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Overview Of Steps In The M&A Process

The processes behind mergers and acquisitions can be quite complicated. Each deal is unique and has its own level of intricacies. However, all M&A transactions tend to follow a basic framework of steps. Most M&A advisory firms follow this basic framework, but bring their own methodologies to the table. This outline will give you a rudimentary view of the process.  

Target List Creation

In order to engage in the selling or buying of a business, you must have potential buyers or sellers. Suitable M&A targets can include competitors, vendors, or customers. This is also a good time to consider how much geographical factors should be taken into account.

Contact Initiated

Once the target list is established, contact is made and discussions begin to gauge the interest level of the buyer or seller.

Sending of a Teaser

A teaser is a document that sellers send to buyers. It supplies just enough information to entice the buyer into wanting to know more. It showcases topline info such as the company’s product or services, its unique selling points, industry overview, ownership structure, potential areas of growth, and high-level financials.

Confidentiality Agreement Signing

This ensures that all sides in the deal agree to keep all discussions and materials confidential.

 

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Sending of the Confidential Information Memorandum (CIM)

The CIM serves is drafted by the sell-side of a transaction and serves as a type of handbook. It provides all the information a buyer needs to ascertain whether they want to make an offer, such as company management, operations details, financial data, future projections, customer diversification, market opportunities, competition, and other relevant specifics.

Submissions of Indication of Interest (IOI)

Upon their review of the CIM, the buyer then expresses interest in moving forward by submitting a non-binding written offer. An IOI typically provides a valuation range for the sale price, transaction structure, timeframe, and other important details. It limits the buyer’s time and financial resources devoted to the deal if the proposal falls short of expectations and other bids. For the seller, an IOI helps them to measure the market appetite for the company, compare different buyers’ views on value, and perform preliminary due diligence on the buyer’s ability to complete the transaction.

Management Meetings

After the initial communications that establish interest on both sides, it is time for the buyer and seller to meet and take the conversation further. Both sides take this time to learn more about each other to get a better idea of compatibility and whether it is a good fit.

The Letter of Intent (LOI)

The buyer submits a detailed document with a price and deal structure that details items such as closing dates and conditions, an exclusivity period, any break-up fees, management compensation, escrow, and so on. These are usually non-binding, but they can be denoted as binding.

Formal Due Diligence Process

This important phase is when all documentation and records are compiled by the seller and provided to the buyer. The findings help the buyer assess their risk and improve the decision-making process. Due diligence examines an extensive level of information on the company, including all financials, intellectual property, customer base, management, talent, synergy, outstanding litigation, technology, infrastructure, stockholder issues, production, inventory, supply chains, real estate, marketing plans, and anything else that is relevant to the business.

The Purchase Agreement

A Purchase Agreement supersedes any previous IOI and LOI. This binding document lays out the final terms of the deal including the purchase price, a detailed list of definitions used in the agreement, timeframes for the delivery of final statements, executive provisions, representations, warranties, schedules, indemnifications, closing conditions, and break-up fees.

Pre-Closing Period

Sometimes there is a pre-closing period during which the seller and buyer prepare all deliverables and fulfill closing conditions such as government approvals and third-party consents. The duration of this period can vary depending on the closing conditions.

Closing

Once all of the closing conditions are met, the transaction is ready to close. Funds are exchanged and the buyer assumes possession of the business.

Post-Closing Period

After the deal closes, there are usually post-closing financial adjustments and integration topics to be addressed between the seller and buyer.

Ready to Make a Deal?

Our M&A experts at Benchmark International would love to hear from you regarding your company and its potential. Our world-renowned team offers the unparalleled transaction experience, remarkable resources, and global connections that you need in your corner to in order to get the most value possible out of your M&A deal. Learn more about our unique Benchmark Fingerprint Process here.

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2020 Mid-Year U.S. Economic Outlook

The COVID-19 global pandemic is having a significant impact on economies across the world and business owners are understandably concerned. In these times of uncertainty, many are asking what can be expected in both the short and long term for the United States economy.

Looking Back at Q1 and Q2

After several years of economic expansion, the U.S. gross domestic product (GDP) dropped 5% in the first quarter of 2020, and plummeted 52.8% in the second quarter. The National Bureau of Economic Research (NBER) declared that the U.S. economy officially entered recession in February. 

  • Consumer spending was down 13.6% in April, slightly rebounding in May, up 8.2%.
  • In May, U.S. employers added 2.5 million workers back to payrolls and housing rebounded moderately.
  • The Federal Reserve cut interest rates and rolled out a $2.3 trillion effort to help local governments and small- to mid-sized businesses, and the U.S. government approved nearly $3 trillion in aid.
  • 8 million jobs were added in June, while more than 19 million Americans were still receiving unemployment insurance benefits.
  • June retail sales jumped 7.5%.

 

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Forecasting Q3 and Q4

Goldman Sachs forecasts U.S. GDP growth of 25% in the third quarter, down from a previous forecast of 33%. The NBER Conference Board expects a 20% rebound in quarter three, with growth slowing to 1% in quarter four.

The manufacturing and construction sectors continue to recover, with predictions of 8% growth in the fourth quarter. Additionally, existing home sales have rebounded at a record pace.

Consumer confidence is going to depend on how rapidly the virus is brought under control. In July, coronavirus cases spiked in many areas of the country, causing some state and local governments to step back on reopening plans. The recent resurgence in cases has slowed expected consumer spending, as many Americans are unable to visit certain places due to state restrictions. Markets will likely remain erratic until there are solid indicators for increased confidence. The economy will recover, it is just a matter of when, keeping in mind that recoveries tend to be longer and stronger than downturns, and returns are usually highest after the market bottoms out. As of late July, September is a hopeful target for a bounce-back in spending.

Even once restrictions are lifted and businesses are able to operate as normal, the recovery will hinge on how willing Americans may be to participate. Consumer demand is expected to remain sluggish through the latter half of the year, but there are positive long-term investment opportunities that arise out of such an environment, especially for companies that have shown that they can adapt under dire circumstances.

New developments in COVID-19 clinical trials indicate that a vaccine could be available by 2021. A vaccine or treatment will be critical to boosting consumer confidence and economic growth.

Finding Opportunities Within a Crisis

While the virus has had devastating impacts across several sectors—especially travel and hospitality—it has also created opportunities for certain industries. Types of businesses that have seen strong growth during the pandemic include telemedicine, online retail, food and grocery delivery services, home improvement, educational services, gaming, cleaning products, RVs, and even puzzle makers.

With people working and schooling from home, people’s lives are now more digital than ever. Demand for cloud-based services has skyrocketed. Streaming services and mobile payment services are increasingly popular, and reliable broadband is a must-have. During mandatory lockdowns, consumers became more likely to try things for the first time, such as grocery or alcohol delivery, and may opt to continue to use them following the COVID-19 pandemic. These types of outcomes could translate into even healthier e-commerce growth potential in the future, not just in the U.S, but also globally.

There will also be possibilities for partnerships through mergers and acquisitions. Prior to the crisis, private equity was sitting on an estimated upwards of $1 trillion in dry powder and will likely play a key part in the revival of the economy. M&A opportunities are expected to be in the most resilient sectors post-pandemic, and bidders are predicted to become aggressive in seeking out company valuation bargains in the hardest hit industries such as the transportation, hospitality, and energy sectors. Additionally, in the more stable sectors, deals could be driven by the need to vertically integrate and address supply chain issues to get back on track. There is also the possibility for stock deals to become more appealing as equity prices fall.  

Schedule a Virtual Valuation

Contact the M&A advisors at Benchmark International to discuss the possibilities for the future of your business. We are here for you, even throughout the pandemic, getting deals done and making great things happen in the most trying of times. You can even schedule a Virtual Valuation in order to practice social distancing while gaining an understanding of the current value of your company.

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10 Important Post-merger Integration Tips

Having a solid integration plan in place for your company merger is critical to the future success of your business. These tips can help prepare you for the process.  

  1. Begin planning from the earliest possible point in time. Outline all of your goals and objectives, employ best practices, and identify any gaps in your plan. Make sure all the key parties involved in the merger are in agreement on the integration plan. You should start implementing the integration process before announcing the deal. This enables you to begin integration immediately versus rushing to make important decisions at the last minute.
  2. Create an integration team and clearly communicate the strategy for moving ahead with all necessary parties involved. Assess your key areas of value and designate the teams or persons responsible for these areas, making sure they understand the exit criteria they will need to meet.
  3. Make sure leadership roles are clearly defined during and after the merger. You may even want to consider bringing in leadership from outside both companies to benefit from a neutral perspective. Insist that leadership is committed to both the big picture for the company and the details of getting integration done right.
  4. Synergy is important in all aspects of the business, but especially in its culture. Commit to one culture and take measures to ensure that it will be preserved.

 

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  1. You are going to want your staff to be positive and excited about the merger, rather than nervous and/or cynical. This means you are going to have to sell the deal to them, ensuring they understand why the move will be good for them. Craft an internal communication plan that makes sure that no one is left in the dark at any point along the way. You will want to make sure you keep the overall messaging consistent to manage expectations properly.
  2. Have a solid plan for all things IT. This is a critical component of any business. How the technology will be integrated must be completely planned out to avoid any communication breakdowns or loss of important data. Implement a structure to track progress and identify potential risks so that they can be addressed in a timely manner.
  3. Understand what type of deal you are making and how it will dictate the days ahead. For example, a scale deal is an expansion in the same or overlapping business. A scope deal is an expansion into a new market, product or channel. All of your integration decisions will be based on this.
  4. All sorts of things can crop up and slow down or sidetrack an M&A transaction. Do your best to stick to the timetable you outlined while ensuring that you make smart decisions rather than just following the process for the process’s sake.
  5. Just like easing the minds of your employees, you will need to do the same for your customers. Make every effort to ensure minimal disruption for all of your customers and clearly communicate your plans with them to address any concerns.
  6. Remember you are still running a business. Avoid becoming so distracted by the transaction that you neglect business priorities such as your customers’ needs. You must keep the company on track and running smoothly if you expect the deal to be a success.

Finally, be sure to celebrate your successes. After an arduous process, employees should feel that their work is appreciated and everyone should share in keeping the momentum going moving forward.

Contact Us

At Benchmark International, our highly esteemed M&A experts are eager to roll up our sleeves and get you a stellar deal for your company. Reach out to us at your convenience.

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The 2020 U.S. Election And M&A

Past presidential elections in the United States have coincided with macroeconomic circumstances that affect markets. For example, in 2000, the dot-com bubble burst. In 2008, America was in the midst of the Great Recession. And now in 2020, we are in the middle of a global pandemic, dealing with the impacts of the COVID-19 virus, coupled with sweeping protests regarding racial injustice and the repercussions that forced closures have on businesses. In the wake of all of this, four months remain until the November election. Unfortunately, we cannot predict the future, but we can take a look at how the M&A market has been impacted in the past.

M&A activity is cyclical in nature, subject to underlying circumstances that include changing technology, electoral politics, and regulatory changes. As the current M&A cycle winds down, it is worth noting that the dealmaking wave that ceased during the financial crisis actually got started during a slowdown in 2003. Leading up to the 2008 election, M&A activity in the U.S. was strong and it did not bottom out until later when the worst of the recession had passed. Two major relief packages, the Emergency Economic Stabilization Act of 2008 enacted by the outgoing administration, and the American Recovery and Reinvestment Act of 2009, enacted during the first year of the new administration, boosted recovery in capital markets and helped companies adapt to adverse macro conditions in the near term, and eventually paved the way for a new M&A cycle because the cost of capital was reduced to historic lows, injecting liquidity into equity and bond markets.

The level of dealmaking activity in the multiquarter period leading up to the 2012 election compares favorably to the financial crisis period that coincided with the 2008 election at $802.6 billion in 6,087 deals, topping activity for the same period the year before. In the first three quarters of 2012, M&A activity saw a combined $837.5 billion in 6,864 completed deals. The JOBS Act was enacted in 2012, designed to encourage small businesses to become public companies. As a result, the SEC made the filing process easier to manage.

 

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M&A activity peaked in Q4 ahead of a decline in 2013 Q2 that bottomed out at $241.3 billion in 2,049 transactions. In mid-2013, M&A activity accelerated and the cycle expanded, partially stimulated by strategic buyers contending with financial sponsors armed with record levels of dry powder. Private equity has kept that cycle going from 2013 to 2019. Volume met or exceeded 900 completed transactions and at least $70 billion in value over the same timespan.

Certain conditions that were a result of the financial crisis spurred expansion of the M&A cycle and have proven favorable for private equity and venture capital dealmaking, such as enterprise restructuring around developing regions, expansion of business portfolios, and optimization for tax benefits and accessing cash outside the U.S.  

During 2014, completed transactions grew 26% year-over-year, while deal value increased by an additional $500 billion. This cycle of completed transactions peaked in 2015 at 12,523 deals of $1.9 trillion in value. Annual volume remained above 11,000 transactions with deal value at around $2 trillion for each of the past five years.

Leading up to the 2016 election, M&A activity was pushed to its highest levels per quarter in a decade. In the first three quarters of 2016, 8,825 transactions worth a combined $1.6 trillion closed. Activity dropped in Q4, but rebounded in 2017. Since 2018 began, M&A has steadily declined and Q4 2019 posted the lowest total since Q2 2013. 2019 saw levels return to those last seen in 2013. On June 8, 2020, the National Bureau of Economic Research announced that the U.S. entered into a recession in February of 2020.

While the global pandemic has undoubtedly been costly and detrimental to many businesses, it has also opened up opportunities for growth for some companies as consumer behaviors adapt to a changed world. Global supply chains were massively disrupted, hampering global trade, all of which has a negative impact on dealmaking. How it will play out in the later half of 2020 and into 2021 will depend partly on if there is a second wave of the virus and the availability of a vaccine. Technology remains a continuously evolving area of opportunity and the pandemic has changed the ways that we work and collaborate. Environment, social and corporate governance practices will continue to designate the convergence of technology and regulation. How the election will impact M&A markets remains unknown, but history has shown that emerging out of a recession tends to spawn accelerated M&A activity well into the future. Every M&A cycle develops in response to different conditions, yet all have emerged during periods of economic recovery combined with improvements in capital markets after consecutive quarters of underperformance.

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Now Is The Time

If you are thinking of selling in 2020, now is the time to get to market. We are in an unprecedented time making it challenging to run a business but also to sell a business. 

The M&A market is changing daily and many factors are affecting deals in 2020. We do not have a crystal ball however there are a few trends that if you are considering selling your company in 2020, then now is the time.

  • This year is a presidential election year. As we begin the second half of the year, we begin to think about Q3 and Q4 2020. Buyers are actively seeking acquisitions and deals are still being completed. However, the closer we get to November, buyers will begin to focus more on the election and want to revisit their acquisition plans after the election is over. As we go into the end of the year, planning for 2021 will begin. One would anticipate that the end of the year will be quiet for the M&A market as companies, financial buyers, and others will want to see what lies ahead in 2021.

  • PPP forgiveness will take place soon. Once the loans are forgiven, if the businesses have not improved their performance, we would anticipate that layoffs will continue and potentially at a higher rate than what we are currently seeing at this time. If this happens, it will continue to harm the economy as additional businesses will also fail.

  • The credit market is changing daily. We are seeing lenders backing away from term sheets based on their bank’s industry exposure, small discrepancies that emerge during due diligence, and more conservative underwriting. There is talk within the market that lenders may continue to tighten their lending standards making it harder to obtain credit for acquisition. This may have a direct effect on multiples.

  • While we know that the tax environment is today, we can only anticipate that long term, taxes will increase. With the various US federal initiatives related to COVID-19 and the economic decline, we suspect that the US will have to raise taxes to overcome the growing debt burden that has been created in 2020.

All these factors contribute to the M&A market, valuations, and deal structures. The best time to sell is now.

Author
Kendall Stafford
Managing Partner
Benchmark International

T: +1 512 347 2000
E: Stafford@Benchmarkintl.com


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5 Tips For Preparing Your Company For Sale

When the time comes to sell your company, you obviously want to get the most value and the highest possible price. There are several steps you can take before going to market to increase the likelihood of you cashing out for more in a merger or acquisition.

  1. Focus on Profits and Growth

You will want to increase your net revenues and profits, keeping in mind that buyers will focus on EBITDA (earnings before interest, taxes, depreciation and amortization) for valuation. This is the number you want to boost because the higher your EBITDA, the higher your sale price will be. Your company’s growth potential will also be important to acquirers so you should put extra effort into growing your sales, even if it means hiring more sales talent (as long as it justifies the costs—adding salaries and benefits need to be worth the results).

  1. Get Your House in Order.

The M&A process will certainly include a comprehensive audit of your financial records and any other business concerns. It is key to get all of your documentation in order before embarking on a sale. The more complete and orderly your record keeping is, the more confidence it will instill in potential buyers. This also means you should address any unsavory topics, conflicts or legal issues. Getting any discrepancies resolved will prepare you to honestly answer difficult questions and demonstrate your commitment to getting a transaction done. Buyers do not want to be faced with surprises during the due diligence process.

 

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  1. Do a SWOT Analysis. 

Take the time to assess your Strengths, Weaknesses, Opportunities and Threats. You need to understand where your company stands in the current market, how it stacks up to competition, and how to maximize its strengths. If you have a complete understanding of your SWOT profile, you can take the necessary measures to position your company to buyers in the best light possible by uncovering growth opportunities and being proactive against any impending risks.

  1. Trim the Fat. 

Think about any areas of your business operations that could be tidied up, such as redundancies or costs that do not add any value to the company. Can you justify everyone that is on your payroll? Would outsourcing be more cost effective? Can you spend smarter when it comes to equipment? Are you carrying outdated inventory? Is there property that you are paying taxes on that you really do not need? What can you do to avoid adding new expenses? This doesn’t mean you should cheap out on anything that affects your core competencies. But sometimes simply reallocating resources can help you optimize the financial health of your company.

  1. Get an M&A Advisor. 

M&A advisors handle a significant amount of the complicated work that goes into the lengthy deal process. Their exclusive connections will get you access to quality potential buyers. They will help you prepare and market your business effectively, finding ways to make it more enticing to buyers. Another benefit of an M&A partner: not only will buyers know that you are serious about selling, but you will also know that they are serious about buying. They will also help you organize your due diligence documentation and present your financials, coordinate meetings, help with exit or succession planning, and ensure that you have peace of mind through such a momentous time in your life.

If you are ready to sell your company, please contact our M&A advisory experts at Benchmark International to get you on the path to a deal that meets all of your aspirations.

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Sellers Vs. Buyers Disparate Interests in the Transaction Process

Buyers and Sellers approach a given transaction from different perspectives. The seller wants to receive as much as possible, as quickly as possible, with little or no potential liability to the buyer or parties associated with the seller’s pre-sale operation of the business. The buyer wants to pay as little as possible, defer payment as long as possible, contractually obligate the seller to indemnify the buyer against actual or potential known or unknown liabilities and ensure that the seller can make good on those obligations by escrowing sales proceeds or deferring payment. The give and take, or push and shove, over these issues takes place during the entire transaction process but predominantly during the negotiation and drafting first of the Letter of Intent and later the Purchase and Sale Agreement. 

Relative bargaining power, from whatever source, often determines which side controls these issues. The other major determinant is the level of experience and degree of sophistication of the parties’ M&A advisors and legal counsel. It is essential, but not sufficient, that a transaction party’s representatives understand what is in that party’s best interest. They must also understand what motivates the other side and how their representatives are likely to try to realize those goals. If both the seller and the buyer stand fast concerning their positions, no transaction will occur. This is where experienced M&A advisors are critical. Helping the parties understand which positions are crucial to their goals and which can be negotiated away is a key function of the professional advisor.

Below are several negotiating points common to many middle-market transactions, and the normal positions of the seller and the buyer with regards to those issues.

Material Terms in the LOI

Sellers are often best served by requesting as many material deal terms in the Letter of Intent as possible. This is because the maximum point of the seller’s leverage is just, before the execution of a Letter of Intent. At this stage, the buyer has expressed interest in the transaction and is unaware of issues that may surface in due diligence. The seller has not yet agreed to exclusivity, and the seller’s M&A advisors have created a competitive environment or at least the illusion of one. 

The buyer is best served by negotiating an exclusivity agreement and skipping the LOI altogether. That means, proceeding directly to the negotiation of a definitive purchase agreement. The buyer’s fallback position should be negotiating an LOI with as few binding terms as possible, except for exclusivity. Either approach gives the buyer strong negotiating leverage and the time to complete due diligence before negotiating material terms. These tactics also minimize the risk that the LOI will be considered a binding agreement giving rise to damages in the event the deal is not consummated. 

Stock vs. Assets

Nearly every corporate seller should sell stock rather than assets if the buyer will agree. However, nearly every buyer will refuse. The benefits to the seller from a stock sale include 1) potential tax savings if the target is a “C” corporation, 2) passing disclosed and undisclosed liabilities on to the buyer, and 3) a generally less complicated and less time consuming, thereby a less expensive transaction. On the flip side, an asset purchase generally provides buyers with a tax-advantageous step up in the basis for the assets and avoids liabilities other than those expressly assumed. Except for “successor liabilities” imposed by public policy such as environmental, product liability, employee benefits, and labor-related issues and liability under “bulk sales” laws. Experienced buy-side advisors will also be aware of potential “fraudulent conveyance” concerns by ensuring that adequate arrangements are made to pay the seller’s creditors and/or restricting distribution of proceeds to the seller’s equity holders until creditors are paid. Although this aspect of transaction structure is generally presented as a “fait accompli,” the seller, the buyer, and their respective advisors should be aware of the issues and how they bear upon the cost, timing, and structure of the deal. 

 

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Caps and Baskets

The buyer will insist upon the seller’s representations, warranties, and indemnifications going to issues that materially affect the buyer’s benefit of its bargain. The seller wants to avoid being “nickel and dimed” for minor issues and serving as the buyer’s insurer against the normal risk of doing business.

The seller will negotiate a cap on liability and attempt to avoid carve-outs from the cap for specific issues. The cap is often a percentage of sale proceeds, and from the seller’s perspective should be negotiated in the LOI. The cap or, lack thereof, can materially affect the value of the transaction and the seller is not well-served by giving up exclusivity until it has been negotiated.

The basket is, in effect, a deductible that must be satisfied before indemnification obligations begin. Accordingly, the buyer can only recover for the aggregate amount of damages over the basket (and below the cap). Variations on this theme include mini baskets related to specific issues and whether or not indemnification begins at the first dollar or is limited to amounts over the basket.

Non-Reliance

An important risk allocation to be negotiated is a non-reliance provision contained in the acquisition agreement. The seller wants this provision to force the buyer to acknowledge that it is relying solely on its due diligence, and the seller’s representations and warranties contained in the acquisition agreement. The buyer is precluded from asserting liability against the seller based upon statements, projections, and oral representations made outside the four corners of the document. The buyer will resist this provision.

Termination Fee (Reverse Breakup Fee)

A tactic not often addressed in middle-market transactions, but a valuable one is the termination fee. The seller requires the buyer to pay a fee, equal at least to the number of the seller’s expenses and perhaps as high as ten percent of the purchase price if the transaction is terminated at no fault of the seller (for example, if the buyer cannot finance the transaction). This type of liquidated damage provision may reimburse the seller for its out-of-pocket expenses, but it will not compensate for lost opportunity costs for failing to pursue alternative transactions because of exclusivity. Again, the reason the buyer will reject or seek to severely restrict such a provision is obvious.

Termination fees are sometimes referred to as reverse breakup fees because they turn a breakup fee on its head. Breakup fees are paid by the seller to the buyer if the seller won’t or can’t consummate the transaction at no fault of the buyer. The seller changes its mind, finds a better deal, or has insurmountable issues discovered during due diligence that adversely affect its value. In the middle-market, these provisions are generally intended to compensate the buyer for its out-of-pocket costs, rather than opportunity costs.

MAC Clauses

A MAC (Material Adverse Change) clause is one of the more contentiously negotiated provisions in the acquisition agreement. In a MAC, the seller warrants that as of a date certain (usually the closing date) there has been no material adverse change in the seller’s business. The M&A counsel has a field day negotiating the specific language. What is the applicable period? Are business “prospects” included? Should the target and its subsidiaries be taken as a whole or viewed independently for purposes of determining materiality? What should be excluded from the operation of the MAC provision? Simplistically speaking, if the seller’s business performance has declined during the relevant period or is an indemonstrable risk of decline (prospects), then the buyer can rely upon the MAC provision to terminate the deal and recover expenses.

In the middle-market, MAC clauses can be a significant cause of transaction failure. To boost enterprise value, the sellers often rely upon very recent favorable EBITDA numbers. If that performance cannot be sustained during the course of the transaction, for whatever reason, the buyer may rely upon the MAC clause to terminate or renegotiate the deal.

Escrows

A favorite buyer tactic is to attempt to escrow a portion of the purchase price to ensure that funds are available to compensate the buyer for breach of warranties by the seller. Sellers resist escrows and attempt to limit their impact. For example, the sellers should ensure that any escrow is held by an independent third party so that the buyer can’t just unilaterally offset. The seller should negotiate limitations as to the length of time the escrow is held and seek to restrict to the extent to which the escrow can be applied. If the seller cannot avoid an escrow, it should seek to limit the buyer’s recourse to only the escrow proceeds and preclude additional recovery.

Conclusion

The foregoing is just a few of the issues that may arise between the seller and the buyer is a strategic transaction. Every transaction is different; the relative positions taken by the respective parties will vary based upon their circumstances at the time. Experienced, knowledgeable M&A advisors, on both sides of the deal, are critical to the success of every transaction.

 

Author
Don Rooney
Transaction Director
Benchmark International

T: +1 813 898 2350
E: Rooney@benchmarkintl.com

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3 Ways To Grow Your Company

  1. Through a Merger

A merger unites two independent, similarly sized companies as one new entity, typically with a new name. This strategy adds value to both companies by growing into new market segments, gaining market share, or expanding geographic reach. A merger enables the new venture to benefit from the best that each company brings to the table as far as expertise, talent, technology, products, services, assets, and market penetration. In total, it offers a powerful competitive edge. A merger can also be less time consuming than other strategies, such as relying on organic growth.

  1. Through an Acquisition

In an acquisition, a company purchases a 51 to 100 percent stake in another company, taking control of it and all of its assets. Acquiring a business means acquiring its already established customer base, talent, geographic diversification, portfolio of services, and other immediate growth opportunities that would take years to create under organic growth.

Both mergers and acquisitions offer several advantages for a company looking to generate growth and value.

  • Expansion: M&A can easily extend the reach of a business in terms of geography, products and services, and market coverage. This translates into more customers gained without having to hire more salespeople or increase marketing expenditures.
  • Consolidation: M&A can unite two competitors to bolster market domination. It can also increase efficiencies by cutting surplus capacity or by sharing resources. Plus, M&A can increase production efficiency and bargaining power with suppliers, coercing them into lowering their prices. It can also allow a business with weak financials to combine with a stronger one and pay off debt.
  • More Capabilities: M&A can boost a company’s capabilities by quickly adding new talent and new technologies rather than taking the time and energy to develop each from scratch.
  • Lower Costs: By merging with or acquiring another business, you can lower costs and increase efficiency and output.
  • Speed: M&A empowers a business to grow more quickly, altering the landscape of the sector more rapidly than competition can adapt and respond.
  • Tax Perks: Profits or tax losses may be transferable within a combined business, benefiting from varied tax laws within certain sectors or regions.
  • Unbundling: Sometimes a company’s underlying assets are worth more than the price of the business as a whole. In this case, a company can acquire another and quickly sell off different business units to other buyers at a substantially higher price.

 

Ready to explore your exit and growth options?

 

  1. Through a Strategic Alliance

Mergers and acquisitions adjoin companies through total change in ownership. But there are ways that businesses can share resources and activities for a common goal without sharing ownership, known as strategic alliances. Strategic alliances enable a business to quickly grow its strategic advantage, but with less commitment. There are several ways a strategic alliance can be accomplished.

  • Equity Alliance: The creation of a new entity that’s owned separately by the two partners involved, such as a joint venture. Both companies remain independent but form a new company jointly owned by the parent companies.
  • Consortium Alliance: This is the same as a joint venture but can be formed with several partners.
  • Non-equity Alliances: These do not involve the commitment implied by ownership and are often based on contracts, such as franchising or licensing. Under this contractual alliance, one company gives the other the right to sell its products or services or to use intellectual property in return for a fee.
  • Scale Alliance: When businesses combine to achieve necessary economies of scale in the production of products or services or by lowering purchasing costs of materials or services.
  • Access Alliance: This occurs when a company needs to access the capabilities of another company needed in order to produce or sell its own products and services. An example of this is when an international company needs access to a local company to be able to product or sell the product.
  • Complementary Alliance: When companies of similar value combine their unique but complementary resources so both have any gaps filled or weaknesses strengthened.
  • Collusive Alliances: This involves companies colluding in secret to bolster their market strength, reduce competition, and demand higher prices from customers or lower prices from suppliers. Regulators usually discourage such behavior.

Mergers, acquisitions, and alliances can provide many benefits for a business that is seeking growth far above and beyond what is possible through organic growth. Each can enable:

  • Faster access to new products or markets
  • Instant market share
  • Economies of scale
  • Better distribution channels
  • Increased control of supplies
  • Lessened competition
  • Adding of intangible assets
  • Removal of entry barriers to new markets
  • Deregulation in an industry or market

Let’s Talk

If you are considering a merger or acquisition strategy to grow your business, we can make it happen. Our world-class team of experts at Benchmark International is a true game changer for accelerating your business growth in the smartest ways possible. Contact us today and look forward to a brighter tomorrow.

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How To Value A Business

When it comes to valuating a business, a major distinction is whether the company is privately or publicly held. For a publicly traded company, calculating the market value is somewhat simple: just multiply the stock price by its outstanding shares. For a private company, determining its worth is a much more complicated process because the stock is not listed and there is zero regulated public financial reporting. For these reasons, private company valuations must be based on a series of estimations, which can be well founded when done properly. There are several different approaches to calculating the market value of a private business. You can choose to one singular method, but using each method of assessment together can form a more complete picture.    

Comparable Company Analysis (CCA)

CCA is a common way to assess a private company’s value. Under this process, publicly traded companies that are most similar to the private company are identified. The similarities must reflect the companies’ sector, size, competitors, and growth rate.

Upon establishing an industry grouping of similar companies, their valuations are averaged to paint a picture of where the private firm fits among its peers. These averages are calculated on aspects such as cash flow, operating margins, and assets. CCA may also be referred to as trading multiples, peer group analysis, equity comps, or public market multiples.

Precedent Deals

If the business being valued operates within a sector that has witnessed several recent mergers, acquisitions, or IPOs, the financial information and value determinations from those transactions can be used to help calculate a valuation based on consolidated and averaged data. While useful, precedent transactions become dated as more time passes since they occurred.

 

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Enterprise Value (EV) Multiple

Also known as private equity valuation metrics, the enterprise value multiple tends to offer a more accurate valuation because it includes debt in the assessment. The EV multiple is calculated by taking the enterprise value (the sum of its market cap, value of debt, minority interest, preferred shares deducted from cash and cash equivalents) and dividing it by the company's earnings before interest taxes, depreciation, and amortization (EBIDTA).

Discounted Cash Flow (DCF)

The estimated discounted cash flow approach is a fairly detailed method of valuation. It compares the discounted cash flow of similar companies to the company being valued. The revenue growth of the company is estimated by averaging the revenue growth rates of similar companies. This process can be challenging depending on the business’s accounting methods. Personal expenses are sometime included in the financial statements of private companies, which can affect the estimation.

Once the revenue is estimated, any anticipated changes in operating costs, taxes and working capital are estimated, allowing for the calculation of free cash flow, or the operating cash remaining once capital expenditures are deducted. Investors often use free cash flow to determine how much money will be available to give back to shareholders in dividends.

Next, the peer grouping of companies are assessed to calculate their average beta (the market risk of a company without the impact of debt), taxes, and debt-to-equity ratios. In the end, the weighted average cost of capital (WACC) must be determined. This factors in the cost of equity using the Capital Asset Pricing Model, the cost of debt using the company’s credit history, capital structure, debt and equity weightings, and the cost of capital from the peer grouping of companies. Calculating capital structure can be challenging, but industry averages can help, keeping in mind that the costs of equity and debt for a private company will likely be higher than that of its publicly traded counterparts. The WACC furnishes the discount rate for the private company. By discounting its estimated cash flows, a fair value can be assigned.

Cost Approach

This method of analysis is less common within the corporate finance world. It assesses the actual costs of rebuilding the business, ignoring any value creation or cash flow generation. It is merely cost equals value.

Ability to Pay

Under this valuation approach, the maximum price a buyer can pay for a business while still reaching target is assessed. If the business will be ceasing operations, a liquidation value is estimated based on selling off the assets. This value is often highly discounted because it assumes the assets will be sold as quickly as possible.

Other Important Factors

While there are several financial methods of valuating a business, there are other somewhat intangible factors that should be considered. For example, the culture of the company is important because it motivates its underlying ethics and competitive strategy, creating an environment for less risk. Also, the company’s management is key, because their track records will say a great deal about the value they bring to the table and the level of confidence that they instill. Ultimately, they will have a deep understanding of the industry and have the skillset to foster and maintain a positive culture. Additionally, aspects such as innovative intellectual property, established branding that is well recognized in the market, retention of key talent, and strong customer and supplier relationships can drive up the value of a business.

Don’t Go It Alone

Due to a lack of transparency, the valuation of a private company is never an exact science, but there are advisory experts that have methodologies that do get it as close as possible. Our world-renowned M&A advisors are standing by, waiting to engage you in the process of taking your future to the next level. We are experts in helping to create added value for your business and getting the most value for it in a sale. Contact us to get this exciting process started.  

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Using Growth Capital To Grow Your Business

Every business owner wants to grow their company, but having access to capital to make it happen can make all the difference in the world. Growth capital is money that you borrow to help grow your business’s operations and, ideally, its profitability. There are many different forms of growth capital. It may be structured as a short- or long-term loan or as a line of credit. Long-term financing is the most common because it is easier to repay.

There are several reasons that growth capital can be secured by a business.

  • To purchase commercial real estate
  • To buy equipment to increase production
  • To increase workforce
  • To expand into new markets
  • To increase advertising and marketing efforts
  • To purchase another company

Growth capital is different from working capital because it is debt financing to create growth, while working capital is used for financing the daily operations of the business and keep it running. It is also different from equity capital, which requires relinquishing partial ownership and entering into a strategic partnership in exchange for investor funding. Growth capital does not require giving up any ownership.

 

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Types of Growth Capital Loans

There are several financing options for small to mid-size businesses seeking paths to growth.

  • Conventional growth capital from bank lenders. This method typically offers the lowest rates and fees, and longest terms. The average conventional business lender approves between 20 to 50 percent of all growth capital loans.
  • SBA financing with an enhancement guarantee by the Small Business Administration to cover your losses if you fail to repay. This financing is used for startups, acquisitions, expansion, construction, revolving funds, and working capital.
  • Asset-based growth capital that shows lenders collateral and substantial cash flow for approval. If you do not have adequate cash flow to get approved, you can use assets such as real estate, equipment, or inventory as collateral. These lending rates are often higher than that of banks, and the terms are shorter.
  • Alternative growth capital from private lenders, non-bank lenders, marketplace lenders and mid-prime alternative lenders have shorter terms but can be amortized over up to five years.
  • Cash advance capital is a short-term advance that involves selling a part of your business’s future receivables for a lump sum. This form of financing is usually more expensive, so the ability to increase revenue needs to justify the cost.

Applying for Growth Capital

When you apply for growth capital, lenders will assess the profitability of your company. They will want to ensure that your business model is proven, cash flow is adequate, and operations are efficient. After all, they want to feel confident that the loan can be repaid.

As defined by the National Venture Capital Association, growth equity investments feature the following attributes.

  • The business’s revenues are growing rapidly.
  • The company is cash flow positive, profitable, or approaching profitability.
  • The business is founder-owned and has no prior institutional investment.
  • The investor is agnostic about control and purchases minority ownership positions more often than not.
  • The industry investment mix is comparable to that of venture capital investors.
  • The capital is used for company needs or shareholder liquidity and additional financing rounds aren’t expected until exit.
  • The investments use zero or light leverage at purchase.
  • The returns are mainly a function of growth, not leverage.

How Can We Help?

At Benchmark International, we have an award-winning team of M&A advisors ready to help you take your business to the next level, whether it’s through a growth strategy, an exit plan, a merger, or an acquisition.   

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What Is An ESOP?

An ESOP is an Employee Stock Ownership Plan under which staff members acquire interest in the company through a particular benefit plan. This type of plan is designed to incentivize employees to act in the best interest of business and stay focused on company performance since they themselves are shareholders and will want the stock to do well. A study by Rutgers found that companies grow 2.3% to 2.4% faster after setting up an ESOP. 

ESOPs are established as trust funds and can be funded when companies:

  • Put newly issued shares into them
  • Put in cash to purchase existing company shares
  • Borrow money through the entity to buy shares

If the plan borrows money, the business contributes to the plan to facilitate repayment of the loan. Contributions are tax-deductible and employees pay no tax on them until they leave or retire. If an ESOP owns 30% or more of company stock and that company is a C corporation, owners of a private company selling to an ESOP can defer taxation on gains by reinvesting in securities of other businesses. S corporations can also have ESOPs and the earnings attributable to the ESOP's ownership are not taxable.

 

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Companies of all sizes use ESOPs, from small family-owned businesses to large publicly traded corporations. Company leadership usually offers employees stock ownership with no upfront costs. It is common for distributions from the plan to be linked to vesting, which is the proportion of shares earned per each year of service. The shares may be held in a trust for safety and growth until the employee resigns or retires—they cannot take the shares with them. If an employee is fired, they usually only qualify for the amount they have vested in the plan. Once fully vested, the business buys back the vested shares from the departing employee and the money goes to that employee in the form of either one lump sum or periodic payments. After the business buys back the shares and pays the employee, the shares are either redistributed or voided.

ESOPs offer several benefits for the ownership, the company, and its employees. Owners gain liquidity and asset diversification, they can defer capital gains taxes on proceeds, and they maintain upside potential and leadership in the company. Companies get tax deductions on sale amounts, can become income tax-free entities, and have a tool to retain and attract talent. Employees secure retirement benefits and enjoy having a real stake in the company they work for.

It should be noted that employee ownership does not mean that employees are more involved in operations or running the business. They are not entitled to receive financial or strategic information. They are given a summary plan description and annual statements for their account. In some cases, employees may be granted certain voting rights.

ESOPs and Exit Planning

ESOPs are often used in succession planning as a strategy for liquidity and transition. Around two-thirds of ESOPs provide a market for the shares of a departing owner of a profitable business. Others are used as a supplemental employee benefit plan or as a way to borrow money in a tax-favored manner. Because ESOP transactions are flexible, they enable ownership to either withdraw slowly over time or all at once. Owners may sell anywhere from one to 100% of their stock to the ESOP, allowing them to stay active in the company even after selling all or most of it.

Additionally, ESOP transactions provide more confidentiality than third-party sales. Because confidential information does not need to be shared with prospective buyers, it eliminates risk of detriment to the business. An ESOP transaction is also known to offer a greater certainty of closing versus sale to a third party, and terms of the transaction are arranged to be fair to the ESOP and its members. It is also considered to be more conducive to maintaining healthy company culture because it aligns the interests of ownership, management, and employees.

Other Types of Employee Ownership

In addition to ESOPs, companies can offer employees the following options:

  • Direct-purchase programs that allow employees to buy shares of the company with their personal after-tax money.
  • Stock options that offer employees the chance to purchase shares at a fixed price for a set period of time.
  • Restricted stock, which gives employees the rights to acquire shares as a gift or purchase after reaching certain benchmarks.
  • Phantom stock, which provides employees with cash bonuses equal to the value of certain shares based on performance.  
  • Stock appreciation rights that allow employees to raise the value of an assigned number of shares, which are usually paid in cash.

Let’s Talk About Your Future

If you’re ready to make a move with your company, we’re ready to make the most of the process for you. Contact one of our esteemed M&A advisors at Benchmark International and we can begin writing the next chapter of your success story.

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What Is A Buy and Build Strategy?

A buy and build strategy is commonly used by private equity firms seeking to expand operations, generate value, and increase returns. It is accomplished through the acquisition of a platform company with already established internal capabilities that can be further built upon. This can include the acquisition of several smaller businesses, combining their operations to create more value. Buy and build transactions, which can be aggressive, tend to occur more often in slower economies because private equity firms become even more interested in improving returns at a time when organic growth and operational efficiencies are not enough. They are also more common in highly fragmented sectors.

Buy and build can be a great formula for expansion and added value. It allows businesses to acquire skills and expertise that would normally require a great deal of time to build on their own. It can help a company expand into other markets in a much more efficient manner. Usually, these private equity firms have a relatively short holding period of around three to five years and investors expect a fair amount of interest after an agreed time period. Buy and build deals result in an average internal rate of return of 31.6% from entry to exit, versus 23.1% for standalone deals. While private equity is the most common employer of buy and build strategies, this tactic is also used by strategic buyers, stock listed companies, and family-owned companies.

 

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Because it brings about a great deal of change, a buy and build strategy must be executed properly in order to succeed. Otherwise, the resulting effects can actually be detrimental to value. In an ideal situation, the private equity firm will have significant experience in the particular sector of the company that they are acquiring. Having a strong CEO and management team with a solid background in the field of business is also important because the transition and integration process can be complicated and needs to be handled adeptly. The leadership should also have a certain skillset that includes an understanding of areas such as risk management, operational metrics, and change management. This is especially true when the acquired companies are competitors and there needs be vertical integration of supply chains. Additionally, a buy and build strategy can take several years because it involves the acquisition and integration of multiple companies.

To learn more about why buy and build strategies work, check out our previous post here.

Time to Make a Move?

Whether you are looking to sell your business, create strategies for growth, or craft an exit plan, our experts at Benchmark International will take the time to carefully devise strategies designed for your specific needs. Your goals are our goals and we will put all of our resources and global connections to work for you, getting you the most value possible for your business.

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How Much Time Will The M&A Process Require Of Me?

As a business owner, you may be curious regarding how much of your time you should expect to invest in the process of a merger or acquisition from start to finish. First and foremost, it is important to recognize that any M&A deal will take time. This can be anywhere from several months to years, depending on various circumstances such as the state of the current market and the type of business. The good news is that if you hire an experienced M&A advisory team to handle the transaction, it will not require much of your time at all in the early stages.

The Preliminary Phase

A quality M&A team will handle the vast majority of the necessary work required to facilitate a transaction with the understanding that you have a business to run and you need to stay focused on doing just that. This early phase of work includes:

  • Compiling due diligence documentation
  • Studying the market
  • Assessing the data
  • Creating a solid marketing strategy
  • Vetting potential buyers

Of course, you should constantly be kept informed of all developments in the process, but you will not need worry about doing all the legwork and dealing with time-consuming details. An M&A team will guide you through every step, making sure that all communications are clear and concise, and that you can stay focused on your day-to-day life with some peace of mind.

 

Ready to explore your exit and growth options?

 

There are many reasons why enlisting an M&A advisory firm as your partner offers you a major advantage in a deal. You could try handling a sale yourself, say with the help of your lawyer or CPA, but it is a complicated process that makes it very difficult for a business owner to juggle running their business while dealing with all the minutia involved in an M&A transaction—especially when you have no prior experience in selling a company. Think about how much you really know about corporate and antitrust laws, securities regulations, and where to even find a buyer. Not to mention that experienced buyers will recognize that you are in unchartered waters and will not hesitate to take advantage of your lack of practice. Keep in mind that it is firmly established that the majority of mergers and acquisitions (70 to 90 percent, according to the Harvard Business Review) fail. This makes it even more crucial that you have an experienced team working on getting you results. Experienced M&A advisors know how to get deals done because they do it every day.

But there is more to it than that. Selling your company is an emotional journey. Your personal feelings can easily cloud your judgment regarding a sale. It is incredibly helpful to have a team in your corner that is looking out for your best interests while being able to assess buyers on their true merit. A good M&A advisor will have empathy for you during this difficult process and know how to help you through it while getting a high company valuation and the results that you deserve.

 

The Later Stages

Once you agree to an offer, it will require a little more participation on your part, but in a way that you should welcome, because this great milestone is finally nearing completion. You will be introduced to prospective acquirers and presented with their letters of intent. Contract negotiations and financing strategies will be underway. Your M&A deal team will work with you to evaluate the top bidders and narrow down the options, and get you across that coveted finish line to an exit strategy that is designed specifically to fulfill your unique aspirations for the future. Once you have decided on a buyer, you will need to work together to formulate integration strategies for the ultimate success of the business.

Thinking About Selling?

Even if you have not made up your mind to sell, it can still be fruitful to have a conversation about the possibilities for your future. The M&A experts at Benchmark International would love to discuss your options and help you gain insights into what and when is right for you, your company, and your family. If you choose to sell, our proprietary methodologies and global connections will help you find the right buyer and get the maximum value for the business you have worked so hard to build.

 

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How To Look Good To Clients

In any industry, it is always important to look good to clients and to live up to their expectations. When working with clients you should always try to go above and beyond what they expect, which will help your firm look good. Regarding mergers and acquisitions, impressing clients is key when it comes to selling their businesses. From the onboarding process to the closing of the sale, looking good is essential. There are many ways to look good to a client but focusing on the firm’s professionalism, knowing your client, and building relationships with customers are a few keys ways to look good to your clients.

Professionalism

Looking good to clients starts with a first impression and how professional you appear to a client. A firm handshake, an appropriate suit, and a friendly greeting can help impress a client, but professionalism is ongoing and will continue throughout the process of selling a company.

A few ways to maintain professionalism are:

  • Well-rehearsed presentations
  • Constant communication
  • Proper business etiquette

Clients want to be respected and treated appropriately in a business setting. Clients will expect professionalism, so it is important to go above and beyond their expectations. Providing well-rehearsed presentations about the client’s company, market, and industry will help you stand out against other firms.

Constant communication and updates on the status of the client’s file are key to impressing the client. Clients will be impressed by proper business etiquette how well you can articulate an understanding for their industry and particularly their business structure. 

Know your client

Knowing your client is about more than just understanding what they do and whom they serve. There are many aspects to a business, and clients will be impressed if you take the time to understand the ins and outs of their company.

Businesses are multidimensional and no one knows the business as well as the owner. Before you meet with a client make sure to know some of the important aspects of their businesses. Some key things to research before your initial meeting with a client include:

  • Details of services and products provided
  • The markets they operate
  • Customer review

Understanding and knowing your client starts before the initial meeting in person. Complete your research on the company prior to the meeting, note public information about the markets they operate, and their customers.

Building Relationships

Selling a company can be a very emotional process for business owners and building a relationship with the sellers is key to looking good to clients. Clients want to know that you are taking the time to understand what they are expecting to get out of selling their business. For some this can be monetary, for others it can be retirement or a change in their careers. Regardless of the reason, it is important to take the time to understand what they are looking for and understand those key aspects.

Some crucial ways to build and maintain relationships are

    • Always be available
    • Be open to listening to concerns and honest with responses
    • Be realistic, do not over-promise

Clients want to know they are being taken care of when it comes to selling their businesses. It is important to build a relationship, establish trust, and let your client know you will be available through every step of the process. By building relationships, you will look good to clients and help them feel at ease throughout the mergers and acquisitions process.

When it comes to looking good to clients, there are many ways to be impressive. However, professionalism, knowing your client, and building relationships are fundamental. When you can provide professional materials and a true understanding of their company and industry, you will look good to clients. Diving deeper with your clients and showing an understanding on more than a basic level will set you apart from competitors and impress the clients. Building relationships and maintaining those throughout the process will also impress clients. While there are many ways to look good to clients, showing clients that you are professional, understand their business, and want to build a strong relationship with them will help you look good to clients.

 

Author
Madison Culberson
Transaction Support Analyst
Benchmark International

T: +1 615 924 8950
E: culberson@benchmarkintl.com

 

 

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7 Key Considerations When Selling Your Business

You have poured your life into building your business. Selling it is not only a very emotional process, but it can also be a monumental task that involves many intricacies. Careful planning and preparation before a merger or acquisition can translate into your efforts being rewarded with a high value deal. While there is quite a bit that can go into preparation, the following seven considerations are key to arriving at a successful deal in the end.

1. Protect What’s Yours

Intellectual property can be a company’s most significant asset. It differentiates you from your competition, is an important marketing tool, and can provide revenue through licensing agreements. It is also a major driver of value in a merger or acquisition. Any intellectual property that belongs to your business (proprietary technologies, copyrights, patents, design rights, and trademarks) must be legally protected. Enlist your legal counsel to ensure that all the proper paperwork is filed and current. If you are considering a cross-border transaction, you will want to make sure the property is protected on an international level as well as a local level, as different countries have different laws and requirements.

2. Get Your Finances in Order

It’s never a good look when a prospective acquirer asks for financial documentation and you are scrambling to put it together. This can also delay the process. Before taking your company to market, you will want to compile all of the proper financial and contractual records and have them organized and ready to turn over. Having your finances in order also means that you should seek to resolve any outstanding issues where possible before trying to sell. For example, if you know you have a situation you can probably resolve, getting it straightened out ahead of time can eliminate unnecessary complications during the due diligence process. The due diligence process is also going to require an audit of your assets. A buyer is going to want a complete picture of what they are acquiring. Intellectual property is an important element of due diligence but the process also includes areas such as equipment, real estate, and inventory.

3. Maintain Business as Usual

Going through the lengthy process of selling a business can certainly provide its share of distractions. No matter how easily it can be to become sidetracked or consumed in the details of the sale, now it is more important than ever that you stay focused on the daily operations of the business and ensuring that it is running at its best possible level. This includes keeping your management team focused. Deals can take time and they can also fall through. Every aspect of an M&A transaction hinges on the health of your company at every stage of the game and you need to make sure the business does not lose any value.

4. Think Like a Buyer

As a seller, you obviously don’t want to leave money on the table. That is why it can be helpful that you look at your business from the perspective of a buyer. This will help you avoid being fixated on a sale price the whole time. Think about why they would want to buy your business and what opportunities it affords them in the future. If you can improve your business and develop it as a strategic asset before you try to sell, you can increase its value and get more money.

5. Predetermine Your Role

Sometimes after the sale of the business the original owner executes a full exit strategy and severs all involvement with the business. You need to decide up front what is right for you. To what extent do you plan to relinquish control of the company? Do you wish to remain an employee or a member of the board? How much authority do you plan to retain? You should think these options through before going to market so that you can find a buyer that supports your intentions for the business.

6. Have a Post-Sale Plan

Consider what life will look like following the sale of your company. Think about what your financial picture will look like. How will you invest the proceeds to maintain your financial health? How much cash will you take at closing? How long should the earn-out period be? What about stock options? And don’t forget about tax liability. How much will be paid immediately and how much will be deferred? These are all important questions to ask yourself when anticipating the sale of your business.

7. Retain an M&A Expert

Selling a business is a complicated process and a seller should never go it alone. You may be an expert at your business, but chances are you aren’t an expert at selling businesses. Enlisting the partnership of a M&A experts can not only help you get a deal done smoothly but can help you get the maximum value for your company. M&A advisors know what to expect, they know how to avoid common pitfalls, and they have access to resources and experience that can be game changers for your deal. They can also help you work through some of the difficult decisions mentioned above. Of course, they come at a price, but a price that is worth it when you consider how much their involvement can increase the value of your sale and the chances of the deal being closed.

Ready to Sell?

When you are ready, so are we. Reach out to our M&A advisory experts at your convenience to talk about your options and how we can help you sell for the utmost value.

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Avoiding M&A Integration Failures

Successful integration strategies are crucial following any merger or acquisition. Knowing how to execute integration the right way means knowing what failures can be avoided.

Not Seeing the Big Picture
When a deal is underway, it is common for the focus to be on external strategies such as gaining market share and creating growth. But internal focus and maintaining continuity need to be just as important during this time as well. The long-term vision for the company is paramount, and this vision should be aligned between all parties involved throughout the M&A deal process and following completion of the transaction. By not sharing a big-picture strategy for the future, leadership puts the health of the overall organization at risk. All areas of the business are able to work together fluidly when all team members understand the goals for the company moving forward—goals that should be firmly outlined and clearly communicated by management. This should be planned before any M&A deal is completed, not after.

A Lack of Planning
Speaking of planning…the lack of it is a major reason for post-M&A integration failures. And planning applies across the board to pretty much every topic and scenario that can affect day-to-day operations, from HR to project management to revenue projections. Everyone should know his or her roles and responsibilities. All systems should be prepared to keep running smoothly. Proper planning can bridge the gap between a singular focus on the bottom line and daily operational matters, bolstering the odds that the business will run efficiently and prosper. This becomes especially important if the integration is happening cross-border and both cultural and regional issues need to be thought out.

 

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Botched Due Diligence
M&A integrations are prone to failure when the due diligence process is not well executed, which is why deals should never be rushed. Without the necessary due diligence measures, any deal can fall through. The right oversight and research increase the chances of success for a transaction before, during, and after it is complete. Due diligence is critical to uncovering any potential issues so they can be addressed before a sale. It also provides an accurate picture of the inner workings of the business, which aids significantly in the process of integration. Due diligence is hugely important to any merger or acquisition and should never be overlooked or pushed through just to get a deal done.

High Costs of Recovery
Leading up to integration, it is possible to run up high costs that become an issue. This comes back to the topic of planning but deserves to be called out because it can be disastrous. You should be sure that you have adequate resources and bandwidth that can withstand the potential costs of integration. When faced with a challenging integration that could span several years, it can be difficult to recover costs in the long term.

Culture Clash
Cultures within the workplace can vary greatly, especially in cross-border transactions. It is an enormous factor in getting the integration process right. When culture is not accounted for in the integration, it can be both costly and a massive headache. Ideally, the cultures should be similar enough to integrate as smoothly as possible. The merging work environments should be carefully analyzed prior to a deal to achieve an understanding of how the two parties will mesh following the deal. This also means that the leadership team needs to grasp any cultural differences, no matter how minor, in order to be sensitive to any issues that may arise post-integration.

Inadequate Capacity
Deals that involve expansion have certain integration needs of their own. There must be proper assessment of the organization’s capacity to integrate and scale up. This means having enough resources so they can fill in any gaps without being over-extended, leaving you with no room for future growth. These resources include people, time, money, equipment, and space.

Time to Make a Move?
If you are a business owner considering an M&A strategy, our team at Benchmark International would love to hear from you. You can count on us to put our global connections and superior resources to work for you, and our award-winning advisors have the experience to help you avoid any pitfalls and get the integration process right.

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A Beginner's Guide To Finding An M&A Advisory Firm

Entering into a merger or acquisition is one of the most important decisions a business owner can make, so finding the right M&A advisory firm is equally important. In the news, we frequently hear about massive M&A deals happening between big corporations. Big investment banks typically broker these large-scale deals. These same banks usually cannot be bothered to represent companies in the lower to middle markets because it’s not enough of a moneymaker for them.

Why Do I Need an M&A Advisor?

While you are an expert in your area of business, you likely do not have access to the connections and experience to identify opportunities that will result in the best strategic M&A solution. Partnering with an M&A expert will afford you many advantages. Selling a company is a complicated process and you will be relieved by how much they will tend to the many details and constant requests. A high quality M&A firm will:

  • Have established networks that will get you access to the right type of buyers.
  • Be skilled at managing expectations on both sides.
  • Know how to improve your business and market it appropriately.
  • Maintain the highest levels of confidentiality throughout the process.
  • Know the right timing for taking a business to market based on experience in that sector.
  • Appoint legal and financial services where needed.
  • Perform comprehensive due diligence and data management.
  • Conduct extensive negotiation and create a competitive bidding environment.
  • Finalize a fair and premium valuation of the business to get you maximum value.
  • Structure the transaction in terms of legal issues, payments, contracts, shareholders, debt restructuring, warranties, and indemnities.
  • Keep you informed at all stages of a deal while keeping you out of unnecessary minutia.
  • Assist with any necessary strategic decisions regarding integration, employees, timing, and announcements.

 

Ready to explore your exit and growth options?

 

Finding Quality M&A Representation

As an owner of a small to mid-size business, where do you start when you are seeking M&A representation? After all, this is a major life decision and you absolutely want to get it right. M&A advisory services range from big investment banks to small boutique firms. You need to assess what is right for you in several aspects. These are some key considerations for your search:

  • Many M&A advisory firms do not have varied expertise that spans local, regional and global levels. Look for a firm that will expand your options through the farthest geographical reach.
  • It’s okay to be discerning. Talk to multiple firms and create a shortlist. This is going to be a long process so you should feel comfortable and have a liking for the people you are working with, while you should also feel confident in their abilities to get the deal done right.
  • Study the reputations of the M&A firms and look for one that is well known for getting maximum value in deals. Look at what types of deals they have done in the past and if their experience is applicable to your business regarding markets, products, services, and regions? Also, seek out any available testimonials from their clients and look for a firm that has proven strong relationships.
  • Pay close attention to the initial discussions you have with them. Do they seem aligned with your goals and motivated to get you exactly what you want or do they seem stuck on going their own direction? You want your M&A advisors to be as aligned as possible with your vision and aspirations for the future. You should feel confident that they are in your corner and not just there to make a buck.
  • Assess their ability to create a competitive bidding scenario among multiple parties. Are they known for doing this? Do they have a large enough network and the right resources to make it happen?
  • Consider how their fees are structured. Some firms may take a percentage based on deal size. Some may have upfront fees, monthly fees, and registrations fees. You don’t want to be met with surprise costs. Make sure they are transparent about their fees and that their justification for them makes sense. While you do not want to get ripped off, you should also keep in mind that selling your business is a once in a lifetime opportunity and you want to get it right, so this probably isn’t the time to cheap out.
  • Look for an M&A advisor that you know will work with you as a true partner. A good firm will offer you constant engagement and welcome active contributions from you. They will make sure you do not miss any details and that you never feel left in the dark. They will also make sure that zero communications are sent to a buyer without your consent and input.
  • Make sure you are getting an M&A advisor and not just a business broker. A broker is less likely to offer a comprehensive partnership that details long-term plans and integration strategies that are important to the process.

Are You Ready to Sell?

If you are seeking an M&A partner, we kindly ask that you include Benchmark International in your search. We believe that our award-winning team can offer you all the qualities you desire while getting you the most value possible for your company. We look forward to hearing from you.

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Key Tips For Building A Great Management Team

Effective management is essential to the growth and success of any business. This is especially true following a merger or acquisition. Through analytics conducted by companies such as Google, we know that certain characteristics and behaviors have been proven to make all the difference in leadership’s ability to get results for the business.

Good Communication & Collaboration
Quality leadership entails listening to staff as well as sharing information with them. Talent that feels both heard and informed also feels included, valued, and motivated. When employees think that their feedback does not matter, or that they are being kept in the dark, they not only feel underappreciated, but they can also lose trust in their leaders. That’s never part of any playbook for success.

Clear Vision and Strategy
Clarity provides the direction that is critical to getting things done, which correlates to the valuation of the company. Management should fully grasp where the company is going and how to get it there. Vision and mission statements are helpful but the leadership team needs to actually believe and uphold what they say.

Adaptability
Leaders of businesses are frequently faced with changes and new challenges. They must be able to adapt to these circumstances quickly in order to be successful. This is especially true in this day and age when technology brings about change more rapidly. Effective leadership will not view change as an obstacle, but rather as an opportunity. When championed by management, this philosophy can be contagious throughout the ranks.

 

Ready to explore your exit and growth options?



Supportive of Development
It is important that employees understand how they are performing and are given paths to self-betterment. Management should help talent set goals, create timelines to achieve those goals, and regularly evaluate performance. Research shows that 69 percent of high-performing businesses rated company-wide communication of goals as a leading tool for building a team that is loaded with top performers. Also, achievements should be celebrated and rewarded. Even small gestures can make a difference.

No Micromanagement
Building trust, respect, and quality relationships between management and employees means avoiding micromanagement. When staff is micromanaged, they tend to feel the opposite of empowered and it can directly affect morale in a negative way. This also means that your leadership must have the ability—and willingness—to delegate.

Strong Decision Making
When you picture a great leader, you picture someone with strength and conviction, not someone who cannot make up their mind. Leaders need to be productive, results-oriented and have confidence in their choices. They must be able to balance reason with emotion, and know when the timing of a decision is critical to its results.

Empowering Coaching Mentality
Management should foster an inclusive team atmosphere that shows concern for the success and wellbeing of employees. This involves being supportive of staff, finding ways to help them grow, keeping promises, and providing an encouraging work environment.

Relevant Technical Skills
Studies show that technical skills fall at the lower spectrum when it comes to ranking leadership qualities. However, in order to help advise the team, the leadership should possess the proper skills and knowledge that apply to the business. If employees feel that management does not know what they are doing, they will see right through it and will struggle to take leadership seriously.

Time to Make a Move?
If you feel that a merger or acquisition is key to your future, please reach out to our M&A dream team at Benchmark International to arrange a deal that will turn your dreams into reality.

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How To Explain To Your Family That You Are Selling Your Business

Once you’ve made the difficult decision to sell your company, there comes a time when you must inform those closest to you about the news. Telling your family that you are going to sell will depend on their level of involvement with the company. If none of your family members are employed in the business, sharing your plans will not be quite as sensitive of a subject. In fact, they may welcome the decision because you are about to have more time to spend with them, which is why you should not inform them until you are certain that you are going to sell.

Family Matters

It is an entirely different story if you have family that is on the payroll. Will a family member be taking over the company? How will any staff that is family be impacted by a change in ownership? These types of scenarios are when things need to be handled more delicately.

If a family member is taking over the business, there are several important considerations that can affect how the entire process plays out and how smooth the transition goes. It is important that you are sure that you and the new owner share the vision for the future of the company. If you decide to sell to them, and later learn that they wish to take the business in a different direction, you may not agree and emotions could lead you to change your mind, causing friction in the relationship that can affect the health of the business moving forward, especially if they are an essential part of the management team. Selling to a family member also means that it is important that there is clear and open communication regarding the valuation of the company and how they will be paying for the transaction.

 

Ready to explore your exit and growth options?

 

Also, it is not uncommon for family members to feel it is adequate to seal a deal with a handshake, but a strictly verbal agreement can be very problematic. You cannot simply just hand it over. It is crucial that you have a tangible agreement in writing so that everything is clear, on paper, and you can move smoothly towards your exit. You will want it to cover details such as a third-party valuation, amount paid, payment schedules, if you as the initial owner will remain on payroll, and whether you will still be involved in the business and to what extent. It can be helpful to bring in a M&A professional to advise you through this process to ensure you have all of your bases covered and help you avoid making emotionally driven decisions.

Additionally, you need to be sure that the next generation actually wants to take over the family business. Sometimes an owner assumes that their children will take the reins without realizing they have no interest in doing so. Another scenario to consider is whether a family member has a sense of entitlement regarding the business that you may not be aware of. You’ll want to make sure everyone is on the same page. If you plan on selling to a buyer outside the family, and you unknowingly have a family member who thinks they will be inheriting the business, a great deal of resentment can arise and cause stress for employees, and problems within the operations of the company, as well as with the success of any merger or acquisition.

Timing is Everything

Regardless of to whom you are selling the company, the timing surrounding sharing the news is critical. Confidentiality is imperative to the sale process, so you never want to break the news too soon. The process can go many different ways. The deal can fall through, or you could change your mind about partnership or minority investments, or the buyer could take actions that alter the terms of the deal. You may even decide to go with a different buyer. In any case, the due diligence process in any M&A transaction can take several months to years. Communicating the news of a potential sale with too many people too soon can lead to issues such leaked information, distracted employees, and other factors that could end up negatively impacting the final terms or killing the deal altogether. It is best to keep the situation to yourself for as long as possible. By waiting, you are also ensuring that the deal is closer to being finalized and less likely to fail, so you avoid getting people worked up about a sale that is not even going to happen.

Communicate Clearly

In any case, when you share the news with your family that you are selling your business, you will want to be open and honest about your reasons. Talk about the buyer and why you chose them. Discuss your plans for the future. Clear communication can help to avert misunderstandings or misplaced expectations. For example, say that your spouse thinks that you are now going to travel the world together but you actually plan on starting a new venture. Do not assume they know what is on your mind. Being clear and up front about your plans can keep things running smoothly at home.

Let’s Talk About Selling

If you are ready to sell your company, contact our M&A specialists at Benchmark International for the highest level of expertise and guidance. We understand that you’ve spent your life creating wealth and value. We know you want your legacy to be handled with care. We can help you sell for maximum value and get you on the path to the perfect retirement or the next phase of your entrepreneurial life.  

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7 Steps To Finding The Perfect Business To Acquire

Purchasing an existing business is a far less risky alternative to starting a new business from the ground up. In fact, more than half of start-up companies fail within the first several years. Some research even reports that a whopping 90 of new businesses fail within four to five years.

By buying an existing business, you are acquiring all of the positive aspects that it already possesses, such as the customer base, infrastructure, supplier relationships, and brand recognition. You will also be taking on its shortcomings as well, and that is another element you will need to factor into your search. So, when looking for the ideal business for you to acquire, where do you start?

7. Consider Your Value

When embarking on your search, think about how you can bring value to the table. Consider how your particular experience, skills and areas of expertise can improve the company and strengthen its weaknesses. It is a logical step in finding the type business that makes sense for you. It also aids in making your case to the owner as to why you are the right person to carry on their legacy.  

6. Focus Your Passion

If you are going to go all in on a business, it is more likely to succeed if it something that you feel passionate about. If you have zero interest in producing or selling trombones, then a trombone company is probably not the best choice for you. Seek out a business that you naturally feel gravitated toward helping flourish. Because you are going to need to dedicate a great deal of time to this new venture, it will help that you feel inspired by your mission.

You may even come across a business that interests you that is not on the market. Don’t be afraid to ask the owner if they are willing to sell. Even if they say no, they could change their mind down the road so make sure to give them your contact information.  

5. Leverage Your Network

Reach out to your colleagues, friends, and family members to see if they are aware of any companies on the market. This can be a simple path to finding a good lead, especially if you already have a connection to the ownership, making for an easy introduction. Also keep in mind that this route can also lead to prospects that may not be serious or may not be the best fit. Just because you know someone who knows someone who wants to sell, it does not mean it is the right opportunity for you.    

4. Search Online

There are several online marketplaces that list small businesses that are for sale. This is a relatively effortless way to access key information such as location, asking price, revenue, inventory, and have access to global listings. Just be aware that these sites may list high company valuations. Also, these types of sites can be flooded with listings, which can be a major waste of your valuable time. You may also come across sellers that are not actually serious about selling. 

3. Consider Lifestyle Impacts

When purchasing a business, you are taking on a massive responsibility and it is important that you make sure your lifestyle can accommodate all that it will entail. Think about how taking over a company will affect your time, your family, and any other obligations you may already have. How much of your time are you willing to invest? Will you need to relocate? Are you going to be losing sleep over any debt? Avoid over-extending yourself for your sake, the sake of your family, and the sake of the company.

2. Know Your Budget

Before even attempting to buy a business, it is important to establish what you can afford to invest in the endeavor. Be sure to ask yourself the right questions, such as how much you have on hand, if you will need financing, and how much debt you are able to take on. Also, if you have a reasonable idea of what you are willing or able to spend on an acquisition, you can avoid wasting time looking at companies that are outside of your ballpark.

1. Work With M&A Experts

By working with a mergers and acquisitions advisory firm, you will have access to exclusive information about businesses that are for sale that you will not be able to find on the street or the Internet. These experts will also have superior resources and proficiencies in matching quality businesses with the right buyers. Going this route also means you can be sure that you are dealing with serious sellers only—not someone who is just toying with the idea of selling. These many benefits are proven to translate to a more efficient and fruitful experience overall.   

Looking to Buy?

While we specialize in sell-side M&A, our talented team at Benchmark International can also help to effectively match buyers with the right businesses. Visit www.BenchmarkIntl.com/buyers/ to create your buyer profile and learn more about the merits of working with us.

 

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How Resilient is the Private Equity Market?

Globally, Q1 2020 saw private equity have a robust start to the year. According to data from Mergermarket’s Global and Regional M&A Report 1Q20, global buyout activity remained at the same value as Q1 2019. This was reflected in Europe, with the continent having a strong start to the year due to ‘high profile defensive consolidation and continued private equity investment’, which equated to a 30.2% increase in deal value over Q1 2019.

Of course, this was before the pandemic, with a fall in activity in March and with the primary market for leverage loans shut down, the private equity market is unlikely to reach the levels of the start of the year in the months to come.

But how resilient is the private equity market anticipated to be?

If we look back to the recession of 2008, it does not paint a promising picture, as trust was completely lost in private equity firms. In 2007, buyouts represented 27% of overall M&A value in the US and Europe, which then dropped to 14% in 2009, due to lack of trust. Similarly, in 2019, over 25% of global deals involved a private equity firm, which does no bode well for buyouts in 2021. However, the current crisis is very different in nature to 2008 and buyout activity should remain resilient due to the record amounts of dry powder financial institutions have at their disposal.

European private equity demonstrates this with private equity activity as late as mid-March, with KKR announcing a 5bn USD takeover of recycling firm Viridor.

Interested in private equity investment?

During the current crisis, exits may be muted – but that does not mean they will grind to a complete stop. For opportunistic buyers, there may still be targets in the coming months, particularly those in sectors immune to the current crisis, such as technology, business services and software. Companies thriving in the crisis – such as those in hygiene, home fitness, and home entertainment should also see a continued interest.

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So, You’ve Decided To Sell Your Company. Now What?

After you have poured your life into your business, there comes a time when you start pondering retirement and planning an exit strategy. Whether you want to assume a smaller role in the company, transition it to a family member, or sell outright to an investor, it is not a process to be taken lightly. Readying a business for sale is a daunting task and an emotional journey. Which is why the first thing you will want to do is partner with an experienced M&A advisory team that is going to understand your goals and your needs, and have empathy throughout the process.

Ultimately, you have two high-level goals for selling your company: for the process to run smoothly, and to get the most value possible. There are many stages that go into making these two goals attainable, and at Benchmark International, we have perfected this process down to both an art and a science. This includes selling at the right time, which is why getting started as soon as possible can be critical to the results.

Our mergers and acquisitions advisors will take a deep dive into learning everything there is to know about your company. (Chances are, we already are very knowledgeable on your industry.) We will be straightforward with you regarding our assessment and what you can do to make your business more valuable and appealing to a prospective buyer. This includes third-party research that vets your company’s reputation in the public space and how to address any concerns.

We will also use our proprietary technologies and global resources to identify the types of buyers that are right for your business, and then create a plan to effectively market your company to these buyers. This gives you a huge advantage as a seller. There are many steps that go into these processes that we can later detail for you to a greater extent should you decide to sell. And don’t worry—everything is handled with the utmost confidentiality and you can rest assured that any buyer is going to be closely vetted. We will never ask you to meet with a potential acquirer that is not suitable and that we don’t believe is in your best interest.

Another important undertaking that our experts at Benchmark International will handle is the due diligence for buyers. Obviously, they are going to want to know a great deal about your company. Buyers also expect to see scrupulous recordkeeping regarding financials, legal issues, and items such as contracts. Our team is here to help you compile the proper documentation, and we can even create a Virtual Data Room to store it securely and conveniently. This includes ensuring the protection of your intellectual property such as trademarks, copyrights, trade secrets, and the like.

We will coordinate all meetings and discussions between you and a buyer, always protecting confidentiality. When a buyer makes an offer for your company, we will present it with honesty as to whether we feel the offer is appropriately valued. We are committed to ensuring that you get everything that you deserve.

When you decide to move forward with an offer, your dedicated deal team will handle all of the negotiations following your instructions at all times. This includes structuring the sale clearly so that all parties involved know their roles moving ahead with the transition of the business. We handle all contracts with full compliance and proper documentation. Not a single piece of paper or communication will go to a buyer without you seeing it first. You can also expect regular contact at all times until an acquisition is complete.

Selling a company is a complicated endeavor and needs to be handled with expertise in order to achieve the right results. Having the right team in place can make all the difference in the success of your exit.

So, the answer to the question, “Now what?” is quite simple: contact us.

Our award-winning M&A analysts are waiting for your call to talk about how Benchmark International can help you sell your company for its maximum value. Reach out to us today and we can embark on this exciting journey together.

 

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Growing Your Business Is Not As Difficult As You Think

As a business owner, you already know that running a company is not a simple task. But growing that business does not have to seem quite as hard as you might think. There are many steps you can take to drive growth without making yourself crazy.

Acquire Other Companies
A quick way to create growth is to identify competitors or businesses in other industries that are complementary to yours and purchase them. An experienced M&A advisory firm can help you easily identify potential opportunities to look at that are worth your time and money.

Know the Competition
Take a close look at who your competition is and what they are doing. Are they doing anything differently? Is it working? What message are they putting out there? What are their weaknesses and how can you take advantage of them? How can you stand out better than them? There are online platforms that can help you uncover the digital advertising strategy of any company. You should also sign up to receive their mass emails and follow them on social media. If you find something that is clearly working for your competitor, it should work for you, too. This strategy does not mean copying whatever they do, just gaining inspiration for your own strategies and being fully aware of what you are up against.

Focus on the Customer
You can use a customer management system (CMS) to track your business’s interaction with existing and potential customers and in turn improve relationships overall. There are many types of CMS software that you can choose from to manage multiple channels. This includes creating an email database to stay directly in touch with customers. Having a CMS can also help you create a customer loyalty program to increase sales. It is far easier and cheaper to retain existing customers than it is to obtain new ones. Offering a clear incentive to choose your company can be a significant method of boosting your sales.

 

Ready to explore your exit and growth options?

Go Global
Consider expanding your business internationally as a way to generate growth. By moving into new geographic markets, you can take your existing offerings and scale them to other countries if it makes sense for your type of business. Initially, it can seem costly do to so, but it can also pay off in a major way. If this type of expansion is not physically or logistically possible, you can employ digital global B2B platforms to expand your borders without having to actually go to another country.

Consider Franchising
If you are looking to quickly grow a well-managed and thriving business, a franchise model is a way to accomplish this. Yes, franchise costs can be pricey, and the process can be rather complicated. But if you have the marketing savvy and your company qualifies for franchising, you can drive growth quite rapidly.

Look Into Licensing
If it’s applicable to your type of business, licensing is one of the fastest and most effortless methods of growing a company. By licensing intellectual property such as patents, trademarks, or copyrights to others, you can immediately draw on the existing systems built by other companies and get a percentage of the profits sold under your license, which can add up rather quickly.

Expand Your Offerings
What other types of services or products can your business provide? In what other ways can you create value for your clients or customers? Do you have the right team members in place to maximize these opportunities? It can be very helpful to take a step back and look at your business in a different light. Just make sure that you can focus on any new venture without distracting from your core competencies or spreading you or your staff too thin.

Create a Strategic Alliance
Merging with another company is a solid way to reach more customers in a shorter timeframe. You just have to make sure that the partnership makes sense, so you will need to identify businesses that either complement or are similar to your own. Working with an M&A expert can help you recognize the right opportunities and take the proper steps to ensuring the merger is a success.

Let’s Discuss Your Business
Reach out to our M&A aficionados at Benchmark International to talk about how we can help you grow or sell your company. Our unique perspectives can give you a serious advantage in the low to middle markets and help you craft a highly prosperous future.

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About “CARES Act” Loans For Small Businesses And M&a Transactions

The United States federal government has released the application for the $349 billion in forgivable loans that small U.S. businesses (under 500 employees) may obtain under the recent CARES Act. These federally guaranteed loans are designed to help businesses continue to pay employees during the COVID-19 pandemic. There are two types of loans available: Paycheck Protection Loans (PPP) and Economic Injury Disaster Loans (EIDL). While you can apply for both loans, you cannot use funds from each loan for the same expenses. The PPP loans give 2.5 times your monthly payroll expenses, up to $10 million. The EIDL loans provide up to $2 million for working capital needs such as payroll and fixed debt. Because there is a cap on this round of funding, you should not wait to apply if you need one of these loans.

What Sellers Need to Know

If the loans are used for qualified payroll costs, rent, utilities, and interest on mortgage and other debt obligations, they should be forgiven. They have a maturity of two years, and the interest rate is 0.5%. Terms are the same for all borrowers.

There is no reason why taking one of these loans should impact the value of your exit. We encourage you to immediately look into whether this loan makes sense for your business, with one caveat: if you are currently under letter-of-intent or nearing that stage, you should consult with your potential acquirer prior to applying for the loan.

Every business is different and a loan may not be right for your company based on other issues, but please do not needlessly delay or assume that, because you are selling, you should not apply. In fact, when it comes to selling your business, acquirers may actually look favorably upon the securing of a CARES Act loan. Here’s why.

  • If the loan enables you to keep a higher employee headcount, it is an asset because when life begins to return to normal, good labor may be in short supply.
  • If it helps you to avoid drawing on other debt, it can protect your balance sheet from impact and keep your interest payments down.
  • It will aid in clearly establishing and defending the quarantine-related add-backs to your adjusted EBITDA when the time comes.
  • It should help to paint a better picture of the quality of the management team, demonstrating that you took rapid action to preserve the health of the business and the welfare of the employees.
  • It is likely to foster employee loyalty, the absence of which is always a concern for buyers.
  • You will be in a better position to take advantage of business opportunities when quarantines end and help you get your growth curve back to where it should have been.

What You Will Need

The loan application is brief and your current lender should be able to assist you in completing the form. If your lender is not qualified to participate in this program, please contact our experts at Benchmark International and we will share the names of qualified lenders that regularly provide SBA loans to our clients’ acquirers.

You will need some financial and tax data. In the event you do not have access to that data, it may have already been shared with your Benchmark International deal team. Feel free to enlist us in using our virtual tools to help you gather and share (with your lender only) any relevant data we have. Even if we don’t have the data, our virtual tools could be of assistance in the timely filing of your application. For example, we can make documents available in virtual data rooms and arrange teleconferences with your partners and/or lenders if needed.

What Will the Buyer Think and How Will This Be Handled at Closing?

There are no personal guarantees required for these forgivable loans, so in a stock deal, there will be no effect. As a seller, you may request a covenant from the buyer stating that they will comply with all actions necessary to have the loan forgiven. There is presently no recourse back to the seller due to the lack of a personal guarantee.

In an asset deal, all employees are terminated, so you as a seller should still be able to get forgiveness for all compensation, rent, etc., paid up until the closing. If you had borrowed more money, you would have to repay it plus the ratable portion of the 0.5% on that overage. Either way, if a deal is fairly far along, you should discuss results with your lender when applying.

For most sellers, the requirements to get the loan forgiven will be met prior to close. You should document where the loan funds are directed so that you can make the buyer comfortable in diligence that you met the criteria in the statute, especially for stock deals, as this will be something acquirers will likely be looking at for years to come. 

As long as you as the seller assume any risk in the purchase agreement for any pre-closing mistakes, the buyer should not view a CARES small business loan as a detriment. One exception may be in stock deals in which the buyer was planning on taking loans after buying the business. If you have taken the loan and saved the buyer all that payroll expense, the buyer may wish they could have saved that payroll expense post-close instead. However, this is for a window of only a couple of months when both seller and buyer would have been eligible.

Keep in mind, the alternative to a CARES loan is to draw on your line of credit and that must be repaid in full at closing.Unless falling under certain specific NAICS codes, only companies with less than 500 employees qualify for a CARES loan. The definition of “company” includes affiliates, so if a buyer together with its affiliates has more than 500 employees after making the acquisition, then there is a complication. The loans up to the closing date can be forgiven and those that were going to be used afterwards must be repaid at the 0.5% interest rate. This could be like many government set-asides where once a contract is awarded the company no longer must qualify as an 8(a) business. Even with the less attractive option, the downside is minimal.

On the plus side, if the buyer has more than 500 employees, they could not have gotten the loan so they will not be upset that the loan was “used up” by the seller. They may even get to “inherit” the benefit as discussed above. 

The loan only covers up to eight weeks of payroll plus 25% of that amount, and it only looks at payroll up to $100,000 annualized for each employee. So the most a company can get for any one employee is $19,230.77.

If employee headcount is cut OR payroll is reduced before forgiveness is sought, a portion of the loan will not be forgiven. February 15th is the start date for assessing headcount and payroll and this can be restored by June 30th in order to get full forgiveness. So, in an asset deal, this could be an issue, but remember the interest rate is 0.5%. So if you take a loan this week and close sale as an asset deal within eight weeks, all you need to do in the worst possible case is pay back the principal and 0.077% interest.

Similarly, if you take the loan and then shut the business down, terminating everyone within eight weeks, all you must do is pay back the same amount as above, the principal and the 7.7 bips. This is a worst-case scenario. 

On the upside, if you do not close in the eight weeks following taking the loan and don’t otherwise cut headcount or payroll over that time, at the end of those 8 weeks, you simply send a request for forgiveness to the lender along with proof that headcount and payroll were maintained for that eight weeks.

The application is brief and key information can be found using the following links:

Program Overview 

https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp

Application 

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

Additional Details for Borrowers 

https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf

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How To Retain Top Talent During An Acquisition

Throughout and following any M&A transaction, the retention of key staff members is critical to the long-term success of the business. When the structure and culture of a company changes, it is not uncommon for employees to feel uneasy and tempted to explore their options. Companies that practice comprehensive retention efforts are more likely to retain the majority of their senior staff. By getting employees engaged early in the process, it can help mitigate communication problems and promote a more inclusive experience. Additionally, the likelihood that your key staff will remain with the business will aid in your company valuation.

Know Your VIPs

Every company has their most valuable players, and keeping them is crucial for the business’s success. Know who they are at every level of management and how the changes to the business will impact their roles. Consider what you can do to avoid redundancy and ensure that their talent and knowledge will still be in a position to be valued. The earlier you do this, the better. A merger or acquisition can turn everything in an organization upside down. Have your best people tasked with challenges and opportunities. Give them the chance to use their talents and be part of the process in a productive way that works for their individual success as well as the success of the company. Be sure that your assessment extends beyond your leadership team. Look at all levels of the company to see where hidden gems may find an opportunity to shine.

Build Trust Though Communication

Communication is always key to running a successful operation, but it is absolutely paramount during the M&A process. Mergers and acquisitions can make people feel insecure about their jobs. While you never want to reveal information too soon, you will benefit greatly from gaining your employees’ trust by communicating with them about what is happening now and down the road, and what their role in the process will be. Key employees need to understand that their jobs are safe. Share your goals, your strategies, your vision and how you plan to go about running the show moving forward. Talking to them will go a long way in creating and maintaining loyalty to your company. If employees sense that something is afoot and feel like secrets are being kept, they are more likely to feel betrayed and even hostile about the process. 

Think Beyond the Bonus

Retention bonuses for key talent are normal during M&A transactions. They are proven to be effective in the short term, but money does not necessarily make people feel inspired, engaged, or even secure. If someone is “checked out,” they are likely to leave for any amount of pay increase, however small. People who are truly invested in their careers want to be assured that the company is making good decisions, creating a strong culture, and working towards a goal they can support. While money talks, having talent feel enthusiastic about the future can be priceless—and contagious.

Avoid Culture Clash

When a business is acquired or merges with another, there is an inevitable convergence of cultures. Whether the convergence goes good or bad lies in the due diligence process. If you assess what you are dealing with ahead of time, you can anticipate how the cultures will meld. This includes having leadership and top talent working together through the evolution. They drive the culture and should be part of any changes to it. They will also play a critical role in the hiring of any new talent post M&A, and ensuring that the new hires will be conducive to the overall culture of the organization. If they feel empowered to be part of the future, it will go a long way in giving them a deeper understanding of the business and promoting its success in the future. 

Let’s Do This

Your award-winning M&A advisory team at Benchmark International is dedicated to fulfilling your goals as a business owner. Whether you are looking to buy, sell or grow a company, we have the experience, resources, and connections that give you the upper hand and make great things happen. We look forward to speaking with you soon.   

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What The Heck is M&A?

Mergers and acquisitions (M&A) involve the consolidation of ownership of companies through financial transactions. They serve as vital components of business strategies, allowing companies to innovate, evolve, and sometimes even survive. You may hear the terms "mergers" and "acquisitions" used interchangeably, but they are two fundamentally different types of transactions. Both processes are comprised of several phases, and both can take several months to years to complete. Some of the world’s largest and most successful companies grew to become what they are today through M&A activity.   

The motivations behind M&A deals can be:

  • Creation of synergy for lower cost of capital
  • Improved performance and accelerated growth
  • Achievement of economies of scale
  • Increased market share
  • Diversification of products
  • Expansion of geographic markets
  • Strategic realignment and technological advancement
  • Diversification of risk
  • The opportunity of an undervalued target
  • Tax advantages

Mergers

A merger occurs when two companies join forces to do business as a single new entity, combining ownership and operations. In these situations, the stock of both companies is surrendered and new company stock is issued in its place. Stockholders of both companies must approve the transaction and consolidation of the businesses creates a new entity. Mergers can be structured in various ways:

  • Horizontal Merger - The union of two companies in direct competition that share similar products or services and markets.
  • Vertical Merger - Occurs between either a customer and a company, or a supplier and company, with complementary offerings.
  • Congeneric or Concentric Merger - When two companies that serve the same consumer in different ways join forces as one company.
  • Market-Extension Merger - Joining of two companies that sell the same products but do so in different markets.
  • Product-Extension Merger - Takes place between two companies that sell different but related products in the same market.
  • Conglomerate Merger - The merger of two non-competing companies that have no shared or common business areas.

 

Ready to explore your exit and growth options?

 

Acquisitions

An acquisition occurs when one business purchases and takes over another one using cash, stock, or both, and establishes itself as the new owner. Once the buyer absorbs the business, the purchased company ceases to exist and their stock ceases to be traded. A simple acquisition often means that the acquirer obtains the majority stake in the purchased business and does not change its name or alter its legal structure. And sometimes a target company does not wish to be purchased. This is known as a hostile acquisition or takeover. In this situation, the acquiring company approaches the shareholders of the target company, bypassing the board of directors or executives. The target company may be acquired without the consent of upper management as long as the shareholders approve the transaction.

Management Acquisitions 

Also referred to as a management-led buyout (MBO), the executives of an organization partner with a financier to buy a controlling stake in another business, making it private. These types of deals are often financed with debt, and must be approved by shareholders.

Tender Offers

A tender offer is when one business goes straight to the other company's shareholders and offers to purchase the outstanding stock of the business at a specific price. It is common for tender offers to result in mergers.

Acquisition of Assets 

This occurs when one company acquires the assets of another company upon approval from its shareholders. This is common during bankruptcy proceedings, allowing for other businesses to bid on assets of the bankrupt firm, which is then liquidated upon the final transfer of assets.

Reverse Merger

There is also another acquisition type known as a reverse merger. This enables a private company with strong prospects to buy a publicly listed shell company with limited assets and without legitimate operations. Together they become a new public company with tradable shares.

Contact Us

M&A deals are some of the oldest and most reliable growth strategies in business. But they do require quite a bit of groundwork and complex valuation processes. In fact, it is not uncommon for M&A transactions to fail. If you are considering a merger or acquisition for your company, please reach out to our M&A advisory team at Benchmark International to get award-winning guidance and plan the next steps for your future and the growth of your company. We are experts at getting the most value for a business in a sale and we can help you decide if a merger or acquisition is right for you.

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5 Ways To Determine It's Time To Explore Your Company's Exit Options

As a business owner, you will someday reach the point when it is time to start thinking about your exit strategy. But how do you know when that point is? Below are five key questions you can ask yourself to help determine if you are ready to begin planning your exit.

1. How is the business performing?
Typically, a good time to sell your company is when it’s performing well and it has a bright future. This is when you can garner high valuations for the business and sell for more money. At the same time, a sale can also save a business that is struggling. You need to assess the health of your company, consider the state of the market for your sector, and decide if the time is right. Keep in mind that it takes time to sell a company, so you will want to factor the timing into your decision.

2. How invested are you?
As you already know, running a business takes hard work and dedication, which can sometimes lead to feelings of being burnt out. Ask yourself honestly how much of your passion is still there. Are you willing to continue to invest in the business? Are you still dedicated to helping it grow? Is your level of commitment what is needed for the best interest of the company, or are you beginning to feel checked out? Be pragmatic about the fact that sometimes a change in ownership can be just what the business needed to reach the next level. This might require checking your emotions at the door and embracing the idea that if you love something, you should set it free.

 

Ready to explore your exit and growth options?
3. What is your financial situation?
If you are planning to fully retire after your exit, you need to have the appropriate financial standing in order to either maintain your current lifestyle, live a little larger, or be prepared to scale back somewhat. Because the timing of a sale of a business is so important, you will want to consider how you can take advantage of the right timing to get the maximum value so that it makes for a more prosperous exit for you. Your financial standing is also important if you plan on investing in or starting another business. Do you have the means to do so? And how can selling your existing business contribute to your financial situation to make the next big thing possible? Again, this is where timing and maximum value are critical.

4. Are buyers already interested?
Some businesses are always in demand and may get approached by buyers even if the owner is not interested in selling. And sometimes your business can serve a specific need for an acquirer, such as a competitor, for example. Maybe you didn’t think you were ready to sell. But if people come sniffing around, it may be worth taking an acquisition into serious consideration. Businesses that demonstrate solid growth in recent years will sell faster and for more money. It might just be the right time and you had not realized it. Or maybe even a merger can be beneficial for both the company and your bottom line. Some transactions can be arranged so that you retain a stake in the business but do not need to be as hands on in the daily operation, giving you somewhat of a head start on your retirement without having to go all in when you are not quite ready.

5. Have you talked to an expert?
Are you struggling to answer some of these questions? Talking to an exit-planning expert like an M&A advisor can help you sort things out. Maybe you need help with growing your business, or you have no idea what your options are. Maybe you just need help with insights into the market for the timing of a sale. Reach out to the award-winning team at Benchmark International to start the conversation. Whether you just want to dip a toe in the retirement pool, or you’re ready to dive completely into a sale, we can offer you valuable and even eye-opening perspectives, along with compassion and understanding about how emotional the exit planning process can be.

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7 Quick Tips About Growing Your Business

1. Build the Right Team
Creating growth for your company is achieved by having certain goals, and meeting those goals starts with having the right team in place to get it done. Seek out self-starters and highly motivated people who are not afraid to pitch unique ideas or put in extra effort to make things happen. Positive attitudes are important—and contagious. When both your leadership and your staff share your goals and passion for the business, it increases your chances for growth.

2. Be Agile
You want your company to be able to adapt and change course quickly based on changes to the market. If you can extend your business model to meet current trends, you will find more opportunities for growth. The more flexible your business is, the faster you can test different approaches and ideas. Plus, you will be able to move on more quickly if something is not working.

3. Know the Data
The idea of analyzing data may sound boring, but data is knowledge and knowledge is power. Use a customer management system. Take a close look at both existing and potential customers to understand their behavior. How long does it take to convert customers? What causes them to leave? What do they love about you? What is getting their attention? What is your competition doing? The premise is quite simple: when you know what is working, you can do more of it. And you can stop wasting time and resources on what isn’t working.

4. Keep It Simple
It is proven that complexity hinders growth and performance in a business. Stay focused on what you do best and keep those processes streamlined for efficiency. If you are trying to do to many things, it makes it hard to be really good at any one thing. Coming up with ideas outside your area of expertise just to make a few extra bucks is more likely to cost you in the long run.

 

Ready to explore your exit and growth options?

 


5. Don’t Underestimate the Power of Marketing
You may have the most incredible product or service, but it doesn’t matter how great it is if people do not know about it. There are many great ideas out there that fail because of a lack of proper marketing support. And some ideas are mediocre but succeed thanks to effective marketing. Many make the mistake of viewing marketing as a nonessential expense. It is worth it to enlist the help of professionals, even if only on a small scale.

6. Continue to Improve
In an ever-changing world, you have to keep up with innovation to remain relevant. Challenge yourself and your team to constantly find ways to get better at every aspect of your business. Think about how you can improve customer relationships. Consider updating technologies to be more efficient. Look at processes to see how they can be done better. It doesn’t matter what it is…if you can do it better, then do it.

7. Form a Strategic Partnership
The right strategic partnership or merger can be a major game changer for the growth of your business because it can help you reach more customers quickly. It can also help to balance weaknesses and strengths. You should look for companies that are similar to your own, but can provide you with beneficial aspects that you may be lacking. Consulting an experienced mergers and acquisitions advisory firm can help you find the right businesses for you to consider.

Let’s Talk
At Benchmark International, our experienced team of analysts is ready to help you with effective strategies to grow your business or sell it for the highest value. Even if you’re not sure about selling at this time, starting the conversation can be beneficial to you in the long run.

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Key Steps For Successful Post-Merger Reorganization

Reorganization is an important part of a merger or acquisition integration process and should be done properly to ensure a shared vision and a smooth transition in the desired timeframe. Unfortunately, research shows that it is not uncommon for this process to take longer than expected because the integration plan was not appropriately focused on the culture, the people, the leadership, and the ultimate goals. Business leaders that employ a solid integration strategy during M&A are more likely to achieve their desired outcomes.

According to research:

  • A mere 16% of merger reorganizations fulfill their objectives in the planned time
  • 41% take longer than expected
  • In 10% of cases, the reorganization harms the newly-formed business

Create a Profit and Loss Statement

First, think about the benefits, costs, and timing of the reorganization. Costs will include employees, advisors, and consultants, but costs will also be incurred in the form of disruption to the business. The last thing you want is for the company’s performance to suffer and for key staff to leave. Setting detailed business targets for reorganization based on the length of the transaction process and its impacts can make a significant difference in the productivity and growth of the company.

Know Your Strengths and Weaknesses

The due diligence process of an M&A deal will reveal a great deal about the business’s strengths and weaknesses, but it is important to make sure no stone goes unturned. You can get a more complete picture by talking to current and former employees, and simply searching the Internet for third party research to see what anyone would read about you when looking up your company. Both internal and external perspectives are important. Armed with these insights, you can then create a plan regarding which areas need your focus based on whether it is a merger or a full buyout. In the case of a merger, both sides will need to have the same informed view of strengths and weaknesses in order to address any issues, streamline the process, reduce costs if necessary, and essentially improve performance.

 

Ready to explore your exit and growth options?

 

Create a Reorganization Team

Designate a team of representatives from various levels of management and departments to handle communication and ensure that the needs of each department are heard throughout the transition. This will help employees feel included, minimizing the risk of losing key talent. It will also help you avoid overlooking key details, will help to keep the process more orderly, and will help you address any issues quickly.

Evaluate Your Options

When creating a reorganization plan, consider all of the possibilities within both companies’ methodologies. Any solution is going to have pros and cons, so you will need to assess which alternative is best for your business and achieving your vision. In order to create synergy, you will need to examine both of the organizations’ structures, business processes, management, staff, culture, capabilities, technology, safety processes, and anything else that makes the day-to-day operations run. In a merger, you are ultimately faced with creating a shared culture, and this means ensuring that every aspect of the business is aligned to make this possible. People are people, and if they are not informed of a clear plan and their role in it, it is nearly guaranteed that it will lead to confusion. Figure out the best way to allocate tasks and processes by communicating with the new leadership team about all of the possible options and determining the best structure together.

Get the Previous Steps Right

You have worked so hard to build your business. Reorganization is complicated and you owe it to yourself, your stakeholders, and your staff to get the process right. Of course, you should anticipate hurdles to crop up along the way. Sometimes in M&A deals, certain information does not become available until late in the process. Nearing the end of a deal, you should reassess all the previous steps outlined above to verify that they are solid and decide if anything needs to be modified. This does not mean you need to turn everything on its head if you uncover an issue. By encouraging leadership to inform you of any snags in the new company and addressing them quickly, you can get ahead of major problems.

Enlist an M&A Expert

Please contact our world-class team at Benchmark International to discuss how the right merger or acquisition could benefit your business.

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2020 Global Outlook For The Marketing Sector

In a world of billions of connected smart devices, digital technology has essentially revolutionized the global marketing industry. From social media to content marketing, the market is massive and poised for continued growth.

The traditional ad agency model now includes a major focus on digital marketing, and digital marketing agencies continue to become more prevalent and provide a wider range of strategic services and specialized areas. And more and more companies outside of the advertising and marketing industry are also developing their own in-house digital marketing arms. 

In 2019, the global digital marketing market size was $300-310 billion. It is expected to grow to $360-380 billion in 2020.

On a global scale, the market size per region is:

  • $110-130 billion for North America
  • $120-130 billion for Asia Pacific
  • $48-52 billion for Europe
  • $6-10 billion for the Middle East/Asia

Online videos and mobile ad spending account for a large portion of the digital advertising space and continue to drive digital marketing spending, especially in Europe and North America. Digital out-of-home media is becoming more personalized and contextually relevant through targeted ad delivery, and location-aware and bandwidth-aware tech tools. And with the increasing emergence of 5G technology in 2020, phone streaming will reach incredible speeds and higher quality, opening up new possibilities for marketers. 

Content Marketing

2020 will be a big year for content marketing in several different forms. User-generated content will be in demand as the majority of consumers report that they find the opinion of users to be more influential than content promoted by the actual brand. This content includes anything from social media posts and blogs to web pages and testimonials.

Another huge component of content marketing is video content creation. More consumers are expecting to see video content from their favorite brands. Video also keeps audiences engaged for more time versus other types of content. Live streaming is also a growing trend, as consumers are reporting that they would prefer to watch live video than read a blog post.

 

Ready to explore your exit and growth options?

 

Social Media

Marketers are forecasted to spend $112 billion on social media advertising in 2020. 

Globally, North America continues to dominate ad spending in this digital marketing sector, with the retail industry as the leading ad spender in the United States. While search remains a preference of retail marketers, video, social media, and other display formats are growing in demand to increase brand visibility. Digital ad spending in the Asia Pacific region has surpassed that of Europe, with growth driven by China due to increasing investments on technology and digital platforms. The automobile, consumer goods, and telecom sectors are the leading marketing spenders in the country.

Print

Digital marketing has had a large impact on the commercial print side of the industry. This is causing service providers to offer more innovative value-added services such as data management and e-publishing. The demand for print services is largely driven by the retail, financial, publishing, and food and beverage sectors, especially for on-demand print materials, packaging, and other promotional materials. Additionally, increased digitalization and eco-friendly practices (such as using soy ink vs. petroleum-based ink) have lessened the printing industry's impact on the environment. Increased digitization will continue to result in more e-versions of print, such as annual reports and catalogs, and use of more online targeting channels such as email.

Direct Mail

The size of the global direct mail market is expected to reach $94–98 billion in 2020. The use of direct mail remains high in developed regions such as North America and Europe due to comprehensive customer database maintenance. At the same time, the increased use of e-mail and mobile marketing is lessening the demand for printed direct mail materials. In smaller markets that have lower Internet penetration, such as parts of Latin America and the Middle East, the direct mail sector remains strong with demand being driven by retail, travel, and real estate. To remain competitive, direct mail providers are offering e-mail marketing and other digital marketing services at lower prices.

Loyalty Programs

The global market for loyalty programs continues to grow due to increasing e-commerce, smartphone use, and online shopping customer behavior. The retail, financial, consumer, and food and beverage industries drive the demand for loyalty services, digital rewards programs, analytics, and business intel used for customization.

Mergers & Acquisitions

M&A activity regarding digital marketing and advertising agencies has high potential due to growth and high fragmentation within the industry. Traditional ad agencies and private equity firms target companies that offer solid growth opportunities. As digital advertising revenues increase, so does the global demand for more online content in an ever-connected world. Digital capabilities and relationships are a priority for traditional agencies and their holding companies as they have a need to grow their digital revenue and expand their portfolios.

Thinking About Selling?

At Benchmark International, our award-winning team of M&A experts would love to hear from you and discuss how we can help you grow your business or sell your company for maximum value. Feel free to contact us at your convenience.

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The Value Of An M&A Advisory Firm

When selling a lower to middle-market company, enlisting the guidance of an experienced mergers and acquisitions advisory firm can make a world of difference in the transaction’s outcome for several important reasons.

  • Having an M&A advisory firm act as an intermediary in a transaction increases the chances that a deal will be closed successfully. In fact, some buyers are willing to pay more for a business when an M&A firm is involved because they know there is a higher chance of closing.

According to a large study by the University of Alabama, private sellers receive between 6% and 25% higher acquisition premiums when they retain M&A advisors.

  • When you work with an M&A firm, it demonstrates to buyers that you are truly committed to the sale process and that your valuation expectations have been properly vetted. 
  • Having an M&A team in your corner will save you a great deal of time and effort regarding complicated tasks such as due diligence, company valuation, and data management. Even simple transactions require a burdensome amount of due diligence regarding real estate, software, employment, benefits, accounting and legal issues. There are also many standard pre-closing tasks that must be completed in a timely manner and can affect the success of a transaction.
  • M&A experts already know all the possible deal breakers and how to avoid them, giving you a major advantage in the market and protecting you from pitfalls.

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  • You will attract a greater number of serious buyers because you have access to the M&A firm’s global connections. And when you have drawn the interest of several buyers, you are more likely to get more for your company. If you sell your business on your own, experienced buyers know they can get away with offering you a lower price.
  • A truly effective M&A firm will use proprietary technologies and databases to review the market for matches regarding the size, industry and geography of your company.
  • Experienced M&A advisors know how to protect your confidentiality through the entire process. Confidentiality is critical because if information is leaked, it can not only derail a sale but also have a negative effect on crafting another potential deal.
  • A quality M&A team will have the capability to build a strong marketing strategy and create materials to attract suitable and quality acquirers for your company.
  • Another important task that an M&A firm will handle is third-party research. Buyers will immediately seek out negative information on a company that is on the market. A good M&A team will create a strategy to mitigate any potential negative impacts.
  • The right M&A advisory firm will take the time to fully understand your objectives and aspirations and will be committed to making sure that the process is tailored to your needs and that you find the right fit. They will also work to keep eager buyers at arm’s length when you need more time to make decisions, understanding that selling your company is an emotional task and you deserve support and empathy along the way.

Work With the Best

Reach out to our world-renowned M&A experts at Benchmark International to discuss how we can help your business achieve its ultimate sale potential. You can trust that our objectives are aligned with yours, and that we will provide you with the most amount of information possible while protecting you from making rushed decisions. Simply put, your best interests are our best interests.

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M&A In The Global Transportation and Logistics Industry

By investing in the transportation and logistics sector, global companies open up the opportunity to advance the flow of goods throughout the world. Businesses in this industry, both domestic and international, benefit from integrated supply chain networks that connect companies and consumers through multiple transportation modes within industry subsectors.

Industry Subsectors

  • Logistics services include the management of fleets, warehousing, order fulfillment, logistics networks, inventory, supply and demand, third-party logistics, and other support services.
  • Air and express delivery provide accelerated end-to-end package delivery services, as well as infrastructure for exporters. Growth in this subsector is greatly driven by the expansion of e-commerce.
  • Freight rail moves high volumes of heavy cargo and products long distances via rail network.  
  • Maritime includes carriers, ports, terminals, and labor involved in the transportation of cargo and passengers via water.  
  • Trucking  moves cargo over the road by motor vehicles over short and medium distances. 

The transportation and logistics industry is consistently a highly fragmented sector. This is largely due to the fact that most fleets are small and there are few barriers to entry when it comes to starting a small fleet. Another major factor is that larger carriers have difficulty retaining drivers and achieving organic growth. Owners are always looking to gain efficiencies, optimize routes and spread fixed costs across more operations. In order to do so, they must create greater scale. It is common in the transportation and logistics sector for acquisition strategies to revolve around broadening service offerings, branching out the customer base, and expanding geographical reach. 

 

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Economic and Industry Factors

Burgeoning economies drive demand in the transportation and logistics industry. More freight demand stems from strong consumer confidence and upward surges in manufacturing, resulting in more loads and vehicles on roads. When this climate is met with driver shortages, it increases transportation costs, which can reduce margins.  

The Impact of Amazon.com

Amazon has greatly raised global consumer expectations when it comes to rapid fulfillment. This demand has shifted distribution patterns, pushing companies to move warehouses closer to customers. Getting products to consumers faster increases the number of touch-points along the freight network.

Automation Technologies

The introduction and evolution of new technologies in the transportation and logistics industry are addressing over-the-road challenges such as driver shortages. Long-haul robotic trucks are being developed and tested. Driverless and remotely piloted deliveries are being incepted, such as aerial delivery drones. Experts expect it to be a very long period of time before these advancements face more mainstream use, but someday in the future, the possibilities they hold will be very real.

Data-Driven Tech

Artificial intelligence, the Internet of Things, data collection, machine learning, and blockchain are all being used within the transportation and logistics industry to gain major competitive insights and advantages, and therefore make better decisions that improve the performance of the company.

 

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Transportation and Logistics M&A

In the 21st century M&A market, transactions in the transportation and logistics industry are often driven by specific demographic, macroeconomic, and regulatory factors.

Sellers are motivated by:

  • The desire to take advantage of a strong overall M&A market
  • Volume limitations due to driver shortages, tight labor markets, aging drivers and increasing hiring costs
  • Aging ownership without a succession plan in place (usually companies with <$50 million in sales)
  • Unease about industry regulations around safety, driver hour limits and logging devices
  • The use of cross-border deals to counter negative impacts on operations, access new markets, and protect supply chains, as remaining agile in a globalized market is critical

Buyers are motivated by:

  • Leverage of economies of scale in order to maintain profitability
  • Capitalization on domestic economies with strong growth potential
  • The need to hire drivers while facing tight labor markets and rising hiring costs
  • Acquisition of smaller companies that expand service offerings
  • Use of various asset models to free up capital and invest in better equipment

A high level of activity in M&A in the transportation and logistics industry is contingent upon suitable timing in a growing economy, low interest rates, and widely available capital. It usually takes up to nine months to complete an M&A transaction, so timing and forward thinking should be considered when deciding to take your company to market.

Contact Us

Are you considering selling your company? Even if you are merely exploring the idea, our M&A specialists at Benchmark International can help you decide if and when a merger or acquisition may be right for you. We’ll work closely with you to ensure that you never have to compromise value or timing, and that you are only matched with the most suitable opportunities.

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Why You Should Spend More Time Thinking About Selling Your Company

Selling your company might be the farthest thing from your mind right now. But there are several reasons that thinking about selling now can make all the difference later, especially for lower and middle-market business owners. Proper exit planning can take years, so getting started increases your chances of selling for maximum value. It also puts you on the right track to fulfilling your aspirations and realizing your vision for the future.

1. Start Making Your Business More Valuable

Whether you want to sell this year or five years from now, you will need to take every step necessary to drive up your company valuation prior to a sale. An endeavor this important is not going to be accomplished overnight. Consider what you can do to improve the business and make it more attractive to buyers. Implement a well-defined strategy to create growth and improve profitability. Hone your marketing plan. Think about how you can make the company more efficient. An experienced M&A advisor can help you craft the right tactics to accomplish all of these goals and get your exit plan moving in the right direction.     

2. Know Your Number

Part of a smart exit plan includes knowing what your business is actually worth and at what price you will be comfortable selling it. This means you will need to know how your company stacks up in the current market in your industry and what the market conditions are expected to be in the next several years based on expert M&A knowledge and analysis.

3. Know Your Buyer

Not all buyers are the same. They can be financial, strategic, or even internal. If you take the time to figure out the right kind of investor for your company, you can spend your time and energy taking the steps to maximize the business’s value based on that type of buyer. For a financial buyer, you will need to focus on cash flow, revenues, and management. For a strategic buyer, you will want to concentrate on profits, innovation, market share, and brand strength. Finally, an internal buyer will look for things such as strong financials and balance sheets, a positive culture, and product diversity. An experienced M&A advisory firm can help you identify the right buyer for you, and give you exclusive access to prospective buyers that you will not find on your own.

 

Ready to explore your exit and growth options?

 

4. Get Your Records in Order

When the time comes to put your company on the market, you are going to need to have all of the proper documentation organized and accounted for. This includes all of the financial documentation, tax records, profit and loss statements, legal contracts and client records from the past few years. Buyers tend to place more value on businesses that can provide comprehensive records that paint the most accurate picture of the company’s health and future potential. You will want to be honest in this process. Do not try to fudge the numbers or hide issues. The buyer’s due diligence team is going to uncover anything that you attempt to cover up, which can lower the purchase price. Disclose the truth from the beginning and you’ll be in a better position to overcome any challenges, plus, the buyer will be more confident in acquiring your business.  

5. Keep Your Eye on the Business

Running a company is already a massive responsibility, and the process of selling a company is a significant undertaking all of its own. You need to remain focused on your daily operations without being so distracted by a sale that it has a negative impact on the business. Enlisting the help of M&A deal professionals to handle the sale can take the pressure off of you and keep your business on course. Remember, the process can take several years, and that is quite a bit of time for you to be unnecessarily preoccupied, putting the health of your company at stake. 

6. Have a Plan

You have worked so hard to build your business and you have earned the right to dream about your future. To get there, you have to ask yourself the right questions. Are you ready to retire? What is your target retirement age? Do you want to purchase or get involved with another business? What level of lifestyle will you need to maintain? Will someone in your family be taking the reins? Do you want to retain a small level of involvement? If you know what you expect from your future, you will be less likely to get cold feet at selling time. It’s also important that you appear confident about a sale so that buyers do not feel that you cannot be taken seriously. Knowing your vision for the future is a critical step in making your dreams a reality. As Warren Buffet once said, “Someone is sitting in the shade today because someone planted a tree a long time ago.”

Let’s Discuss Your Options

If you are thinking about selling your company, now is the time to start considering your options regarding timing, exit planning, and market value. Contact our M&A geniuses and let Benchmark International help you map out a future that is in the best interest of you, your family, and your company.

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10 Things About Buying A Business You May Have Not Known

1. It’s Easier Than You Think
When acquiring a business nowadays, many think of this as a very strenuous and long-term process. Though it is a large investment of time and money, if you already run a successful small business, there are plenty of transferable skills.

2. Synergy Is Key
The growth of a business through acquisition is statistically faster, cheaper, and less risky than the other methods of expansion. It is of the utmost importance to ensure that the synergy is there, and when companies are choosing to acquire or merge, the desire is for the sum to be greater than its individual parts.

3. An Acquisition Can Expedite Growth In Your Current Business
Once an acquisition is done, you immediately have access to a multiplicity of new (to you) assets and employees. Many challenges come along with combining two businesses, but this can give your current company the ability to expand to new areas and cross-sell services to existing and newly acquired customers.

4. Understanding The Value Of The Employees And Management On-Hand
Many deals come with a staff who has vast knowledge about the company and the day-to-day functions of the business. It is important to get to know the staff and ensure they have the same intentions as you for the business and the direction it is trying to take.

5. The Current Owner Is Likely To Stay In The Picture
Though many of our clients are looking to retire, it is never as simple as handing the keys over. The owner built this business, and they know the ins and outs of the company. Usually, the owner signs a contract with the buyer to stay on for a required amount of time to help the new owners/managers learn the entire process. This also gives comfort to the buyer and customers about the change of ownership.

6. Cultural Fit
Selling a business can be a very emotional process for a seller. The company is their baby, and they want to ensure the success of the company and the continued employment of the employees. Commonly, money may not be the primary motivation of a seller. They are concerned with bringing in the right fit, expanding the company, and keeping true to its roots. A good buyer would acknowledge the importance of culture and seek to maintain the culture that was created and fostered by the previous owner.

7. Businesses Can Be Relocatable
When acquiring a business, buyers are concerned with the real estate associated with the company. Many believe that some companies should be relocated for better success geographically, or to a space that has more room for development. Most businesses can do so, which buyers may be unaware of, and most sellers will entertain the idea of selling the real estate, leasing it back, or allow the buyer to break the lease altogether.

8. Funding Options
It’s often easier to fund an existing business than a startup since it already has a track record. Banks tend to offer more loan types for individuals than for established businesses. Right now, banks are lending aggressively and looking to deploy capital due to interest rates being low.

9. Time Is Of The Essence
Due Diligence is a time consuming and arduous process, so it is key to operate with a sense of urgency. Doing so inspires confidence in the seller and helps maintain excitement on both sides for the eventual transaction. Failing to maintain a sense of urgency and stick within the prescribed timeline could result in deal fatigue, a delayed closing, or even the deal coming unraveled altogether. It’s imperative to move as swiftly as possible during due diligence.

10. Using An Intermediary
The process itself is easy, but selling a business takes time and effort that business owners do not always have the time for or knowledge on. Bringing on an investment banker or business broker/intermediary can help with finding financially capable prospects, negotiating the deal, and get the deal closed without anyone finding out until the deal is done.

 

Author
Jack Chilcutt
Deal Analyst
Benchmark International

T: +1 615 924 8950
E: Jchilcutt@BenchmarkIntl.com

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Tips For Transitioning A Company's Leadership

One of the keys to creating value in lower to middle market mergers and acquisitions is the plan for successfully transitioning the leadership of the company. Maximizing value hinges largely upon a solid succession plan that empowers the new CEO to take the reigns, maintain stability, and lead the business into the future.

Finding the right person to assume leadership is important to the company in several capacities, but there are reasons that it will be personal to you as a business owner who cares greatly about the company you have worked so hard to build. The new CEO should actually care about the company and its employees. They should have a proven track record at getting things accomplished versus a history of being asleep at the wheel. And they should leave you with a high degree of confidence that they are going to do the right thing so that you are not left worrying about the fate of the company and whether you made the right call.

As a founding CEO planning your exit, there are some best practices you can follow in your process to find the right candidate and make a seamless transition in leadership and avoid a succession gone wrong.

Consider Structure and Timing
Initially, there are three important factors to determine the circumstances for the incoming CEO. Are they from inside or outside the company? Will they assume the role immediately or work alongside you for a period of time? And will you maintain a presence in the company as chairman or as an advisor? The answers to these questions will affect the transition process.

Get an Executive Search Expert
Do not underestimate the importance of enlisting the help of a quality external executive search professional. They should have proven experience that gives you the confidence that they will identify a replacement that's in the best interest of the company. They should be able to provide certain insights, find candidates that may not be currently known in the market, and prevent the costs associated with the wrong hire. An executive search firm can also save you time, take the burden off of your HR team, and ensure confidentiality through the process.

 

Ready to explore your exit and growth options?



Consider What They Face
Think about the new CEO's first year and what it may hold from a political and cultural perspective, such as a recession. Could there be problematic circumstances that will make it difficult to make leadership decisions and are they equipped to handle them adeptly based on their experience?

Meet Face-to-Face Onsite
An important part of building trust and bolstering success is having the candidate come to the company's headquarters to meet with you and get an in-person understanding of the business and its culture from your perspective and in your own words.

Foster Relationships
The vetting process can benefit from the candidate's development of relationships with the management team to enable shared experiences. A quality candidate is going to value this effort in establishing trust.

If the new CEO is someone from within the company, think about how they will assume their new role and the responsibilities that come with it. Consider the fact that they are now going to be the leader among their former peers. How will they handle this change and how will it impact their relationships?

Look for the Obvious
You surely want a new CEO with whom you have a good relationship, but the most important relationship will be between them and the management team and the employees. So their personality is going to be a big factor in their ability to succeed. How are they under pressure? What is their vision for the future? Are they comfortable with change? Are they motivated to create growth? Are their values aligned with yours? What about their ego? A candidate may look exceptional on paper and have incredible qualifications, but if he or she does not possess the right people skills for your company's culture, it should be a deal breaker.

Are You Planning Your Exit?
If you think it's time to make a move in the best interest of your company, feel free to reach out to our M&A experts at Benchmark International at any time. Our impressive strategies can be the game-changer you are seeking for your future success.

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M&A In The Ride Services And Autonomous Vehicle Industries

Two of the most transformative factors in the world of automotive and technological development have been the advent of ride-hailing platforms and autonomous vehicles. They each create various mergers and acquisitions opportunities both individually and in concert with each other in various capacities on a global scale.

Ride Service Companies

Ride services—also known as ride hailing and ride sharing—will continue to create opportunities for M&A in decades to come as their popularity around the world continues to increase. Uber, DiDi Chuxing, Gett, Grab, and Lyft are some of the leading firms in the market. As more companies emerge, the market becomes more and more fragmented. The right M&A transactions can help companies increase market share and improve service quality.

It can be relatively inexpensive to start up a ride-hailing company. After all, they depend on contract labor that does not rely on special skills or loyalty, and are powered by free mobile apps that easily bring their service to the public’s fingertips. While this makes it easy for more smaller firms to enter the space, it also creates ripe opportunity for M&A activity in an incredibly competitive industry that has been predicted to one day be dominated by only a couple of major players.

The ride hailing sector is not unlike other transportation industries, as it is subject to strict laws and regulations that can make M&A challenging, meaning that deals in this space require added due diligence.

 

Ready to explore your exit and growth options?

 

Autonomous Vehicles

A strong investment climate lies in the sector of autonomous or self-driving vehicles. Traditional auto manufacturers are investing billions of dollars and stepping up efforts to try to catch up with advancements already pioneered by the big tech companies. It is both faster and easier to acquire existing technologies than to try to reinvent the self-driving wheel. While they retain the advantage of being capable of the mass production of vehicles, it is expansion of their capabilities that is a major driver of M&A.

Companies at every level of involvement in the auto industry need to adapt their strategies, from manufacturers to suppliers to retailers. M&A is a necessary strategy for all existing industry players to maintain any foothold as newer digital companies transform the space. This includes rethinking business models and emphasizing innovation to establish themselves as a leader in the future.

Autonomous vehicles also present the possibility of major ramifications for other industries.

  • Law enforcement: With self-driving cars programmed to obey traffic laws, fewer police resources may be needed on roads and less local revenue could be earned from citations.
  • Insurance: With fewer accidents come fewer insurance claims, reducing the cost of insurance premiums.
  • Healthcare: Ideally, fewer traffic accidents can reduce reliance on emergency services.
  • Air & rail: Using autonomous vehicles for long-distance travel can mean fewer passengers on airplanes and trains.
  • Advertising: Withdrivers turned into passengers, their attention can be shifted from audio to visual, and advertising could be targeted by location.

Many companies around the world have demonstrated enthusiasm over the prospect of disrupting public transportation as we know it, and have been eager to invest in companies that are focused on bringing autonomous vehicles into this realm. This includes robotic taxis, driverless shuttles, electric car ride services, and taxis that are not equipped with steering wheels or pedals.

Countries leading the way in the development of autonomous driving technology include Norway, Singapore, the United States, Germany and Israel. 

Many challenges exist before the proliferation of autonomous vehicles on roads everywhere is a real possibility. While careful planning and programming goes into the technology that makes these vehicles both operational and safe, there are unexpected scenarios that are not easy to predict or take into account. These situations include other drivers’ errors such as going the wrong direction or making illegal maneuvers that can confuse the technology that a self-driving car relies upon. Essentially, the radar and high-resolution cameras in autonomous vehicles are able to detect and identify objects (such as a bicycle or pedestrian), but it cannot predict what those objects might do next.

These types of uncertainties, along with the strict regulatory environments surrounding self-driving vehicles, can also make the M&A market in this sector more complicated to navigate. It is prudent to consult with M&A experts regarding the opportunities in this area.

Contact Us

How can Benchmark International help you realize your dreams for your business? Give us a call and set up a meeting with one of our M&A experts. Whether you are looking to sell, grow, or formulate an exit plan, we are committed to helping you achieve what is best for you and your company.   

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4 Reasons Why the UK has Deal Appeal

Political uncertainty in the UK has been a hot topic for the last year, particularly due to Brexit delays. This has had an impact on dealmaking throughout Europe in 2019, however, as we enter into 2020, greater optimism is expected with regards to deal activity.

Ready to explore your exit and growth options?

So, what are the reasons for this positive outlook, and what are the reasons for the UK’s deal appeal?

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2020 Outlook For The Global Energy Sector

The global energy mix is comprised of the oil, liquefied natural gas (LNG), coal, renewable energy, and electricity sectors. The landscape of this industry has seen a great deal of change over the years, and is primed for even more change in the future. Five years ago, fossil fuels accounted for 82 percent of global primary energy. This number is targeted to decline, with large growth in the natural gas and renewable energy sectors, especially wind and solar. However, a rising global population and economic growth make it challenging for renewables to keep up with demand, meaning that fossil fuels will remain a primary source as energy demand will rise one percent each year over the next 20 years.

Oil & Gas

Oil output is projected to remain on the rise in the next 10 years, with 85 percent of the production increase coming from the United States. At the same time, oil demand is expected to slow after 2025 due to better fuel efficiency and more electric vehicles, according to a report by the International Energy Agency (IEA).

In 2020, shale production in the U.S. is expected to continue to grow even as growth is slowing due to reduced capital expenditures from drillers. Additionally, exports of U.S oil and LNG are forecasted to grow as infrastructure capacity increases.

As the number of U.S. oil and gas companies in distress grows amid limited funding options, there is an opportunity for smaller firms to be acquired by bigger firms, or for them to merge in order to scale operations and reduce costs. M&A strategies may be more appealing to these companies than the option of restructuring through bankruptcy.

Oil and gas prices should remain range-bound this year as production increases from non-OPEC nations such as the U.S., Brazil, and Norway.

Internationally, oil markets will be affected by the ongoing trade negotiations between the U.S. and China, as well as the result of the March expiration of the OPEC+ pledge between OPEC and non-OPEC partners for deeper production cuts.

 

Ready to explore your exit and growth options?

 

Coal

The coal industry continues to experience challenges, including declining demand, bankruptcies, climate concerns, ownership changes, and mine closures. Coal production in the U.S. is expected to decline, along with the amount of energy production that relies on coal, which is at its lowest level in more than 40 years. In contrast to the struggling coal industry, increased growth is forecasted in the renewable energy sector. According to the IEA, market share for coal will fall from 38 percent today to 25 percent in 2040, largely due to a surge in more affordable solar power.

Renewable Energy

The outlook for the renewable energy industry in 2020 is quite favorable. The sector has already seen unprecedented growth propelled by increased demand, competitive costs, innovation, and the uniting of industry forces. Renewables are likely to become a preferred provider in electricity markets this year, as customers are more concerned with saving money and addressing climate change issues. Last year, renewable energy eclipsed coal for the first time ever in the United States, with wind and solar energy accounting for about half of renewable power generation. Companies that are poised to innovate and jump on new opportunities will be in a position to thrive in this new growth phase.

Some key points regarding this sector include the following:

  • China has been the largest investor in renewable energy capacity, committing $758 billion over the past decade. The U.S. follows at $356 billion, with Japan third at $202 billion.
  • Lower prices for renewable sources and battery storage have helped to drive growth in this industry, making wind and solar more competitive with traditional energy sources.
  • Several utility companies have already outlined goals for de-carbonization and more are expected to follow suit.
  • Renewable energy will need to be scaled up significantly in order to meet the goals outlined in the Paris Agreement.
  • In 2019, 11 of the 28 countries in the European Union already met their 2020 renewable energy targets, but there has been a gradual slowing of the rate of renewable use because costs have fallen and less investment is needed to install the same level of power capacity.
  • Grid modernization projects will also contribute to growth, as renewable microgrids are becoming more popular solutions for increased efficiency.
  • In the U.S., the Production Tax Credit has been extended for 2020. However, the amount of the Solar Investment Tax Credit will be reduced from 30 percent to 26 percent. Both of these credits have been important drivers of growth in this market.

 Electricity

Power and utility companies will face several priorities and challenges in 2020, but with a balance of careful strategic planning, digital innovation, and risk management, the industry can sustain growth throughout the year.

  • Clean energy remains a major priority, as many power and utility companies are setting their own clean energy goals to help customers make the transition.
  • Cyber security is an increasing concern, with vulnerabilities being a clear and present danger.
  • Preparation and response for natural disasters will be more significant as major storms have become more common around the world.
  • Providers will continue to be more focused on improving the customer experience.

Let’s Discuss Your Options

Please contact us at Benchmark International to talk about how we can help you grow your business or formulate a solid exit plan for the future, no matter what industry in which your company operates. We look forward to hearing from you.

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2020 Global Outlook For The Media Industry

The New Media World

The media industry has undergone several major transformations in the Internet age. Magazines and newspapers have been disrupted by digital publications. News consumption has been significantly altered by the existence of social media. Broadcast radio is now challenged by satellite radio, podcasting, and both free and fee-based music-streaming services. Television continues to undergo sweeping changes that come with more and more people cutting the cord, smart TVs, and the inundation of subscription streaming platforms on a variety of scales. And all of these sector trends affect how advertising dollars are being spent and how audiences are being targeted. 2020 proves to be no different, as these trends will continue to reshape the industry.

Streaming Wars

Companies and TV networks are faced with the task of inventing new offerings for delivering content in ways that facilitate direct relationships with consumers. New bundling and tiered options will be more in demand as viewers grow frustrated with having to manage various streaming options amid a crowded sea of subscription services that go beyond Netflix and Amazon Prime. Individual TV networks are offering their own on-demand services (such as HBO Now), and big industry players are getting in the game with their own digital networks such as Disney+. And the availability of tiered streaming platforms such as BritBox and Sling TV continues to grow. The major streaming networks will be faced with how to leverage an influx of competition. These options will also need to address how advertising is delivered regarding ad-free options and ad-supported video.

Podcast Popularity

There are currently more than 700,000 active podcasts, and research shows that the consumer appetite for podcasts continues to thrive. Podcasts are going to be seen as a new vehicle for content and will garner more advertising money, with predictions that the spending amount will surpass $1 billion by the end of 2020.

 

Ready to explore your exit and growth options?

 

For the Love of Data

As media companies compete for more audiences, data will become more imperative to achieving the goals of these companies. This means that the data platforms used by media companies and advertising agencies are going to become paramount. The gathering and processing of the third-party data needed to create more meaningful and personalized experiences and services for consumers will be essential to the ability to remain competitive.

User-Generated Content

In today’s social-media-driven world, users are able to generate their own content through various mobile applications such as SnapChat and TikTok. As more of these types of platforms emerge, larger parent companies (such as the Facebooks and Googles of the world) may be inclined to acquire them to diversify their offerings and expand their user bases.

M&A Opportunity

As media companies continue to need more diverse content and content delivery options, it creates significant opportunities for mergers and acquisitions. This M&A activity is expected to be on smaller scales than the megadeals that occurred in the last couple of years. This is because there are fewer opportunities for the major networks to consolidate, especially as there is a growing over-supply of third-party streaming applications and the content rights are being withdrawn. 

Contact Us

If you think that it is time to sell or grow your company, or even start your exit planning strategy, please reach out to our experts at Benchmark International. We look forward to taking your future to the next level.

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Why 2020 Is The Right Time To Transition A Business

When determining the best time to sell or exit a company, unfortunately nobody has a crystal ball. However, there are several circumstances that should be considered, from fundamental business positions to external influential factors.

The state of the M&A market is among the most significant factors in a decision to sell a business. The market held steady from 2015 to 2017, and optimism skyrocketed in 2018. In 2019, the market dipped slightly but remained strong in deal volume and value, with a wave of multi-billion-dollar megadeals being completed.

While some expect a modest drop in global M&A value in 2020 due to what is perceived as inevitable economic correction after a lengthy, seemingly unstoppable up-cycle, many experts predict that little change is expected due to sustained economic growth, low unemployment, low inflation, high consumer confidence, and strong corporate earnings. Companies still have a need to diversify their portfolios, acquire talent, and innovate technologies in order to stay competitive—all needs that are best addressed through M&A. Also, plenty of capital is available and private equity has amassed the dry powder that can drive larger deals, even in the event of an economic downturn.

Additionally, there is potential for more aggressive M&A strategies earlier in the year to get ahead of a potential downturn and downgrade in valuations. Companies that have proven to perform well during times of recession may be especially appealing targets.

The 2020 U.S. Election

Regarding a potential downturn, one of the major factors that play into the state of this year’s M&A market is the upcoming November 2020 presidential election in the United States and the issue of impeachment of the current president. History indicates that economies typically perform well in election years. However, as uncertainty looms contingent upon the results of the election when it comes to topics such as trade and regulation, acquirers may become hesitant and the M&A market could lose momentum leading up to November, with the market remaining slow in the months following, depending on the election results.

Another matter affected by the election results is capital gains taxes, which is a matter of concern if you are selling a company because how much profit you yield from the sale will be taxable. Some presidential candidates are proposing higher taxation of the highest-income taxpayers’ accrued wealth and income, and this includes capital gains. Most candidates’ plans would tax capital gains at ordinary income rates, with just the very top marginal tax rates varying at incomes of more than $488,850.

The closer the election nears, the more every single day counts. If you hope to sell, the sooner you initiate the process, the better, as most M&A deals take several months.

Ready to explore your exit and growth options?

Brexit

As of January 31, 2020, the United Kingdom is officially no longer part of the European Union, but a second round of negotiations will continue with the goal of reaching a deal by the end of 2020. With lessened political uncertainty now that an initial Brexit deal has been made, there is heightened confidence in deal-making activity. The inability to make a second deal by the end of the year will mean higher costs and barriers to trade.

The Brexit situation is affecting changes to M&A strategies. M&A could be used to secure an operational presence in the EU to maintain access to European markets. M&A could also facilitate access to markets outside the EU. Additionally, some companies could be facing new pressures that can directly impact share prices.  

The Boomer Retirement Wave

While it seems as though we have been talking about it for years, the Baby Boomer generation remains a factor in 2020.

According To Pew Research Center population data, 10,000 Baby Boomers will turn 65 on each day of this year.

In the U.S. alone, Baby Boomers own 2.34 million small businesses, and employ more than 25 million people. This aging ownership pool points to a flood of M&A activity in the lower and middle markets this year, especially in certain sectors such as those that offer professional services.

As this population retires, there will be an increased need for consolidation, succession planning, and exit planning. If Boomers do not properly plan for these scenarios, it could result in an economic crisis that in turn affects millions of jobs. Also, most of these business owners have the majority of their net worth tied up in their company. This means that if the company should lose value, so does the owner’s ability to retire.

The unfortunate reality is that the majority (75%) of owners of small to mid-sized businesses choose to procrastinate and do not have a plan in place. If you are a part of this generation, you should most certainly already have your plans for the future underway. Even if you are not a Boomer and are considering selling, this is the time to get ahead of the massive wave of businesses that are expected to hit the market this year.    

Are You Ready to Sell?

If you are considering selling your business, we encourage you to enlist the expert M&A guidance of Benchmark International’s team to create your growth strategy, exit strategy, or company sale for maximum value. The time to start planning is now.

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