint ventures.

Smart Business | @Smart_Business

The Twitter account of Smart Business Magazine offers a U.S.-based perspective on business insights, advice, and strategies for growth. Here you will also find individual profiles on dealmakers and interesting viewpoints from American business leaders.

M&A Navigator| @manavigator

M&A Navigator is a great tool, especially if you prefer simplified access to your headlines. There are no flashy graphics or photos, just the headlines on what is happening in the world of M&A.

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The Ultimate Cheat Sheet On How To Sell Your Business

Once you have decided that the time has come to sell your company, you will want to be as prepared as possible for the endeavor. Being adequately prepared will pave the way for a smoother process, avoid unnecessary delays in the sale, and increase the value of your business. Use this cheat sheet as a guide to get your business ready for what lies ahead.

Know Why You’re Selling

An important part of selling your company is having a clear understanding of why you are doing it.

  • Do you want to exit the business completely and retire?
  • Do you wish for it to be under control by family or an existing employee?
  • Do you hope to retain a stake in the business as part of the sale terms?
  • Do you plan to sell the business to facilitate its growth?
  • Do you aspire to sell the business to fund other ventures?

These questions should all be considered so that you have a clear answer before initiating the sale process. By knowing why you are selling, you can look for the right kind of buyer to suit those needs and establish a clear plan of action.

Compile the Proper Documentation

Any buyer is going to expect to see the facts and figures on your business. The more prepared you are to provide detailed documentation, the more likely they will be to trust you. Items you should compile and have ready for review include:

  • Current and recent profit & loss statements
  • Balance sheets, income statements, and tax returns for at least 5 years
  • Leases and real estate paperwork
  • A business plan
  • A marketing plan
  • Accounts payable and client lists
  • Inventory and pricing lists
  • Insurance policies
  • Non-disclosure/confidentiality agreements
  • An executive summary and detailed profile of the business
  • Employee, customer, vendor, and distributor contracts
  • Outstanding loan agreements and liens
  • Organization chart
  • Letter of intent and purchase agreement

Feel like it's a good time to sell?

Inventory Your Assets

Your assets are a key factor in determining the value of your company, so it is important to have a clear picture of what they are and what they are worth. Create a record of these assets, including:

Physical assets:

  • Business furnishings, fixtures, and equipment, inventory, real estate, automobiles

Intellectual property assets:

  • Trademarks, patents, licensing agreements, trade secrets, and proprietary technology

Intangible assets:

  • Brand equity, business name, and brand identity
  • Processes and strategies
  • Trained employees
  • Loyal clientele
  • Supplier and distribution networks

Enlist the Help of an Expert

Selling a business is a complicated process, and it is not as simple as just gathering the items listed above. This is why most business owners opt to partner with a mergers and acquisitions firm to organize a deal. They do all the work and tend to all the details so that you can focus on running your business and keeping it thriving in the wake of a sale. This includes finding the right buyers, creating a competitive bidding environment, and making sure you get the most value for your company.

Advisors such as our experts at Benchmark International have specialized tools at our disposal that are proven to maximize value for our clients and get desired results. Give us a call and let us put our connections to work for you.

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HVAC and M&A

The HVAC industry is considered to be very stable at this moment in time. Many experts believe the outlook for both buying and selling parties will remain positive. As public interest and government regulations continue to push for energy-efficient designs and products, deployment of more advanced cost-effective HVAC systems has increased. This is expected to drive consolidation of HVAC organisations as they look to increase their ability to scale and grow in both commercial and residential markets. Despite uncertainty surrounding a possible recession, there has been no signs of slowing in the M&A industry amongst HVAC businesses.

The global HVAC market is projected to grow at a compound annual growth rate of 5.7%, to reach a value of $183bn by 2025. The growing commercial sector and rapid urbanisation worldwide are driving the demand for HVAC services and equipment. Furthermore, even manual industries such as HVAC must change with the times, and as a result they are being integrated with next-generation technologies such as IoT sensors, remote control systems and hybrid HVAC united, as a way to further reduce energy consumption - this is another factor which is anticipated to contribute to the global market expansion.

Key Industry Trends

  •        Smart HVAC: The growth of IoT has allowed us to control, monitor and interact with a range of systems and appliances like never before; HVAC systems are beginning to incorporate this technology. These advanced HVAC systems will include the likes of repair notifications that let you know when repairs or maintenance is needed, remote access that have remote capabilities, and self-regulation which feature new sensors which help the system regulate itself and determine when and where in the building it is most needed.
  •        Sustainable Building Design: Sustainability is a primary consideration when designing new buildings, often referred to as green buildings design. HVAC is a key component in green buildings design as it is one of the primary energy consumers. The increased focus on sustainability has led to several advancements in the industry, such as ventilation systems using more use of natural airflow to lower the energy consumption of the facility. HVAC systems using alternative power sources and using new building materials that help to maintain a more constant temperature in the buildings where a powerful HVAC system isn’t necessary.
  •        DeVAP HVAC: DeVAP (Desiccant Enhanced Evaporative) is changing HVAC as we know it. These systems provide cooling by using an evaporating cooling system which turns water into evaporation and causes the surrounding air to cool down. DeVAP systems also remove humidity from the surrounding air. They provide the same dry, cool air offered by traditional air conditioners. However, DeVAP systems consume considerably less energy and contain no harmful refrigerants.
  •        Geothermal HVAC: These take advantage of consistent temperatures underground to cool and heat buildings. Using water running through underground tubes, these tubes are either heated or cooled by the temperature of the ground. This water then travels to an indoor unit, where a fan, pump, and compressor are used to deliver cool or hot air to other parts of the building.

We Are Ready When You Are.

Call Benchmark International today and speak with one of our analyst about your company's exit or growth strategies.

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Which is the Best Way to Structure the Sale of my Business?

When selling your business, receiving offers is a big hurdle to overcome so, when this happens, it might seem like plain sailing from here. Unfortunately, there is still quite a way to go with the transaction, the first being to analyse the offers on the table, to make sure they suit your exit or growth strategy.

This might not seem difficult, but there are many ways to structure a transaction. Therefore, depending on what you want to get out of the sale of your business, this will influence the type of deal you take. For example, are you planning to retire and need to live off the proceeds of the sale? Or do you want to remain involved in the business?

Ready to explore your exit and growth options?

Consider the below list of ways to structure a deal to find out which is right for you:

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Benchmark International Facilitates the Transaction of In-O-Vate Technologies Inc. to Continental Materials Corporation

Benchmark International has successfully facilitated the transaction of In-O-Vate Technologies Inc. ("InOvate") to Continental Materials Corporation ("CMC").

InOvate, based in Jupiter, Florida, is a leading manufacturer of premium, metal dryer venting accessories used in residential home construction. Founded by Rick Harpenau in 1996, and led by tenured employees James Ortiz and Cliff Budnick, InOvate has grown consistently through supplying quality engineered, superior products along with delivering excellent customer service.

In response to the transaction, CEO Cliff Budnick stated, "Benchmark helped create a strong first impression for InOvate when introduced to CMC. The InOvate team is excited to continue its growth as part of the CMC portfolio. Equally, we appreciate the ability to maintain our family-oriented culture while ensuring stability for our staff, customers, and vendors alike. "

Founded in 1954, Continental Materials Corporation is a public holding company with subsidiaries in heating and cooling manufacturing, building products, commercial door distribution, and manufacturing and aggregates mining and processing. Headquartered in Chicago, IL, CMC employs approximately 450 employees across the US.

Ready to explore your exit and growth options?

Senior Deal Associate, Sunny Yang Garten, added, "It was a pleasure to represent InOvate in this transaction. Throughout the process, Rick and his team were exceptionally responsive, diligent, and professional. This acquisition represents a tremendous opportunity for both businesses and their teams to strategically accelerate the rate of profitable growth. On behalf of the numerous Benchmark International personnel that worked on this opportunity, we congratulate both teams on reaching this goal."

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Buyer Comfort

Buyers tend to assuage their discomfort with deal structure.  When negotiating with buyers, it is prudent for the seller, guided by a seasoned M&A Advisor, to consider what the underlying issue is, discomfort, instead of addressing the result of that discomfort, a specific deal structure. Huh, you say? Let me dive a bit deeper.

Buyers of businesses use deal structural devices to cure many issues or concerns. Let's take a second to illustrate the most typical elements of a structured deal. While the following encompasses the most common deal structures, it is, by no means comprehensive.

Cash at the closing table is obvious and needs no further illustration. A seller note or seller financing is also fairly simple. The seller essentially serves as a lender to the buyer. The attorneys draft a promissory note, perhaps a stock pledge agreement and incorporate them and potentially other documents in the definitive agreements. The buyer pays off the principal of the note and interest over the course of a few years.  Seller notes don't tend to be contingent upon anything other than the solvency of the entity backing the note. They are deferred. Rollover equity, often known as Seller Rollover, Rollover or simply Roll, occurs when the seller maintains a position in either the existing business or Newco. In some circumstances, a seller may sell 80% of the shares in his or her company while in another, that seller may sell 100% of the shares in her business and simultaneously reinvest what amounts to 20% of the proceeds in Newco. This is generally a cashless exercise. It is critical for the seller to engage seasoned advisors to assist in structuring the rollover in the most tax-efficient manner. The final typical structural element of a deal is an Earnout. Where the seller note isn't contingent upon performance, an earnout is. Earnouts pay out a prescribed dollar amount over time as certain agreed upon and defined metrics are achieved. While these tend to be quantitative metrics like EBITDA and Revenue, they can also be tied to qualitative measures like maintaining key customers or employees or integrating technology. In addition, earnouts can be tied to maintenance or growth.   

Ready to explore your exit and growth options?
As I hinted at earlier, buyers use these structures to cure their apprehension. What is behind that discomfort or apprehension? Many things but at the heart of most of those is the oft-cited, yet misunderstood concept, risk. Risk, in a business context, is the chance for an unanticipated outcome. Risk can be specific to a business, to an industry, to geography or more global. Risk isn't inherently bad, thus the risk/reward model, but it needs to be accounted for in decision making. Buyers, in their initial diligence, aim to understand the underlying risks and determine their tolerance for said risks. When structuring an offer, they seek to allocate and incorporate those risks.   

Some buyers seek out businesses that are very easy for them to understand, have very predictable financial performance and robust operational teams.  Those types of businesses, if proper controls are also present, will garner simple offers with a high percentage of the deal in the form of cash. This is a low-risk deal. A business with more volatile performance introduces incremental risk. A buyer may still be interested in the business but may shift cash at close to an earnout. If the business is growing rapidly, but that growth hasn't been consolidated in the buyer's eyes, that earnout may be linked to the growth of earnings or revenue. Perhaps the buyer will apply a three-year average to EBITDA to incorporate the volatility into the valuation.  If the seller wants to be paid on the recent growth, a buyer may use an earnout to bridge the valuation gap. A buyer willing to pay 5x EBITDA in an all-cash deal may pay 8x or more if allowed to incorporate structure, thereby mitigating their risk.

If the seller is adamant that he or she won't accept an earnout, it behooves an M&A advisor to dig deeper into where the actual buyer's discomfort lies.  Rather than fighting the earnout, might it be a better strategy to uncover the underlying issue and solving that? The earnout is the solution, not the problem. Why might a buyer incorporate an earnout? There are several possible reasons; 1. Earns reduce the cash required to close the deal.  2. They create alignment between buyer and seller post-close, thereby ensuring the seller continues to act like an owner even when he longer is an owner. 3. They confirm their diligence. Can these concerns be addressed in other ways? Of course, they can. If the earnout is moved to a seller note, no additional cash at close is required of the buyer to fund the deal. Both two and three can be addressed through a seller roll. If the buyer wants to ensure the seller acts like an owner, make him an owner. Rollover allocates some of the risks to the seller in both an earnout and rollover equity. Perhaps an employment contract signed by key employees would provide the buyer some comfort? Many deals incorporate an options pool, Management Incentive Program (MIP) or Profits Interest as additional ways to create alignment post-close. 

The central idea is this. Rather than focusing all of your attention on the proposed structure of a deal, attempt to think through the concerns the buyer is trying to sooth with that deal structure. Solving for the actual underlying problem rather than the buyer's proposed solution may lead to better outcomes for both parties.

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What is a Management Buyout (MBO)?

There is a vast range of different types of acquirers a seller can go to when selling their business. From trade to private equity, national to international buyers, there can be a large pool of potential acquirers to approach.

One of the many options available is selling to the current management team – otherwise known as a management buyout (MBO). This is a transaction where a company’s management team purchases a majority or all of the shares from the existing shareholder(s) to take control of the company. This requires the management team to pool resources to fund the acquisition, but there are various funding options available such as private equity financiers and seller financing.

Do you have an exit or growth strategy in place?

There are different reasons as to why a company might opt for an MBO rather than look to sell to an outside company – for example, it might particularly appeal to a shareholder who is looking to retire. If the company is run by its management team and the shareholder(s) are no longer involved in the day-to-day then an MBO can allow the shareholder(s) to fully retire.

While an MBO may appeal more to a shareholder looking to retire, it can be an attractive succession plan for any company. One of the reasons being is that there is no need to disclose confidential information to outside parties such as competitors. Another reason is it ensures a smooth transition as the management team has the skills and experience to take the company forward and continuity is ensured for customers, suppliers and employees.

Nevertheless, there can be pitfalls to an MBO which must be treated with caution. If both the management team and the shareholder(s) are spending a lot of time working on the MBO, then this could be detrimental to business performance and, as MBOs require a lot of specialist knowledge in structuring and financing the deal, a lot of attention is required.

However, these pitfalls can be avoided – a good corporate finance team can assist in executing a successful MBO, without compromising business performance.

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14 M&A Cartoons That Will Brighten Your Day

All images may be subject to copyright.

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How to Strike a Work-Life Balance to Improve Your Health

What were the reasons you started your own business? Most likely you wanted to pursue a passion but there are a multitude of other benefits that would tempt anyone to start their own business – from flexible working times to calling the shots. But, have these benefits actually become a reality?

If not, then it might be time to look at your work-life balance. Do you find yourself having no time to spend with your family and doing the things you love? Even worse, do you find that it’s having a detrimental effect on your health? For example, if you are stressed, being overworked can lead to a number of health problems such as stress induced insomnia and heart disease – something that needs to be remedied straight away.

Feel like it's time to slow down?

Here is what you should do to make sure you are balancing work and life without being detrimental to your health:

 

Visit the Doctor

If you are feeling stressed and this is making you feel unwell then it is time to visit the doctor. Nobody likes visiting the doctor and it might be difficult to fit an appointment in around your schedule, but it is best done sooner rather than later – a doctor can tell you if you need to slow down and what will happen if you don’t.

 

Factor in Time for a Healthy Lifestyle

Make sure you schedule time for eating well, exercising regularly and getting plenty of sleep. Admittedly, it’s easier said than done, but fitting these activities into your day can help you work better and, often, working longer hours doesn’t actually lead to increased productivity, in fact – studies have shown that work performance can improve with a shorter work week.

 

Schedule Some Non-Business Time

Aside from scheduling in time for a healthy lifestyle, you should have some time for leisure activities you enjoy. You can’t work 24 hours a day so try and find time in the evening or weekend to switch off and enjoy other passions in your life to help reduce stress.

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Five Things I Wish Business Owners Knew Before Engaging Us

1. No one can control the market.

You can know it. You can be smart about what it will do, how it will react. But you cannot control it. The nearer into the future you look, the more of a feeling of control you can have. But the longer a business owner wants us to look into the future, the less valuable the insights. Things change. Interest rates move. Sectors fall in and out of favor. If you want me to try to control the market, please act quickly so that we are dealing with the current market, not some future version of the market.

2. There is no perfect buyer (or seller).

Everything in life involves tradeoffs. Your business, like the ones we will bring to you, has imperfections. I’m here to convince buyers to take a favorable view on your business – to trade off its defects against its outstanding features in a way favorable to you – AND to help you uncover and evaluate the buyer’s defects and favorable features. So … please don’t expect your business to be perfect and don’t expect us to bring you perfect buyers. One of the main reasons our business exists is because buyers – and sellers – are imperfect. If that were the case, you’d not need us.

3. Your priorities will change over the course of the company sale process.

This is not a bad thing. It’s a marvelous occurrence that is very satisfying to observe. It is an unintended consequence that will be of great benefit to you. What makes it problematic is when you don’t realize its happening AND when you don’t tell us its happening. As your broker, we are out there trying to achieve your objectives – as you’ve explained them to us. If we don’t know what you’re after, we’ll be after the wrong thing.

 

Ready to explore your exit and growth options?

 

4. We’ll give you plenty of feedback but we need feedback also.

We will start by proving you some feedback from our internal knowledge base and experience. We will then give you feedback from specific buyers and the market in general. In order to get the best result for you, we need that feedback loop to be a two-way street. We want to know what you think of each buyer, of our service, of your own business, of the market in general, and of the process. Both our process and the market are highly flexible and changes can be made to meet your needs and expectations, but only if we know they need to be made.

5. It’s a marathon, not a sprint.

Too many clients come out of the blocks at full speed. Many also tend to think the signing of a letter of intent is the beginning of the end but it is just the end of the beginning. Running out of gas is a big problem when it comes to getting deals closed. Some parts of the process require significant time and energy from you and others do not. In order to hit your goals, we’ll need you well-prepared for those stages where your input is crucial. The deficiency we most often see emerging during the process is not one related to energy or time but rather emotions. This is understandably a stressful process. It should be and we build our service model around that fact. And that emotional aspect of the process is the hardest one to deal with over the course of the lengthy process.  

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I’ve Had an Offer for my Business – What do I do?

If you’ve received an offer for your business, you have three options – the first being take the offer and sell your business. This is possibly something you have been considering, or it seems too good an offer to refuse; however, you should be cautious in such an event and, if you do want to pursue the offer, make sure you do the following:

Keep the Business Sale Confidential

Confidentiality is very important when it comes to the sale of your business. If it gets out that you are selling your business then this could potentially lose you staff, customers, and suppliers as they could get nervous about an impending sale and the changes that could be in store for them. Therefore, do not discuss anything until a non-disclosure agreement (NDA) has been signed, including whether you are prepared to sell the business.

Make Sure you Stay Focused on Your Business

One of the dangers of the sales process is that it is very time-consuming at the point where you really need to focus on maintaining a good business performance – if business performance dips, then this can give a buyer an excuse to lower their offer.

Need help with a business offer?

In fact, this is not the only situation where a buyer might decide to lower their initial offer. The buyer is under no obligation to actually pay this price for your company until you both sign the Sales and Purchase Agreement (SPA) and there are several reasons a buyer might try and chip away at the offer to try and get your business for a bargain price.

For example, when you have accepted the offer and signed the subsequent Letter of Intent (LOI), the buyer can commence the due diligence process, providing them with access to confidential information such as financial documents and contracts for a specified period of time, typically 30-60 days. There are two related problems with this. Number one is the fact that the due diligence process is time-consuming and a resource drain, which could lead you to take your eye off the business. Number two is the buyer can now look at re-negotiating now they have had a thorough look at the ins and outs of your business.

Therefore, after this huge resource drain, you now have an offer on the table that does not meet your expectations as the buyer has chipped away at the price. Either you still take this less than favourable offer, or you turn away from the deal. While it is your prerogative to do so, you have lost time and valuable resources, you have given information about your company to another party, and you have not had your full focus on the business.

So – what are the alternatives to accepting an unsolicited offer?

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How Do I Know If I’m Ready To Retire?

Retirement is a significant decision that you have waited your entire life to make. Most people retire between the ages of 60 and 70, but everybody faces a different set of circumstances that dictate when they can retire. So how do you know if you are ready?

The most important factor in retirement is whether your financial situation will allow you to do so with security and peace of mind.

Do you have enough money saved? You want to live comfortably and maintain the standard of living to which you are accustomed. The last thing you want to do is retire and then realize you don’t have the means to live the way you are used to and end up having to downsize your dreams.

Are the markets in the right place so that you maximize your investment returns? Maybe your portfolio took a little bit of hit recently. Giving it a little time to recover can be a wise strategy. Consider where the markets are and where they are forecasted to be in the upcoming months. If you time it right, you can make the most of your decision.

Are you debt free? It may not be the smartest move to retire if you still carry debt you must pay, especially if it is significant. Retiring when you are debt free means retiring when you are worry free.

Do you need a plan to cut down on potential expenses? If you have a strong desire to retire but feel that you are not as financially confident as you would like to be, you can devise a plan to reduce your monthly expenses and ease some of the burdens.

Of course, there is more to the decision than just financial factors. You must consider whether you are mentally and emotionally prepared for retirement.

Are you no longer interested in pursuing career opportunities? If you are still hungry to attain work-related goals or you feel that you haven’t achieved everything you set out to achieve, then maybe retirement is not for you just yet. You do not want to retire and then feel that you are missing out or that you didn’t reach your full potential.

Do you find yourself thinking about recreational and social activities more than you are thinking about work? If you find yourself standing on the golf course, wishing you could spend more time there, then it may be a good time to consider retirement. Sometimes getting out before you are completely checked out is in the best interest of you and your business.

Do you have a plan for how you want to spend your time? It is not unheard of for people to retire only to become overwhelmed with boredom and a lack of purpose. Having a plan in place can help you stay busy and feel that you are achieving a new set of goals in life.

If you are retiring with your spouse, are you equally ready and on the same page when it comes to how you will spend your time? If you are in this together, make sure your plan is truly in sync. If one of you wants to travel the globe and the other one just wants to spend time with the grandchildren, there could be a conflict that you didn’t even realize you would have to address. Plan your vision for retirement together.

These are all critical questions to ask yourself when deciding if you are ready for retirement. But there is one more crucial question that you must address.

Do you have an exit strategy for retiring from your business? An exit plan is essential because it ensures that your business will make a successful transition into its next phase of ownership. Also, an exit plan will help you boost the value of your business so that you are prepared to sell at the ideal time.

Ready to explore your exit and growth options?
A proven strategy for success regarding exit planning is to partner with a trusted advisor, such as Benchmark International. We can help you find the right buyer, maximize value, and craft a dream exit that leads to a happy and satisfying retirement.

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Benchmark International Facilitated the Transaction of Master Printing Group to JAL Equity

Benchmark International has successfully facilitated the sale of Master Printing Group to JAL Equity. Master Printing is one of the Mid-South's leading marketing solutions providers. The company provides complete services from design and concept through the production of complicated collateral pieces. Additionally, the company operates a full-service graphic design, marketing, and advertising division as well as comprehensive direct mail services.

JAL Equity is a boutique private equity firm based out of Sarasota Florida and focuses on acquiring small businesses and operating them profitably over the long term. The company targets printing services, data services, direct marketing, and lead generation entities.

Ready to explore your exit and growth options?

Senior Deal Associate, JP Santos, added, "The Benchmark International team is incredibly excited about the future of Master Printing Group under the ownership of JAL Equity. The previous owners did an outstanding job of building a company with an impeccable reputation in the market, and a brand that was built over generations. Jon and Susan were a pleasure to work for, and we're excited about what the future holds for them both. JAL Equity has proven to be successful in this industry, and the corporate and cultural fit amongst the JAL Equity and Master Printing Group was apparent from the first conversation."

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External Market Impact On M&A

When deciding to sell their business, sellers generally focus mostly, if not entirely, on internal factors. Revenue is growing and predictable. Earnings are improving as a result of increasing revenue and internal controls. Backlog is up. Customer concentration is low. This fictitious company paints a very compelling picture and is no doubt an attractive candidate for acquisition. However, while those are all important aspects and contributors to value, there are other factors that are beyond the seller’s control that not only impact the value of the business but also impact how sellable it is. In this piece, we will discuss some of the external market factors that impact M&A transactions. These factors are in no way comprehensive. The research wasn’t exhaustive. The intent here isn’t to create a definitive list of external influences. Instead, it is to demonstrate how important factors that are well beyond our control impact M&A deals. As a result, sellers should consider moving quickly if the factors within their control are positive.

Interest Rates

Interest rates, while still hovering around historical lows, will rise over the coming 18 months. Why is this important? Buyers, both financial buyers like Private Equity Funds, Independent Sponsors and Family Offices, and strategic acquires alike, use leverage to fund their deals. Many buyers will fund 40-60% of the cash at closing by way of debt in some combination of senior and junior debt instruments. When the cost of debt increases, buyers are faced with two options: 1. Use more equity, either out of their fund or from the corporate balance sheet to fund the transaction; or, 2. Lower the multiple they use to value the company. Given that the cost of debt is far cheaper for most buyers than their cost of equity, they generally favor using as much debt as is practicable. Most Private Equity funds are averse to using more equity and will instead, lower the valuation multiple. Compression of transaction multiples is coming, after a historic run. It is simply a matter of when.

Regulatory Environment

While we are in a much-publicized period of regulatory retrenchment, some industries are facing increased regulation. Many more are facing a changing regulatory environment. Whether there is more regulation or simply shifting regulation, the changes create both risk and uncertainty for buyers. Risk and uncertainty can impact the desirability of a company/industry and certainly can affect valuation.

Global Economic Concerns and Geopolitical Issues

Global economic issues can impact the M&A environment both generally and for specific industries. At the moment, we face a great deal of uncertainty related to trade with our largest trade partner, China. Tariffs are impacting companies across sectors by increasing manufacturing input costs, reducing the speed to market, and decreasing the demand for their products. Unrest in the Middle East, uncertainty in North Korea, Brexit, Russia, and all the alike contribute the geopolitical risks that impact M&A.

Industry Consolidation or Convergence of Industries

Industry consolidation can have a considerable impact on valuations. If you are in a fragmented industry that is in the early days of consolidation, this can have a very positive impact on the value of your business. However, if that consolidation began years ago, you may have missed the window. That doesn’t mean you can’t sell your business, but it will be more difficult to identify the buyer and may have an impact on valuation. The same can be said when industries converge. For example, the manufacturing and technology sectors have converged. Convergence of industries, depending upon where we are in that cycle, can create either risk or opportunity.

Changes in the Workforce Dynamics/Millennials/Gig Economy

The ready availability of a talented workforce can significantly impact industries and businesses. Due to workers having very little switching costs to move from one company or industry to another, construction and landscaping businesses have found it increasingly difficult to attract and retain talent. Specific industries that require talent to be aggregated in the same room for the entire workday face different challenges. The Great Recession, coupled with a generation of workers that place a premium on their time, has led to an enormous gig economy. It is not out of the question that the gig workforce overtakes the traditional workforce in the next decade. This shift will impact every business in ways we couldn’t possibly understand yet.

Political Trends and Risk/Elections

The constantly changing domestic political landscape impacts the M&A environment in numerous ways. We have uncertainty around healthcare. Any provider of healthcare or any business dependent upon reimbursement faces at least a measure of uncertainty. Immigration has become a hot button issue in the US. Wherever you fall on the issue, there is little doubt that American businesses rely on non-citizens to supplement the citizen workforce. Buying decisions are often postponed with looming elections. Tax planning is difficult when an administration change could entirely change the tax code…again. Political unrest creates uncertainty. Uncertainty is interpreted by buyers as being the equivalent of risk and manifests itself in the form of lower multiples.

Dry Powder in PE Funds/Excess Cash on Corporate Balance Sheets

An economy on an unprecedented run of success has created enormous cash reserves in the corporate coffers. Strong performance by private equity funds has made raising subsequent funds easier. Also, outsized multiples have reduced the number of investments many PE funds have made, so they too have tremendous stores of dry powder to deploy. Abundance of capital to deploy into transactions certainly should help with valuations. PE funds, in particular, have only one mandate: buy businesses, grow them, and sell them 3-5 years later for a meaningful return. As such, there is no risk of them using their capital for other projects. The same can’t be said, however, for strategic acquirers. Corporations have many competing uses of their cash. If the environment for M&A turns unfavorably, businesses may pursue growth through organic initiatives. For example, they may opt to forego M&A deals in favor of greenfielding new territories, launching new products, building out new technologies, or exploring alternative revenue models. Alternatively, some may view the best use of their cash is to distribute it out to owners in the form of a dividend.

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In summary, there are many outside influencers on the M&A market that simply cannot be controlled. While companies can put mitigation strategies in place, they cannot exert control over external market forces. When the key factors within a potential seller’s control are favorable, it behooves them to seek out a talented M&A advisor, like one from Benchmark International, to assist them. We can help them to ride the tailwinds, overcome the headwinds, and navigate the obstacles.

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10 Things Most People Don’t Know About The M&A Process

1. Most M&As Fail
According to collated research and a recent Harvard Business Review report, the failure rate for M&A is between 70 and 90 percent. To effectively complete a deal, there must be a clear strategy and open communication among all parties.

2. Expect Due Diligence
Experienced buyers conduct meticulous due diligence. They want to know exactly what they are taking on, and that includes factors such as obligations, liabilities, contracts, litigation risk, and intellectual property. As a result, sellers should be prepared to provide very thorough documentation.

3. Priorities Change
Your company may be a good strategic fit today, and in a year from now. But people are fickle, and priorities can change, so a good offer today could be a non-existent offer later.

4. Employees Will Have Questions
In any sale of a business, employees are going to have questions about how the transaction will affect them. Also, the buyer will want to know how specific issues are handled. Will there be layoffs? Have confidentiality agreements been signed? What about any stock options? How will management be changed? These are just a few questions that should be anticipated.

5. Don’t Overlook Technology
These days, virtually every industry is impacted by technology. In the M&A process, it is important to think about how IT platforms will be consolidated or integrated, how technological changes can affect inventory, and how cloud management will be used, among many other factors.

Ready to explore your exit and growth options?

6. M&As Are Often Funded by Debt
Low interest rates on loans encourage M&A. In 2015, acquisition-related loans worldwide totaled more than $770 billion, the most since 2008.

7. Competition Will Result in the Best Deal
The more bidders there are on a sale, the more favorable the conditions are for the seller to negotiate a higher price and better terms. Even if there is only one serious bidder among several, the perceived level of interest can lead to brokering a better deal.

8. Synergy is a Must-Have
For an M&A deal to succeed, vision and strategy need to be synergized at the executive level and communicated to all management. M&As can fail due to a misalignment of vision for the culture, the industry, each company’s role, and more. The cultural fit of two companies can be crucial to how successfully they meld.

9. It Can Take Awhile
From beginning to end, most mergers and acquisitions can take a long time to be completed, usually in a period of around 4 to 12 months. The length of time depends on how much interest the seller has generated and how quickly a buyer conducts due diligence.

10. You Need an M&A Advisor
An experienced M&A advisory team can help ensure that the complex process of selling or buying a company goes smoothly, addressing all of the issues mentioned above on this list.

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Senior Deal Associate, JP Santos, Announced as Winner of the 10th Annual Emerging Leaders Awards

Benchmark International is delighted to announce that one of our very own has been awarded as an Emerging Leader by The M&A Advisor. The M&A Advisor created the awards to show recognition of leading M&A, financing and turnaround professionals, and to gather professionals together for professional development and mentorship opportunities.

Senior Deal Associate, JP Santos, has been chosen for his accomplishments and expertise from a pool of nominees by an independent judging panel of distinguished business leaders. Benchmark International is proud to be represented by one of our talented teammates at this prestigious event.

Santos expressed his gratitude for the award stating “I’m humbled at being nominated as an Emerging Leader by Benchmark International and subsequently being chosen as a winner. I’m fortunate that I have the opportunity to be a part of a team of driven individuals who are passionate about serving our clients in an effort to help them reach their goals,” he said. “This award is a tremendous honor for me personally as well as our firm, and I appreciate the recognition from The M&A Advisor and the panel of judges.”

On Tuesday, September 17, The M&A Advisor will host a black tie Awards Gala at the New York Athletic Club in Manhattan to introduce the 2019 Emerging Leaders Award Winners to the business community and to celebrate their achievements. The Awards Gala is a feature of the 2019 Emerging Leaders Summit—an exclusive event bringing current and past Emerging Leaders Awards winners together with their peers and industry stalwarts.

In 1998, The M&A Advisor was founded to offer insights and intelligence on M&A activities. Over the years, networks have grown, and their award ceremonies have been dubbed the Oscars of M&A. Benchmark International is proud to accept recognition from this organization and always strives to leave no stone unturned.

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Benchmark International has Successfully Facilitated the Transaction Between Lightning Packaging and Bunzl

Posted on June 1, 2019 By in Deal completions

Benchmark International has successfully facilitated the transaction between Lightning Packaging and Bunzl.

Bunzl, a global distribution and outsourcing group of packaging, catering equipment and safety wear, has spent approximately £600m on acquisitions during 2017 – a marked increase of £327m in 2015 – with the company consolidating its fragmented markets through acquisitions, an important part of its ongoing strategy.

 

Ready to explore your exit and growth options?

 

The acquisition of Lightning Packaging, a UK-wide distributor of packaging materials to a variety of sectors, has provided Bunzl the opportunity to further consolidate within the packaging sector.

The impact of Bunzl’s acquisitions, along with its growth from organic revenue, has led to an approximate 15% increase in revenue at actual exchange rates and, at constant exchange rates, between 9% and 10%.

Speaking on the process with Benchmark International, Martyn Taylor, Managing Director at Lightning Packaging, said:

"Without Benchmark International being involved in our sale, there is absolutely not a possibility of that sale going through as smoothly as it did. I would say that without professional help, and I mean professional help of a very, very high level, you would not be able to conclude the deal that we concluded. It just could not happen. I'm convinced of that.”

Benchmark International would like to thank all parties involved and we wish them all the very best of luck for the future.

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Waterwaste Treatment Industry Outlook

The global industrial wastewater treatment market was valued at $10.6B last year, and industry experts expect this figure to reach $16.6B by 2026 – at a compound annual growth rate (CAGR) of 5.8%. The global market is propelled by factors such as diminishing freshwater resources and stringent regulations related to emissions and treatment of industrial waste. Industries such as food, petroleum refining, textile dying, and power plants are some of the main contributors to industrial wastewater. 

Over recent years, new water recycling and process technologies have begun emerging, some include membrane bioreactors, wastewater monitoring and control systems, and granular sludge treatment processes using engineered microbial structures. Increasingly stringent wastewater discharge controls and tighter water quality requirements, nutrient removal, trouble maintaining complicated systems while keeping prices down are the major hindrances for the industrial wastewater treatment market. 

Key Industry Statistics

  • North America (35.5%) is expected to be the largest player in the industry, owing to the presence of huge infrastructure in the oil and gas sector, mining and strict regulations against wastewater treatment. Europe is the second largest accounting for 31.2%.
  • The largest segment of the wastewater treatment industry goes to power generation, which accounts for 62% of the total market share. Mining holds 30.6%, while chemicals hold 7.4%. 
  • Elsewhere, coagulants are anticipated to register the highest growth rate in the industry, at a rate of 6.4% through to 2026.

Water infrastructure has experienced several ups and downs. While the majority of market stakeholders were interested in business collaborations, natural disasters created a range of problems for water treatment manufacturers. Most of the top players have become focused on integration of advanced technologies to develop smarter and more effective solutions for water treatment and management.

The value chain for water and wastewater treatment equipment market is expected to witness changes in terms of investments, innovations, advancements and business opportunities. New technologies, business models and technologies are expected to be introduced, especially to support the changing requirements for water treatment. 

We Are Ready When You Are.

Call Benchmark International today and speak with one of our analyst about your company's exit or growth strategies.

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