Cross-border mergers and acquisitions offer key geographical diversification benefits for buyers and businesses alike. Gaining new exposure in new regions can lower business and operational risks under different economic and regulatory conditions. Buyers often look for cross-border deals when their core markets become saturated, when business slows down, or if they can find regulatory or monetary benefits in another country. Cross-border deals are important because they allow companies to expand their offerings by entering new markets or adding new products, services, intellectual property, or technologies. Cross-border M&A can bolster revenue opportunities and cost synergies while scaling efficiency as company operations expand to a broader market.

In most businesses, books are kept on one of two typical bases: cash or accrual. Some business owners choose one or the other for a specific reason. Others work under the guidance of their CFO, bookkeeper, controller, tax advisor, accountant, or other financial specialists of choice and review the resulting reports to measure operations. However, the two bases of accounting have major differences and can significantly impact the perceived performance of a business. For example, if you've been grappling with the potential sale of a business, most acquirers prefer books on an accrual basis. There are many reasons for this, but the primary reasoning is that accrual basis financial statements follow Generally Accepted Accounting Principles (GAAP), whereas the cash basis financial statements do not. However, both bases have their merits depending on the type and function of the business.

2023 holds a positive outlook for middle-market business valuations. Results of the survey, 2023 M&A Outlook from Citizens M&A Advisory show good signs for company performance and high motivation for growth this year. The annual survey polls 400 leaders of US middle-market companies with $50 million to $1 billion in revenue and private equity firms actively buying and selling companies in the same revenue range.

If you are a business owner and want to keep up with all the latest business, finance, and M&A news and insights, these ten sites are a must-add to the bookmarks in your browser, or a follow on social media.

1 – Working Capital is Not Cash!

First and foremost, let’s be clear what working capital is not, it’s not cash! In fact, all things being equal, when working capital goes up, cash goes down, and vice versa.  You'll often hear the expression, "the business needs to fund working capital for growth", when what is actually meant is that the business needs extra cash to finance the increase in working capital that accompanies growth. Businesses that try to grow without sufficient working capital are said to be 'over-trading'. 

In most businesses, the basic components of working capital are stock, plus trade debtors, minus trade creditors. This working capital will have built up over time as the business has grown and, generally speaking, the longer a business has been trading, the more complex the components of working capital will have become. To explain this, we can consider a company that starts trading on Day One, wholly in cash and without holding any stock. After its first year of trading, all profits will be in the form of cash, so its balance sheet will be 100% cash, and there will be no working capital – i.e., no stock, debtors, or creditors. However, as the business starts to give credit to its customers (that become trade debtors), take credit from its suppliers (that become trade creditors), and invest in the stock, the constitution of the balance sheet will change such that its assets are cash, trade debtors and stock, and its liabilities are its trade creditors.

With discussions of a recession looming, business owners may display concerns about the timing of going to market to sell, asserting that the economic downturn will not be beneficial if they were to go to market. In fact, acquisition opportunities present a significant value creation prospect for private equity groups, which tend to increase mergers and acquisitions during a recession for various reasons.

Several important factors play into the deal-making process if you are a business owner considering a merger and acquisition for your lower- to middle-market company. Timing is often one of these factors.

The flagship of The Small Business Administration's programs to support small businesses is the SBA 7(a) loan guaranty program. The program was designed to encourage lenders to provide loans to borrowers that might not otherwise obtain financing on reasonable terms and conditions. Under this program, the SBA will guarantee 75% for loans greater than $150,000 with a maximum loan amount of $5 million with reasonable interest rates. This is a viable option for the average person looking to acquire their first business or an existing business looking to grow through acquisition. This loan is so popular that in 2021, the SBA approved 51,856 7(a) loans totaling $36.5 billion.

If you have ever taken a family road trip, you understand the necessity of planning in advance. Navigation systems and GPS have made it easier, but advanced planning will make the journey more enjoyable. The most important decision is what is the intended destination. Once that is determined, there are a whole series of decisions that must be made, either in advance or along the way, to reach that ultimate vacation spot. The questions include which car we should drive, what roads we should take, how fast we can drive, whether we should pack a cooler or eat at restaurants along the way, what our budget is, and where we will stay.

Benchmark International was awarded Logistics Deal of the Year for the sale of X Caliber Container, LLC, to LongWater Opportunities at this year’s M&A Atlas Awards from the Global M&A Network.

Benchmark International was recognized by the Global M&A Network for its role in arranging and brokering the sale of KGM, an Oklahoma-based natural gas infrastructure distributor, to St. Louis-based private equity firm Compass Group Equity Partners. The coveted "Private Equity Deal of the Year for the Americas" was awarded at this month's 14th Annual M&A Americas Atlas Awards at Manhattan's Metropolitan Club.  

Benchmark International was honored with several M&A Atlas Awards by the Global M&A Network, including:

Benchmark International is pleased to announce the transaction between Gem Drugs, Inc. and Vital Care Infusion Services. The reason for targeting was strategic expansion.

Benchmark International is pleased to announce the successful facilitation of the strategic growth partnership between INVISION Architecture Ltd and The HFW Companies.

The majority of sellers within the lower middle market only go through the sale process once in their lifetimes. Sellers often hire an M&A expert to help guide them through the sale process and advocate on their behalf. While M&A experts have a wealth of experience, they do not have a crystal ball.

Benchmark International successfully facilitated the transaction between Flowstate Branding and Decision Sciences Research Associates.

Before completing a deal, buyers may conduct a variety of different research on a seller’s business to better understand its complexities of it prior to due diligence. This research is an important step to ensuring that due diligence is carried out. Business research occurs in a variety of different ways.

In 2021 and early 2022, we saw record-breaking levels of M&A activity in the United States and around the world, and many business owners are wondering how long this cycle
will last.

One of our Managing Partners at Benchmark International drafted an exclusive publication detailing many of the attributes that are unique to strategic buyers and how those attributes can impact   business owners in the sale of their business. 

Introduction

There has been significant growth in the number of Employee Ownership Trusts (EOTs) in recent years, and in this article I explore some of the differences between shareholders selling to a trade buyer and selling to a trust set up for this purpose.

What is Net Working Capital?

Introduction

Working capital also called net working capital, measures a company's financial security. According to Jensen and Meckling, authors of the new famous Theory of the Firm (1976), the components of working capital measure the firm's shareholder value. Working capital helps evaluate a company's short-term health, liquidity, and ability to invest and grow its operations. Working capital is defined as current assets less current liabilities. Current assets often include cash, accounts receivable, customer unpaid bills, and inventory, with current liabilities encompassing accounts payable and short-term debts, to name a few.

When it comes to selling your business, and you are considering waiting or pausing, there are several factors to consider, such as market conditions and interest rates. But there is also something called the denominator effect.  

Many individuals at large institutions that trade in the public markets are turning to private ownership and pursuing majority equity positions in lower middle-market companies and even creating their own funds. This public-to-private trend is partially being driven by current and expected public market volatility over the next few years, combined with individual business circumstances, all with the expectation for a brighter future. The recent stock market instability is presenting attractive opportunities for companies that may perform better in the private market. Private equity and private investors have ample capital available to them at a time when public market valuations are sinking. The interest is coming from both private equity funds and strategies, as private markets are gaining ground on public markets. Take-privates are on pace for the second year in a row at $100 billion or more in deal value. That is a first for the industry in more than a decade.

How will running a competitive bid process help me?

The lower middle market remains very active, and we anticipate that this trend will continue for the foreseeable future. If you are a business owner, you have probably received unsolicited interest and perhaps even offers for your business. There is a lot of money chasing few deals, so buyers are looking to find off-market deals to build their pipeline and purchase a business below market value to boost their investors’ returns. Having additional buyers at the table tends only to benefit the seller.

When a buyer uncovers an off-market deal, they are often in a better position to buy the business at a discounted price than what they would pay in a formal auction or open bid process. Buyers seek acquisitions to help solve a problem or hit an ROI benchmark. If the buyer can purchase a business below market, then the buyer ends up winning both in the current transaction and future transactions. The business owner is the one who tends to have seller’s remorse. Our team commonly speaks with buyers who will not participate in auction processes because they do not want to pay top dollar, and those buyers know that they are not willing to do what it takes to win the bid.

If you have ever watched an episode of Shark Tank when all the sharks are bidding on an opportunity, you have seen how a competitive bid process can benefit the company pitching to the sharks. When Lori Greiner, Barbara Coroan, Robert Herjavec, Daymond John, Kevin O'Leary, or Mark Cuban share an interest in an opportunity, it often piques the interest of another shark who wants to jump in and try to win the bid. Sometimes, the sharks even go into the deal together. This process also happens for deals within the lower middle market. When two buyers go into a deal together, they are called co-investments. In this case, two can be better than one. However, you will not know if co-investments are an option until you go to market and run a process.

When a seller receives an offer from an unsolicited party, the offer only reflects one party’s view of the value of the business. Businesses are comprised of both tangible and intangible assets. That is, the value of the business lies not only in its tangible assets like machines and inventory but, perhaps more importantly, in the quality of its people, process, customer base, and intellectual property. Acquirers buy businesses for many reasons, including for geographic expansion, product line development, talent acquisition, and competitive advantages, to name a few. Why is a business worth 5x to one buyer but 7x to another? A business's real value is the opportunities an acquirer has post-closing. Ultimately, the only way to know if the offer in hand is a representation of the market or even the best option for the business owner is to explore multiple views of the value of the business.

If you move forward with the one offer available, what will you do if the deal falls apart during due diligence? Due diligence can be a time-consuming and overwhelming process. If you go through the due diligence process and the deal is unsuccessful, what? You will not have a second or third option. The sale process can be very emotional. Often, when a deal closing is not successful, a firm that ran a bid process will typically have a handful of bidders that they are able to re-engage to work toward a successful closing. The deal team can utilize the initial data request and due diligence process to make the workload lighter the second time around. An experienced M&A deal team will be able to craft a strategy to target active buyers from previous efforts and bring them back to the table. However, if you only have one option, you must start over from the beginning. By the time you start over, you are at risk of missing the market, which might cost you tens of millions of dollars.

The other great aspect of running a bid process is that you have leverage during due diligence. Typically, when a letter of intent is signed, the negotiation power shifts from the seller to the buyer. If you have other suitors waiting in the background, an experienced M&A deal team can use that competitive tension to help a seller secure the best deal on the market and keep the buyer in check. The buyer who ultimately wins a formal auction process knows that there were other suitors competing for the bid.

It is crucial for any seller considering a sale to hire a capable sell-side M&A firm to take them to market. A dedicated sell-side team virtually assures you that you will have multiple suitors and bids. You will be able to see several different views on the value of your business and be able to determine the optimal deal structure. The process will allow you to explore other partnerships and understand what competitive advantage various firms can bring to the table. If you compare the company sale process to dating, it is good to know what other suitors offer so you can pick the best one for you! Having an experienced M&A team take you to market to uncover your best options will give you the peace of mind that you have the information you need to make the best decision for you and your business.

  Author
  Kendall Stafford
  Managing Partner
  Benchmark International

  T: +1 512 347 2000
  E: STAFFORD@BENCHMARKINTL.COM

The digital advertising sector is also often referred to as online marketing, Internet advertising, and web advertising. The market includes revenues gained by advertising activities conducted by organizations targeting consumers via Internet-enabled mobile devices and personal computers.

Global Big Data Security Market

The global big data security market was valued at $24 billion in 2021 and is projected to reach $115 billion by 2030. That is a compound annual growth rate (CAGR) of 19% over the forecast period of 2022 to 2030. North America led the global market and is expected to grow at a CAGR of 17.5%.

Benchmark International has successfully facilitated a transaction between Bone Daddy’s, a Texas barbeque joint, and The Island Spot, a Jamaican restaurant with multiple locations.

The seller, Neil Dornbusch and Associates, located in New Prague, Minnesota, has been providing pumping and fluid handling solutions since 1988. They fabricate and custom-build food processing plants, specializing in sanitary and stainless-steel applications. They also assist with the design of fluid handling systems.

On 23^rd September, Chancellor Kwasi Kwarteng delivered his mini-budget, announcing comprehensive changes to tax in a bid to boost economic growth.

Ultimately, the changes are designed to improve the ability of British companies to raise money, attract talent, and grow and succeed.

With increased incentives to invest introduced in one go, as well as a number of tax breaks – what are the changes and how do these directly affect business owners and investment?

Last month, small business sentiment in the U.S. fell to its lowest level in nearly 9-1/2 years due to concerns surrounding inflation. Yet, at the same time, demand for labor remains more substantial than expected as companies continue to pursue growth.

Join us for the complimentary webinar: What You Need To Know About Selling Your Business To A Strategic Buyer.

As a business owner, you may have noticed an increase in conversations regarding environmental, social, and governance (ESG) policies in the workplace and B Corp status. Even though these policies are being implemented more frequently with larger companies, many small and mid-size business owners are not fully aware of what these policies are, what they mean, and how they are affecting investor behavior and M&A transactions. Let’s start by breaking down exactly what ESG is. 

An IPO is an initial public offering (IPO), which is the first limited public stock sale by a private company. IPOs are a strategy often used by smaller businesses to raise capital from public investors in order to facilitate expansion and growth. Once public, the company can be traded on the open market. There are both upsides and downsides to taking a company public. 

What is an M&A Strategy?
A strategy for a merger or acquisition is the rationale behind the transaction. Your objective should determine the type of deal that is right for your company. Maybe there is even more than one objective. Commonly, these goals are focused on boosting financial performance and mitigating risk.

When it comes to mergers and acquisitions, it is common for a seller to struggle to see the transaction from a buyer’s point of view. This is quite understandable because a business owner spends years, and even decades, building their company into a successful venture. It makes it more difficult to see the transaction from a potential buyer’s perspective. Many M&A transactions fall through because the seller and buyer simply cannot get on the same page. As a seller, you can work with an experienced M&A advisor to help you manage your expectations for the value of your company so that you can not only get the most out of your deal but also make sure the deal goes through. If you’re selling a business, you should understand how the valuation of a company works, what it is based on, and what is important to a buyer.

As a business owner, it is important to have a solid understanding of what a sustainable growth rate (SGR) is, and why it matters to the valuation of your company. 

In the first quarter of 2022, global middle-market M&A activity maintained the momentum that we saw in 2021. Last year, lower and middle-market companies played major roles in deal-making activity. Companies of all sizes enjoyed significant buyer interest in sectors ranging from tech, transportation, healthcare, manufacturing, and logistics.

 A notable imbalance in supply and demand in the lower and middle markets has been driving up the valuations of healthy companies in hot sectors. This trend is expected to continue through 2022 for strong companies in the lower and middle markets, especially in sectors such as healthcare, cybersecurity, cloud computing, artificial intelligence, and niche manufacturing.