Benchmark International Logo Blog Mergers and Acquisitions

Archives

How Seller Due Diligence Maximizes Business Value

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

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

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

Planning Ahead is Crucial

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

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

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

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

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

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

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

Timing is Everything

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

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

Professional Help is Key

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

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

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

READ MORE >>

The 12 Best M&A Twitter Accounts To Follow

PitchBook Data| @PitchBook

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

Mergers&Acquisitions| @TheMiddleMarket 

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

Benchmark International | @benchmarkgroup

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

The M&A Advisor| @themaadvisor

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

The Deal@TheDealNewsroom

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

WSJ Private Equity| @WSJPE

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

 

Ready to explore your exit and growth options?

 

Flipidea| @Flipidea_AI

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

Buyouts| @Buyouts

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

Mergermarket| @Mergermarket

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

M&A Critique| @mnacritique

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

Smart Business | @Smart_Business

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

M&A Navigator| @manavigator

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

READ MORE >>

The Ultimate Cheat Sheet On How To Sell Your Business

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

Know Why You’re Selling

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

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

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

Compile the Proper Documentation

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

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

Feel like it's a good time to sell?

Inventory Your Assets

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

Physical assets:

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

Intellectual property assets:

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

Intangible assets:

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

Enlist the Help of an Expert

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

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

READ MORE >>

Five Things I Wish Business Owners Knew Before Engaging Us

1. No one can control the market.

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

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

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

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

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

Ready to explore your exit and growth options?

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

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

5. It’s a marathon, not a sprint.

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

READ MORE >>

How Do I Know If I’m Ready To Retire?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

READ MORE >>

External Market Impact On M&A

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

Interest Rates

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

Regulatory Environment

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

Global Economic Concerns and Geopolitical Issues

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

Industry Consolidation or Convergence of Industries

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

Changes in the Workforce Dynamics/Millennials/Gig Economy

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

Political Trends and Risk/Elections

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

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

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

Ready to explore your exit and growth options?

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

READ MORE >>

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

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

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

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

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

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

Ready to explore your exit and growth options?

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

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

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

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

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

READ MORE >>

9 Surprising Stats About Buying or Selling a Business

Are you considering buying or selling a privately held business? Below are a few stats that you might find surprising:

READ MORE >>

The Importance Of Succession Planning

As a business owner, have you given any consideration to your succession plan?

It is important to note that a succession plan is not the same as an exit plan, but rather an element within an exit plan. Succession planning is focused on the interests of the business when an owner departs and another takes over. Exit planning is focused on the interests of the business owner, with succession just being one aspect in the overall plan.

It is actually quite common for small business owners to not have a succession plan, or even an exit plan, in place. Regardless of whether you have no plans of retiring anytime soon, the future is unpredictable, and having a solid, documented strategy in place can be crucial to the health and fate of your business. You will want to be ready for any scenario or opportunity that comes along.

READ MORE >>

10 Undeniable Reasons To Sell Your Company In 2019

Timing is everything, and 2019 is the prime time to sell a business for maximum value. The conditions are extremely favorable right now for several reasons, and waiting could mean that you miss out an ideal opportunity. 

READ MORE >>

Global Food & Beverage Industry Outlook

This is an intriguing time to be involved in the global food and beverage industry. 2019 remains promising for M&A opportunities for several reasons. Giant food companies are on a spree to expand their portfolios with food innovation. Food start-ups and smaller private food companies are looking to cash in on growth and exit strategies. And private equity and venture capital firms are motivated to get their piece of the pie.  

READ MORE >>

What Is A Strategic Partner?

A strategic partner is another business entity with which you form an agreement to share resources with the mission of growth and mutual success. There are different types of strategic partnerships.

  • Horizontal Partnership: Businesses within the same field join alliances to improve their market position. Example: Facebook and Instagram.
  • VerticalPartnership: Businesses team up with companies within the same supply chain (suppliers, distributors and retailers), often to stabilize supply chains and increase sales. Example: LiveNation and Ticketmaster.
  • Equity Partnership: An investor acquires a percentage interest in a business, providing needed capital and sharing in profits and losses.
  • Joint Venture: Two or more businesses form an entirely new legal entity in which the profits and risks are shared, and the original companies continue to exist on their own. Example: Microsoft and NBC’s creation of MSNBC.
  • Merger: Two companies agree to go forward as a single new company and the original companies no longer exist. Example: Exxon and Mobil, now Exxon Mobil Corp.
  • Acquisition: One company takes over another company and establishes itself as the new owner. Example: AOL and Time Warner, now Time Warner.

Why Do I Need One?

A strategic partnership can be an extremely powerful tactic that gives your business a competitive edge. According to a study by the CMO Council, 85 percent of business owners believe partnerships are essential for business success.There are several reasons why it is a commonly relied-upon growth plan.

  • Expansion into new markets
  • Increased brand awareness
  • Product line extension
  • Access to new customers
  • Improved supply chain performance
  • Added value for existing customers
  • Acceleration of innovation
  • Strengthening of weaknesses
  • Sourcing of capital

Ready to explore your exit and growth options?

A successful partnership must be built on a solid growth strategy and make sense from a capabilities perspective. The goals, values and culture of all partners should be aligned. You also need to have the right infrastructure in place. And the timing of the venture can be critical depending on the market. A partnership is a major endeavor and you absolutely want to get it right. Unfortunately, most organizations are not armed with the proper connections, resources and management capabilities to maximize the potential of a partnership. According to a report by the Business Performance Innovation Network (BPI):

  • 43 percent of business partnerships have high failure rates.
  • 45 percent are unable to maintain long-term, successful relationships.
  • 42 percent of partnerships are not well leveraged.
  • 67 percent of companies that agree to work together lack formal partnering strategies. 

How to Get It Right

The smartest way to ensure that you are entering into a successful partnership is to seek the guidance of an advisor such as Benchmark International. We have the connections, experience, data-driven analytics, and knowledge to help you devise a carefully crafted growth strategy that is built on confidence and captures the most value. If you are a founder, an owner, an entrepreneur, or part of the leadership of an established company, we encourage you to reach out to us and start the conversation about how a strategic partnership can benefit your business.

READ MORE >>

Real Estate Industry Outlook

The global real estate environment is off to a strong start for 2019. While uncertainties regarding trade, Brexit, and other geopolitical tensions linger, we have yet to see any major weaknesses in real estate markets. The sector continues to attract capital and pricing levels are holding steady thanks to strong capital flows. 

Real Capital Analytics (RCA) reports that acquisitions of income-producing commercial real estate last year rose by 3 percent to $963.7 billion. That is the third highest annual total on record behind 2007 and 2015.

Ready to explore your exit and growth options?

The Multifamily Sector

Multifamily housing is expected to continue to attract sustained investment and debt capital. Multifamily demand remains steady and is driving up rent prices as younger generations are being priced out of home ownership and older generations are downsizing. The top three emerging markets to watch in the United States for multifamily housing this year are Phoenix, Portland, and Tampa Bay.

Workforce Housing

The growing need for workforce housing is also driving the market for multifamily housing. In fact, workforce housing has actually outperformed the overall multifamily market in each of the last four years.According to a report by CBRE, workforce housing has brought in nearly $375 billion in investment over the last five years. That is more than 51 percent of the total for all multifamily asset classes.

Tech, Retail & E-commerce

Real estate fundamentals remain strong amid trends surrounding urbanization, retail, and ecommerce. Suburban markets are adapting to technology and becoming more urbanized with added focus on community-oriented retail concepts. Retail stores and shopping malls are undergoing an identity transformation, as retailers are adjusting their real estate needs to accommodate omnichannel experiences, especially in the U.S. and Europe. Additionally, e-commerce companies are adding smaller, satellite facilities to their networks of regional distribution centers as a reaction to the demand for fast, low-cost shipping.

Tech firms and flexible space providers continue to have a major impact on the global real estate market this year. Flexible space providers are targeting their focus on larger enterprises. More and more firms are leasing shared spaces. And as employees become more mobile, companies are adapting and coworking is becoming more popular. Coworking is primarily focused in high-wage markets and cities with a large number of professional services companies. Coworking spaces in tech markets are nearly double that of other markets.

Mixed-use real estate is also going to remain a significant opportunity, with the convergence of retail, office, residential, hospitality, and community-focused spaces. This adaptation is causing a shift in the types of tenants that properties are accommodating, resulting in shorter lease agreements.

REITs and Mergers & Acquisitions

Investors are expected to continue to diversify into secondary markets in search of yield. This includes real estate investment trusts (REITs), which have recently increased valuations and pay healthy dividends. Global REITs are projected to outperform other sectors and deliver strong returns in 2019. The property sectors among REITs expected to see the most M&A activity this year are industrial, self-storage, data center, multifamily, and student housing. Experts also predict the possibilities of some deals in the hotel REIT sector.

The year 2018 outperformed 2015’s prosperity for global commercial real estate investment in the current cycle, with a five percent increase in global investment volume. The U.S. accounted for 52 percent of global transactions. A total of six investors from Canada, France and China invested a record $41 billion in U.S. entities.

The value of U.S. entity-level transactions increased threefold last year, driven in majority by cross-border investment. Toronto-based Brookfield acquired Forest City Realty for $11 billion, making Brookfield the second-largest property owner in New York City, led only by the city government, and boasting a NYC portfolio worth around $32 billion. In 2018, Brookfield also acquired the second-largest U.S. mall owner, General Growth Properties, for $15 billion. Both Forest City and GGP were publicly traded REITs. 

Global Hotspots

International property is sustaining its 2018 performances as a remarkably popular market. Some of the top cities for real estate investment in 2019 include Lisbon, Toronto, Dallas-Forth Worth, Melbourne, Singapore, Berlin, New York City, Vancouver, Raleigh, Montreal, Tokyo, Madrid, Osaka, and Sydney. Specifically, the city of Lisbon has been noted to be the 2019 investment capital of Europe. This is due to increased tourism, a growing economy, and competitively lower pricing.

Contact us

If you are interested pursuing a growth strategy or an exit plan. No matter what sector you work or invest in, Benchmark International can help you take your aspirations to the next level.

READ MORE >>

Telecommunications Industry Outlook

The telecommunications industry will be undergoing some new transitions this year, most notably due to the rollout of fifth generation (5G) technology. Global telecom revenue is forecasted to grow up to three percent through 2019.

READ MORE >>

Retail Industry Outlook

While ongoing geopolitical uncertainties could present challenges in 2019, the overall outlook for the global retail industry remains optimistic. In the world’s top retail market, the United States, retail sales are predicted to grow more than 3 percent to exceed $5.5 trillion. But for the first time ever, China is expected to outperform the U.S. in retail sales. China is forecasted to see a 7.5 percent growth in retail sales this year, reaching $5.6 trillion.

READ MORE >>

The Value In Hiring An M&A Advisor

When the time has come for you to sell your business, there are plenty of reasons why you do not want to embark on this journey alone. Enlisting the help of a trusted M&A advisor can make a world of difference in the process and, most importantly, the results.

A Better Process.

Selling a business takes time. It can take up to one year to complete a sale. Think about what you need to be doing during that time. You still have a company to run, and this is the most critical time for your company to be running smoothly and performing well. Selling a company requires a great deal of time and attention. For an owner, this time and attention needs to be focused on the day-to-day running of your business. You do not want be so preoccupied with the sale of your company that you end up neglecting the business that ultimately should be generating maximum results during this time. If your company falls short of expectations, it could result in a botched deal. Basically, you need to be operating your business as though you are not going to sell.

When you form a partnership with an experienced M&A advisor such as Benchmark International, you will have an expert dedicating their time to the sale of your business, so you can remain a strong leader for your company. You will still be heavily involved in the process, never missing an update on opportunities and negotiations. The difference is that you will not be bogged down by certain details, time critical deadlines on the deal won’t pull you away from key business situations, and your advisor will be there to resolve any issues that arise along the way.

Ready to explore your exit and growth options?

Essentially, an M&A advisor is going to do all the heavy lifting for you. They will prepare the necessary marketing materials, find quality prospective buyers, market your business, negotiate terms, manage the due diligence process, arrange the closing, and even help you plan the transition and your exit strategy. Your time is precious and so is your business. Give them both the attentiveness they deserve.  

Better Results.  

Experienced buyers know what to look for in a company. They know how to get the most value from a merger or acquisition. Meanwhile, it is likely that you have never sold a business before, giving the buyer a major advantage in negotiating a sale. You need someone in your corner whose wholehearted motivation is to exceed your goals and get you the most value for your company. This includes the exploration of the full spectrum of your options, and even knowing when to walk away from a deal.  

In a recent study titled The Value of Middle Market Investment Bankers:

  • 100 percent of owners who sold their businesses with the help of an M&A advisor or investment bank said that the advisor added value to the transaction.
  • For 84% of business owners, their final sale price was equal to or higher than the initial sale price estimate provided by their advisor.
  • Business owners viewed “managing the M&A process” as the most valuable service provided by their advisor.

Selling your company is a very complex process. Some business owners think they can simply broker a sale through their accountant or their attorney, but these professionals do not have access to the databases, connections, and methodologies that you will gain with an M&A advisor. Another important quality that an M&A advisor brings to the table is a solid understanding of the market and precisely WHEN to sell to get the most value.

These are some characteristics that you should look for in an advisor:

  • They understand your industry, your business, and its value.
  • They have both global connections and local expertise that allow them to identify prospective buyers that are serious and high quality.
  • They know the fair market value and will work to get you maximum value.
  • They have a disciplined process and a proven track record.
  • They have opportunities that are confidential and exclusive.
  • They structure their compensation to align their interests to yours.
  • They listen to your aspirations and concerns as a true partner.

Are You Ready to Sell?

If you feel that you are ready to sell your company, you will want to partner with an M&A firm such as Benchmark International sooner rather than later. Getting ahead of the game means that your business will be properly prepared for maximized value. However, no matter what stage you are at in the process, it is never too late to ask for our expertise.

 

READ MORE >>

New Tax Break Clarification Spurs Additional Immediate Interest from M&A Acquirers

If your business is in or serves one or more of the 8,762 neighborhoods identified by your state’s governor as a “Qualified Opportunity Zone” under the 2017 federal tax legislation, new buyers will be entering the market for your company in the coming months and they will be looking to make some quick deals.

When the tax cut law passed, investors in these zones were granted numerous attractive tax benefits including:

  • Deferment until 2026 of tax on capital gains from the sale of projects outside the zones if those profits were now invested in any zone
  • A 15% reduction certain capital gains taxes
  • No capital gains taxes on any investment held for at least 10 years

But acquirers of businesses never took advantage of the new opportunity. Reports came back to the Administration that the statute called for the Treasury Department to implement regulations laying out the details as to which investments would qualify and absent those regulations there was too much concern that the “investments” would only cover real estate acquisitions and improvements.

Seeing that the real estate industry had wholeheartedly undertaken the desired action - investing in the zones – and wanting other investors such as acquirers of businesses to do the same, the President publicly released draft regulations last Wednesday.

The M&A investment community is quite pleased with the breadth and clarity of the regulations and appear to be jumping into action to exploit the new guidelines.  And their action will likely be immediate. The incentives are set to cover only those investments made by the end of 2019.

To view all Qualified Opportunity Zones to see if your business may qualify, visit the IRS’s map here. https://www.cims.cdfifund.gov/preparation/?config=config_nmtc.xmland follow these instructions. https://www.cdfifund.gov/Pages/Opportunity-Zones.aspxAs this map of Tennessee demonstrates, you might be surprised which areas are covered. The official method of designation is by “census track” and you can also search this website by your track – if you know it.

The regulations remain complex as there are a number of independent ways for an operating business to qualify based on where income is generated, where labor is provided, where services are provided, where working capital is invested, and where tangible property is maintained – among others. But business acquirers are getting ahold of the new details, have the firepower to get command of them, and will very quickly be refocusing their searches in light of these significant benefits. 

There is still time to get your business on the market to take advantage of this increased interest and the potential boost to your sale price that it should also carry with it. Eight months from engagement to closing is not difficult with a properly motivated seller and buyer – and nothing motivates people like tax breaks!

Ready to explore your exit and growth options?

Author
Clinton Johnston 
Managing Director
Benchmark International

T: +1 813 898 2350
E: Johnston@benchmarkcorporate.com 

 

READ MORE >>

Is a Minority Rollover Your Selling Solution?

If you are considering selling your business, but you are not completely sure you want to sell a 100% stake, “rolling over” (essentially, “retaining”) a minority interest in the business may be a favorable solution for you. Rolling over a minority interest allows you to retain less than 50% stake, along with certain rights that you can negotiate prior to sale. It is common for minority interest ownership to range from 20% to 30%. It is also sometimes referred to as non-controlling interest because you have very little influence over business decisions. This arrangement can be an ideal solution if you are not quite ready to relinquish your company altogether, but you do not want to deal with the burdens of ownership. In the case that you do want to remain involved in business decisions, there is the option to negotiate a seat on the board or certain contractual protections. These protections could apply to items such as the termination of certain employees, deviation from the operating budget, or relocation of the company’s offices, as a few examples.

Ready to explore your exit and growth options?

Minority rollovers are becoming increasingly popular because of the many advantages these types of arrangements provide for both owners and investors. In fact, 2018 was a record-high year for venture capital spending, with $21 billion in minority rollovers. There is optimism that this activity will remain steady through 2019, depending on various macroeconomic issues across the globe.

Advantages of Selling a Majority Stake

A noteworthy benefit of being a minority owner is that you are able to share ownership in a growing business. A private equity investor is absolutely going to be driven to grow the business to boost the value for a future sale. They are going to invest the time and money (that you may not have) to make it thrive as much as possible. You get to sit back and relax while they do all the heavy lifting to grow the company that you started. The amount of money that private equity investors usually put into a business can be quite substantial and make a significant difference in the company’s value. 

Since the majority investor intends to grow the business for a future sale, that second sale is another advantage for you as a minority owner. A larger, well-run business is going to sell with a larger price tag. This can often be the result of reduced competition, improved technologies, new products, and more efficiency. Consequently, even though you have a minority stake, you end up cashing out with a larger return.

Something else to consider when selling a majority stake in your business is the lower tax bill for the time being. Depending on how the deal is structured, you may not have to pay taxes on the equity you put back into the company. Taxes will not be owned until a future sale.

It is also worth keeping in mind that there is the possibility that you could re-purchase the majority stake in your business and re-establish control. However, the value of your company is likely going to be much higher, so there is the potential that it will be expensive. On the other hand, you may also elect to sell your equity back to the majority investor if the business does not perform as expected or should you decide that it is time for you to exit the business completely.

There is also the option of what is known as tag-along rights, which allow you to remain an owner even in the event that majority equity changes hands. Furthermore, it is not uncommon for a majority investor to require a drag-along provision. This means the minority owner would be required to participate in any sale of the company because the majority owner does not want them to be able to prevent a sale. These provisions would need to be established during the negotiation of any deal.

All owners of minority interests should assess different exit strategies and transfer restrictions. You will want sufficient protections in place while retaining the right to divest under beneficial terms and conditions. An experienced broker can help with exit planning and ensure that you orchestrate the best arrangement for you.

 

Are You Ready to Sell?

If you think it is time to sell a majority stake in your business, you are going to want to negotiate the most advantageous deal possible. You are putting a lot on the line and the process is sure to be complicated. In order to ensure that you get the right buyer, the right terms, and the right price, you need the right partner. Benchmark International has a team of specialists that arrange these types of deals every day. Even if you are not sure about selling, we can answer your questions and help you determine what is best for you, your business, and your exit plan. One simple phone call or email to us can start the process and provide you with the level of peace of mind that you deserve.  

READ MORE >>

M&A Outlook for Tennessee Business Owners

The state of Tennessee is expected to see sustained economic growth in 2019. The state has a record-low unemployment rate, with nearly 43,000 new jobs projected for Tennesseans this year. The state’s inflation-adjusted gross domestic product is also expected to rise. The transportation and utilities sectors are predicted to see positive gains and the healthcare and real estate markets are expected to remain strong.

 Ready to explore your exit and growth options?

A Healthcare Hub

Since 2017, the U.S. state of Tennessee has experienced a surge in M&A activity. The healthcare and technology industries are major drivers behind the increased action, especially in the city of Nashville. In 2018, the private equity firm KKR purchased Envision Healthcare Corp. for $9.9 billion. Apollo Global Management acquired LifePoint Health for $5.6 billion. LifePoint Health then merged with RCCH HealthCare Partners. This momentum is expected to continue through 2019, with much optimism surrounding the healthcare market in particular.

According to Mergermarket, Nashville ranks fifth in the U.S. in terms of the overall value of healthcare M&A deals closed since 2015, with $30 billion in transactions. The upswing in activity is largely due to new technological and data opportunities in the healthcare sector.

In the early part of 2019, we have already seen major M&A ventures surrounding Nashville healthcare businesses. Maryland’s Omega Healthcare acquired Nashville’s MedEquities Realty Trust, Inc. for $600 million. HealthStream, Inc. purchased healthcare-training company Providigm for $18 million. HCA Healthcare, Inc. purchased North Carolina-based Mission Health for $1.5 billion. HCA now owns and operates more than 170 hospitals in 20 states across the country.  

It is important to note that Nashville is home to the headquarters of almost 20 publicly traded healthcare companies and an overall industry that creates more than $92 billion in annual revenue. These healthcare companies employ more than 570,000 people worldwide. The area is anticipated to continue to shape the industry landscape in what is an increasingly inviting market. Strategic buyers and private equity investors will be keeping a close watch on the growing opportunities in this region as the year progresses.

The Real Estate Market

Another industry that is forecast to have a strong year in Tennessee is real estate, specifically in Nashville, which is home to more than 600,000 people. The city’s real estate market has continued to grow over the past decade. Home values increased 8.2% last year and are expected to go up 8% this year. According to the U.S. Census Bureau, Nashville ranks as the nation's fifth-surest investment bet for 2019. This real estate market is positively impacted by several factors, such as ample redevelopment opportunities, low mortgage rates, high demand for housing, a large student population, and plenty of young families. Because Nashville is also known as the Music City and boasts a major tourism industry, there is also a large market for tourism-related rentals.

The attractive quality of life is also a big draw. Last year, Nashville was ranked 11th out of the 100 best cities to live by U.S. News & World Report, up from 13th the year before. We will have to wait and see if it climbs even higher on the list in 2019. 

In addition to the city of Nashville, the Memphis and Knoxville areas also offer attractive real estate markets for investors. This is due to affordable housing and high quality-of-life benefits.

Make a Move

If you are a business owner looking to create value, whether it’s in the state of Tennessee or on the other side of the world, contact Benchmark International to craft a strategy that best suits your company and your aspirations. 

READ MORE >>

Questions You Should Ask a Potential Buyer

Once you have decided it is the right time to sell your company, it’s time to find the right buyer. You are going to want to sell to someone that shares your vision for the business that you worked so hard to build. At the same time, you do not want to waste your time on prospects that are not serious or financially fit. An important step in the vetting process is knowing what information you should request from potential buyers. Start by reviewing this list of questions to generate additional ideas and help you manage expectations. 

“Do you have prior experience with acquiring a business?”

A buyer’s track record is paramount when considering whether or not they have the necessary resources and competencies to handle an acquisition. What is their experience? Do they have any success stories? What about failures? Nobody wants to sell to someone who has acquired businesses only to see them fail.  

 Ready to explore your exit and growth options?

“Why are you interested in buying my business?”

Understanding a buyer’s motives is crucial when seeking someone who is going to operate in the best interests of your company. If they share a passion for what you created and have a solid plan to build upon that success, they are far more likely to take your business in the right direction. Asking this question can also help you ascertain how serious they are about working towards a deal.

“How do you plan to finance the sale?”

Securing capital is often complicated and you can learn a great deal about a buyer from their answer to this question. It will demonstrate how experienced and how serious they truly are, helping you to weed out the dreamers. How do they plan to structure the deal? Can they prove that they have the funds available? How much cash is on the table? A serious buyer is going to be adequately prepared to answer this question and may even provide documentation.  

“How long have you been looking to acquire a business?”

This is a serious question when it comes to avoiding giant wastes of your time. There are people who will claim to be eager and ready to invest in a business, but they really are more interested in talking about the idea of it, as opposed to actually sealing any deal. How many deals have they passed on, and why? Ask for explanations. Sometimes deals simply do not work out. But if someone has a routine of waiting around for the perfect deal for years, you probably want to move on.

“How do you plan to carry on the legacy of my family business?”

If you have a family-owned business, it is likely that it matters to you that the company’s legacy remains in tact. This means you need to find a buyer that cares about maintaining its heritage and has a plan to do so. If you have family that will continue to be employed with the company, you will want assurance that the new owner is including them in their plans.

Don’t go it alone.

There are many considerations when seeking the right buyer for your business. To help you navigate the entire process, it is vastly beneficial to partner with a mergers and acquisitions firm that has the connections and resources to match you with the right investor. A firm that cares about the future of your business. The experts at Benchmark International will do all the homework for you and protect your interests to ensure that you get the very best deal possible.  

READ MORE >>

2019 Outlook For The Healthcare Industry

Value-based Care

Quality, affordable healthcare remains an important issue for people all over the world, from Europe and the United States to Asia and Africa. As global healthcare spending continues to skyrocket, people are demanding more bipartisan policies from their political leaders to address the problem. This is why value-based care solutions are starting to play a major role. The industry is undergoing a shift in focus from treating illness to achieving and maintaining wellness. These solutions are more productive and less wasteful, as they aim to avoid unnecessary testing and interventions. Up until now, this role has been typically driven by health plans, but physicians and health systems are getting more involved in the full spectrum of care. All of these elements of value-based care represent huge growth opportunities in the digital healthcare coming-of-age, with various forms of technology as the major impetus.  

Technology, Artificial Intelligence, and Data

Technologies that automate nonclinical duties such as paperwork are being developed to save physicians time and allow them to focus on patients. The implementation of electronic health records (EHRs) and artificial intelligence tools is expected to better connect patients, physicians, health systems, and health plans. Physicians will be able to utilize EHR data to manage illnesses with fewer scheduled in-person appointments.

Virtual care is also an emerging market factor in the changing healthcare landscape. Many people put off doctor visits until their condition worsens, which increases costs such as emergency room expenses. New virtual care technologies are enabling patients to see a physician from the comfort of home. It also means that physicians are able to see more patients. TeleHealth Services is an ideal example of this trend. It uses digital information, computers and mobile devices to access and manage health care services remotely. In the last few years, nearly three quarters of major employer health plans had incorporated TeleHealth software services into their benefit packages.

Tech-enabled medical devices and services are another growing trend. This includes wearable devices, digital therapeutics, and applications that collect and communicate data. Last year, FitBit acquired Twine Health, a health-coaching platform that helps people improve health outcomes while helping health systems, plans, and providers reduce healthcare costs. Last summer, Amazon acquired the online pharmacy PillPack for almost $1 billion, and drug giant GlaxoSmithKline entered into a four-year agreement with the online platform 23andme, the world’s leading DNA-testing-kit resource for consumers. Also in 2018, Roche acquired Flatiron, which uses oncology EHRs to connect oncologists, academics, hospitals, researchers and regulators on a shared technology platform. 

Cloud technology also brings new benefits to the table, such as easy integration of immense datasets, and AI capabilities that analyze data and provide insights remotely. Cloud technology is expected to continue to gain momentum, as data—both big and small—are finally being used in ways that may make a meaningful difference for the healthcare industry.

Healthcare Mergers & Acquisitions (M&A) in 2019

The industry saw ample M&A activity last year, and this activity has already carried over into 2019, with several major deals already closing in January. There are also some big moves in the works that everyone is watching. A proposed merger between retail pharmacy CVS and insurance giant Aetna has drawn much speculation and scrutiny as it still awaits regulatory approval as of this month. Walmart has been in talks to merge with insurance provider Humana, another sign of major retailers attempting to take a stake in the healthcare industry. 

With the growing digital health market and continued pharmaceutical innovations, M&A strategies remain a preferred growth plan for executives and it is expected that there will be lively M&A activity throughout 2019. Southeast Asia has drawn abundant attention, with a 92 percent increase in healthcare IPO volume last year. Plus, the stock exchange in Hong Kong introduced new rules allowing biotech companies to issue shares even before recording revenue or profits. Singapore, Indonesia and Malaysia all have ripe environments for new opportunities. And even despite trade tensions, rising interest rates, and volatile markets, deal-making activity in the region remains forecasted to grow. 

What it Means for You

Whether you are seeking a new investment, looking to grow your company, or considering selling your business, a great deal of financial opportunity lies in the global healthcare industry. 2019 may very well be the right year for you to make a move. If you contact our specialists at Benchmark International, we will use our global connections and mergers and acquisitions expertise to help you carefully craft the ideal opportunity for you and your next venture. 

 Ready to explore your exit and growth options?

READ MORE >>

Assumptions Matter! What Assumptions Form the Foundation of An M&A Transaction?

Assumptions form the foundation of every facet of an M&A transaction. They permeate every fiber of a deal. Sellers make assumptions. Buyers make assumptions. Lawyers, accountants, wealth managers, and other advisors make assumptions. Deals are built upon assumptions.  When assumptions are thoughtful, reasonable and defensible, there is a much higher likelihood of success.Buyers may assume they can get three turns of EBITDA in senior debt and another turn of second lien debt when determining both valuation and deal structure. However, what happens to the deal if those assumptions prove faulty?  Assumptions should be tested.  Before proceeding, apply a reasonable test.Determine if the assumptions will survive further scrutiny. Are they defensible? If they are not, challenge them and make the appropriate course correction.  

Ready to explore your exit and growth options?

Buyers often use Discounted Cash Flow (DCF) as at least a data point to derive a valuation. However, as any finance student or professional will tell you, DCF is limited by the inputs; the assumptions you make. One has to make assumptions as to the cash flows derived by the business, a terminal value, a growth rate and their cost of capital. Each of those is a lever that a seasoned professional can pull to move the results.  So, the results are subject to confirmation bias. I can make the model spit out a number that aligns with my preconceived notion as to value. Further, I can make the results provide evidence to a narrative that portrays the business in the most positive (or negative) light. Again, assumptions matter. They need to be reasonable and defensible. 

Sometimes we will see buyers assume that all businesses in a specific industry are perfect substitutes. I’ve seen buyers point to other sellers on the market with more “reasonable” price expectations. But that assumption, on its face, is flawed at best and perhaps intellectually dishonest. No two business are alike. They are living, breathing beings with unique people, processes, supply chains, distribution channels, relationships etc.Two businesses that compete with similar services or products will yield different valuations from buyers. Those differences in valuation may be vast.  Why is that, you ask? The answer is businesses are not fungible. They are not interchangeable. They aren’t gold, silver, frozen orange juice or any other commodity.  They don’t trade purely on price as they have unique aspects to them.  As such, we at Benchmark, as a sell side mergers and acquisitions firm, really thrive when we encounter a buyer with this argument.  We love it when a buyer brings that level of analysis to defend their assumptions.  Our clients do too. 

Assumptions matter on the sell side when contemplating net proceeds. Every seller concerns themselves with the amount they will take home once all fees and taxes are accounted for.  More importantly, they want to know if they can “live on” those proceeds.  When considering this question, make sure all of the inputs into the waterfall are reasonable and defensible.  The waterfall demonstrates the net proceeds to the seller accounting for all expenses and taxes. Are your tax assumptions correct?  Make sure you engage advisors that understand transaction tax. Your CPA may not be qualified to dig in here as the questions and answers aren’t black and white.  Often times, the sell side law firm has an M&A tax specialist on the team and that person may be best suited to assist. 

Let’s address the aforementioned question; how much do you need at closing to maintain my lifestyle? Again, as before, the assumptions here matter.  You may not know the market opportunities available to you post-close as perhaps you’ve never had the power and influence that may come from a sizeable pool of investable capital. We suggest sellers speak to wealth advisors to determine if their risk tolerances and investment goals align with the cash flow they require.  We have worked with wealth managers that specialize in working with small business owners transitioning out of ownership for the first time.  They will work with you to determine the proper asset allocation for your proceeds and provide the basis for sound assumptions as to rates of return. They will also review your entire financial profile and exposure to assist you.

Assumptions matter for your advisors. Attorneys may mistakenly assume a seller is adamant about an issue that may in fact be unimportant to the seller. Other advisors may apply their own biases to a deal and assume both buyer and seller think as they do. I’ve found that making this sort of assumption, that buyers and seller think as I do on all matters, leads to poor guidance and poor decision making. 

So, what is the cure for all of these issues that result form poor assumptions you ask?  Simply ask the other party, whether on other side of the transaction or on the same side, to present and defend their assumptions. Once the assumptions are on the table it is easy to test them to determine if they are credible, reasonable and defensible. 

Author
Dara Shareef
Managing Director
Benchmark International
Ready to explore your exit and growth options?

T: +1 813 898 2350
E: Shareef@benchmarkcorporate.com

READ MORE >>

How To Reduce Owner Dependence Before A Sale

Build your dream team.

An important step in reducing your company’s dependence on you is to create your management dream team. Assembling the right people to take over the reigns can shift the burden off of you far before the time comes to sell. Make sure your team members know that they have your confidence by giving them more responsibility. This also means that there can be less reliance on you moving forward. Another significant benefit of having a stable and experienced management team in place is that it makes your company more appealing to buyers and ensures a smoother transition period.

Ready to explore your exit and growth options? 

Create documentation.

Before selling a business, it is imperative that your processes and procedures are fully documented. When you outline howthings work and whythey work, it can be key to your organization’s appearance of professionalism. Not having a proper roadmap to your operations could be a deal-breaker for prospective buyers, as they will want to follow guidelines that they see are proven effective or adapt those guidelines accordingly.

Having proper documentation in place also means that your management team can make informed decisions in your absence should you just want to vacation for a couple of weeks. It will also be needed to keep everything running smoothly when it is time to transition the company in the event of a sale.

Creating this documentation may seem like a tedious task that you may feel too busy to do, but remember that it is critical to reducing your company’s dependence on you and will ultimately pay off in the long run.         

 

Plan your exit strategy.

As a business owner, it is critical that you have a plan for your exit from the company. A sound exit strategy will allow your business to transition smoothly into the right hands. This forward planning will ensure that your business stays on track and is achieving your goals. After all, if you have not set any goals, how can you expect to achieve them? These goals will be crucial in increasing the value of your company prior to a sale. Your management team should clearly understand these objectives so they can work with you on the path to shared success, and eventually, without you.

Establishing an exit strategy can be complicated and somewhat intimidating, which is why most savvy business owners partner with an experienced broker such as Benchmark International. Our specialists will work closely with you to establish an exit plan that is tailored to your specific needs and helps take the guesswork out of the process. We can even help you find the right buyer because we have powerful connections around the world.

Exit planning can reduce your company’s dependence on you and arm you with confidence for when it is time to sell. Instead of worrying about where to start, just start by
giving us a call.
Do you have an exit or growth strategy in place?

READ MORE >>

3 Benefits of International Mergers and Acquisitions

If you are thinking of growing your business on an international level, it might be worth considering partnering with another company through a merger or acquisition, due to these three benefits:

 Do you have an exit or growth strategy in place?

New Markets

International expansion allows access to new markets and a greater reach to more of these consumers, thus increasing sales. While this can be achieved by establishing a branch or subsidiary, a merger or acquisition could save time and money spent on starting a business from scratch.

Partnering with a company in a smaller country can be particularly fruitful, as the smaller the country, the larger the access to its market.

 

Diversification

An advantage of an international merger or acquisition is a wider range of services or products can be explored. This helps a business in diversifying their assets, protecting the bottom line against unforeseen circumstances. For instance, companies with international operations can offset negative growth in one market by operating successfully in another. Companies can also utilise international markets to introduce unique products and services, which can help maintain a positive revenue stream.

For example, Coca-Cola diversifies through global operations and recently reported increased sales in China, India and South Korea, which benefited Coca-Cola worldwide.

 

Obtaining Access to a Talented Workforce

One of the conditions for merging with, or acquiring, another company is to retain the staff and integrate them in the new company, which are legal requirements imposed by national and international regulations. The benefit is that international labour can offer companies unique advantages in terms of increased productivity, advanced language skills, diverse educational backgrounds and more.

 

READ MORE >>

Five Reasons Why It’s Worth Investing in an M&A Adviser When Selling Your Business

You have come to a point in your business life where you have decided that it is time to sell and move onto the next project. Of course, you want to command the best price for your business and explore all the opportunities available. As such, you have considered an M&A adviser to help in the process – but is it really worth it? They could help you generate more value for your business but if you factor in the fee for engaging their services, will you make any more money?

Then again, there are many advantages to hiring an M&A adviser, which are not just limited to value. If you have thought about hiring an M&A adviser, but are unsure of the benefits, consider the below:

 Ready to explore your exit and growth options?


They can Minimise Distractions During the Process

You know your business the best and if you are knowledgeable about the M&A process you could facilitate the transaction yourself – although this doesn’t mean you should. After all, an M&A transaction takes a significant amount of time and the time you have to spend on the transaction could end up being detrimental to business performance. As the value of a business is more often than not linked to financial performance, you need to focus your efforts into making sure the company is performing the best it can be, rather than focusing on the transaction itself.

 

They can Source a Larger Pool of Buyers

If you’re thinking of selling your business you may have an idea of the acquirers you want to approach. This is good, but an M&A adviser constantly networks with various strategic and financial buyers on a national and international basis in various industries; therefore, they have a very large pool of acquirers at their fingertips to contact about the opportunity. Not only is an M&A adviser’s pool of acquirers large, it is also varied, which means they can think outside the box and a lucrative deal could be sourced cross-sector. Another benefit of generating interest from a large pool of acquirers is you are more likely to have multiple competing bids, strengthening your negotiating stance.

 

They can Negotiate a Favourable Deal

As mentioned, an M&A adviser can help to create a competitive bidding environment which can lead to a better deal being negotiated; however, this is not the only way an M&A adviser negotiates on your behalf. Often, deals are not for 100% cash so an M&A adviser will negotiate a deal structure so both parties can reach a compromise and agreement. This can be very beneficial for you if, for example, you have just secured a large contract where earnings will increase over the next year, as, if the deal has been based on a multiple of current earnings, then you will not be correctly compensated for the contract you have secured. Therefore, an M&A adviser will negotiate a deal which will maximise value beyond the purchase price.

 

They can Protect your Interests

It is in your best interest to keep the sale of your company confidential – if it gets out that you are selling this could potentially alienate employees and customers and give your competition the upper hand. By yourself, when approaching potential acquirers, it is difficult to protect the identity of the company as it’s not easy to solicit interest without disclosing who you are. An M&A adviser, on the other hand, will have interested parties sign a non-disclosure agreement before they are given any information about the business, including the name of the business and the owner. At this stage, it is also important to gauge whether the company you are approaching has the finances to purchase your company – again, this is something which is difficult to do without compromising confidentiality.

 

They Add Valuable Resource

They say ‘first impressions are the most lasting’ so when it comes to selling your business, it is important that a potential acquirer’s first impression is first rate. An M&A adviser can assist with this through their proven processes that help businesses to market themselves as the complete package. As well, engaging an M&A adviser can add credibility to potential buyers as they can see that you are serious about conducting a transaction, which can save time and improve offers.

 

READ MORE >>

Preparing for Due Diligence: Sell-Side

Due diligence is a buyer’s detailed investigation into the matters of your company in preparation for a possible sale transaction. For many business owners, this is one of the most dreaded parts of selling their business. After a letter of intent (LOI) is signed and a price range is agreed to, buyers have the right to dig into the business to ensure that they know what they are buying, and to identify any potential risks of owning the business. While buyers and sellers have different objectives and motives, both parties benefit from a thorough and efficient processes. Whether your company is pursuing a capital infusion or positioning itself for an acquisition by a strategic or financial buyer, due diligence is a critical component of every investment.  It’s an intrusive process and, like everything else about the sale of your business, you need to be prepared.

Ready to explore your exit and growth options?

When a potential buyer assesses your company, they will want to fully understand the essentials of the business such as organizational information, financial records, regulatory matters and litigation, employment and labor matters, and many others. When your company is well-prepared for the exit process, long before it is anticipated, not only will it make the company look more attractive to potential buyers but it will also maximize the value and expedite the transaction timeline. If not properly prepared, this can result in an incredible demand on a company and its resources, give a buyer the perception that the company is disorganized, and create operational difficulties within the company.

Below are four ways to prepare for due diligence and secure the deal you want:

Start with a Due Diligence Checklist

Most buyers will provide the target company with a due diligence checklist but, before receiving that list, sellers should ensure that common checklist items are available, up-to-date, accurate, and organized. The data needed for the due diligence process should be in order and ready to be uploaded to a virtual data room within a couple of days of initiating due diligence. This is not only necessary in the event of an acquisition, but it is also a valuable discipline to maintain as the company grows.

Invest in Professional Accounting Practices

The due diligence process is dependent upon the strength of the seller’s accounting system. It is essential that the company’s financial reports present potential buyers with a clear story, allowing them to fully evaluate the company’s earning potential. Buyers will be concerned with all of the target company’s historical financial statements and related financial metrics, as well as the reasonableness of the projections of its future performance. A business’ financial records should be clearly stated and easy to follow. If not, this could create confusion, misunderstanding, and devaluation.

Planned transactions have failed, even though the business itself was healthy and growing, when the financial reporting was outdated, inaccurate, or incomplete, and the buyer could not trust the data. Accurate financial statements are also necessary for the seller to support the business valuation. What assets does the business have? How profitable is the business? What is the working capital? What are the growth trends? All of these are major factors in the valuation of the business, so the data representing them needs to be accurate and precise.

To avoid issues, it is recommended that, before going to market, a seller contacts an independent accounting firm to review or audit the company’s financial statements. This will help to ensure that the company financial data is accurate and complete, will instill a sense of confidence from the buyer, and will more likely result in an efficient and successful due diligence process.

Engage Qualified Representation

A team of good professional advisors is crucial to a successful sale of a company. These advisors will steer sellers in terms of what they need to do to get their company ready for sale. Tap into these resources because they will have dealt with enough transactions to know what you should be focusing on to ensure a successful sale. Some recommended professional advisors include, but are not limited to, a M&A broker, an accountant, a tax advisor, a M&A lawyer, a wealth advisor, an investment banker, and a trusts and estate lawyer, if needed. With advance planning and the help of good advisors, a seller can ensure that his or her best interests are fully represented, common pitfalls are avoided, and the transaction will run smoothly and efficiently.

Responsiveness to Requests

During the due diligence process, potential buyers will seek to comprehensively understand the business practices behind a company’s earnings. It is the sellers job to guide the buyer through the learning curve. Respond to the buyer’s due diligence requests in an organized, detailed, and complete manner. If there are requests for missing data, respond punctually. This responsiveness allows the seller to gain credibility with a buyer, and provides buyers additional comfort with the quality of the business they are buying.

Conclusion

Due diligence is a vital and complex part of M&A transactions. Preparing beforehand can help a company position itself for higher valuations, stronger negotiations, and better outcomes. Understanding the importance of due diligence to both parties in a transaction, planning in advance, enlisting the support of specialists, and investing the time to run a thorough due diligence review early in a transaction will help prevent unwelcome surprises and potential liabilities for both parties.

Ready to explore your exit and growth options?

Author
Kayla Sullivan 
Associate
Benchmark International

T: +1 813 898 2350
E: Sullivan@benchmarkcorporate.com 

READ MORE >>

Should I Start a Business or Buy One?

Maybe you are a lot like Sam. Sam has been working at a job that he doesn’t love, going to work each day and feeling unfulfilled.  Sam would really like to quit and go into business for himself but he has a wife and a child to support.  This leaves him with a big decision to make; should he start a business or buy an existing one?  As Sam does his research, he discovers the many factors that will influence his decision.

Sam, like many of us, has a family to support so most important to him is to have sufficient income to continue supporting his family.  Taking on the risk of possibly not generating any income for several years with a startup is not a realistic option for Sam.  Since starting up is not an option for Sam, buying an existing business will allow him to have the necessary cash flow from day one as he will be taking a salary directly from his business.  In addition, depending on the way he chooses to acquire his new business he will be able to keep investing back into the business so it can continue to grow.  While Sam understands that there will be many headaches and long days because of his new business owners he will be free to be his own boss.  Furthermore, this new business will likely relieve a lot of the financial stress that he currently has as his family’s expenses continues to grow. 

Like most people going into business for themselves, Sam will need to secure financing and/or attract investors to help him get started.  He quickly learns that banks and investors strongly prefer dealing or lending to a business that has a proven track record and strong historic financial performance rather than a higher risk start up business with so many uncertain factors such as high debt, or customer concentrations.  With the right guidance from a reputable M&A firm such as Benchmark International, Sam will be able to find financing to be on his way to fulfilling his dream of business ownership.

Like many young entrepreneurs, Sam is excited and motivated by the idea of growing a business.  He understands that there is a marketplace for businesses he is currently looking for and is much less interested in the grueling legwork and struggle of getting one up and running.  He knows that buying a business will give him an established brand that has been tried and tested along with any patents, copyrights and valuable legal rights that may come with that.  Having acquired a business, rather than starting one, will have be doing the work he is most passionate about from day one.

Sam’s wife Helen is a very active member in their community and their home is usually filled with family and friends. Like many of us, friends and family are very important to Sam and he wants to make sure he will still have time for those things and does not miss out.  Sam is especially enthusiastic about four children’s school activities.  He realizes that by buying an existing business, he will have an established vendor, customer base, goodwill, equipment and suppliers.  Things he would otherwise need to spend countless hours acquiring.  Sam will also have an experienced and trained staff in place ready to go that will know and understand the business so he can take a couple of hours and see his children flourish.  The seller has spent time teaching and training those people and Sam will reap the benefits of that.  From day one, he will have people in place who are able to help run the business and teach him things while he gets settled in.  Sam understands the target business and he knows that with a few tweaks and changes here and there it will be running the way he wants to in no time.  While at the same time being able to spend the evenings at home with his wife and kids. 

Business ownership may seem like a daunting thought but it really should not be that hard.  Sam’s experience shows us some of the things to think about when making such an important life decision.

So, what about you?  Are those advantages important to you as well?  Do you have a unique idea that may be easier to get off the ground by incorporating it into an existing business?  As we move into a time where more and more baby boomers are looking to retire and sell their businesses, the opportunities are endless for budding entrepreneurs.  Your time may be now!

And what happened to Sam you wonder?  Sam did make the decision to purchase an existing store rather than start his own and was very successful in growing it.  In fact, Sam Walton grew his Wal-Mart stores to be the largest retail chain in the United States.  What business will you grow? 

Author
Amy Alonso 
Administrator
Benchmark International

T: +1 615 924 8522
E: alonso@benchmarkcorporate.com 

READ MORE >>

Rising Interest Rates – How Does This Affect the Sale of My Business?

Most business owners have become acutely aware of how a change in interest rates can impact their financing decisions.  Whether it means taking advantage of a competitive rate and refinancing previous notes or whether it means holding off on acquiring a needed piece of equipment until the monthly payment becomes more manageable; the interest rate associated with obtaining debt can play a major role in the decisions a business owner makes in the day-to-day operations of their company.  But, how do interest rates impact the sale of a business?  Is there a correlating relationship between interest rates and activity in the M&A market?  If there is, what is the importance of timing the sale of a business based on the indications provided by the Federal Reserve?  All of these questions are important to consider as a business owner begins to contemplate the potential sale of their company.

Ready to explore your exit and growth options?

The Federal Reserve has indicated that it is planning on increasing interest rates as it is continuing to pull back from its decade-long effort to stimulate economic growth.  As of November, 2018, the Wall Street Journal Prime Rate was 5.25% whereas one year prior it was 4.25%.  This metric is important as it consists of a survey of the 30 largest banks and is the rate at which banks will lend money to their most credit worthy customers; additionally, this rate will move up or down in lock step with changes made by the Federal Reserve Board.  So, what does this mean for those who are in the market to sell their business?  An increase in the federal funds rate increases the cost of borrowing and hence affects the value of merger deals, especially if a portion of the transaction is being financed through loans.  If the company to be acquired is highly leveraged and the cost of debt goes up, the internal rate of return is impacted, lowering the valuation of the company. 

The timing of when a business enters the open market for sale as well as the speed at which interest rates rise also plays a role in the impact that interest rates have on activity in the M&A market.  A methodical rise combined with a strengthening economy, which the United States has experienced over the past 18 months, should not have a detrimental impact on the aggressiveness with which buyers enter the acquisition market.  The reason that a controlled and steady increase in interest rates mitigates the risk associated with increased cost of debt has to do with the corresponding increase in corporate confidence.  With interest rates having been at historical lows over the past several years, many companies in the market to buy are armed with strong balance sheets earned via normal operations of the business as well as having taken advantage of low market interest rates to issue debt.  This cash held on the balance sheets of acquirers in the market may deflect some of the increase in borrowing cost due to the availability of deployable capital.  Specifically addressing those sellers looking to sell a business in the middle to lower middle market space – a slow rise in rates will give them an opportunity to cash out and use this new-found liquidity to put their money back to work in a recovering and dynamic market. 

In conclusion, the general consensus is that rising interest rates aren’t going to put a damper on mergers and acquisitions activity, at least not in the near-term.  However, as interest rates continue to increase, there will come a time when the increased cost of borrowing shifts the economics of valuation and activity.  The buyers most affected by the increase in rate will be those that rely heavily on financing through loans to complete an acquisition.  Fortunately for sellers, interest rates being at historical lows has helped buyers compile large amounts of cash on their balance sheet which, when combined with acquirer confidence in the business and consumer marketplace, a taxation environment that can be viewed as business friendly, the ideal conditions for selling begin to take shape.  It is important to take note that an increase in interest rates does not have as large of an immediate impact as the speed at which those interest rates increase.  As the Federal Reserve continues to be relatively transparent with their intentions regarding gradually increasing interest rates, and with firms having taken advantage of historically low interest rates and compiling large amounts of cash on the balance sheet, the ideal time to sell a business, particularly one in the lower middle market space, will be sooner rather than later.  As time goes on and increased rates continue to take a bite out of returns on investment, there will come a time when the balance will shift from a sellers’ market to one that is in favor of the buyer.

 

Author
JP Santos 
Senior Deal Associate
Benchmark International
Ready to explore your exit and growth options?

T: +1 615 924 8522
E: Santos@benchmarkcorporate.com 

READ MORE >>

What to Do When You’ve Lost the Entrepreneurial Spirit

When you first started your own business, you were probably brimming with entrepreneurial spirit, otherwise the company would never have got off the ground in the first place. Now, however, you are feeling lacklustre towards your business, as the mundane tasks to keep the business going are taking over and hampering your entrepreneurial spirit. Here are four steps to take action and get your business moving forward again:

Feeling unfulfilled? Explore your options...

Delegate Tasks

As your business grows you might find yourself doing increasingly more menial tasks to keep the business going. To ensure you have time to focus on the business, these tasks need to be delegated. Granted, this is easier said than done as you might want to stay in control rather than train somebody else to do them; however, if you continue to do this you are working in the business rather than on it. To ensure that you are the visionary and troubleshooter that you need to be, delegate work – you’ll be able to work on the bigger picture and your employees will appreciate the trust and responsibility you give to them.

 

Work on Goals for the Year Ahead

If you have got to a point where you have grown from a start-up then it might seem like the largest hurdle has been overcome. Nevertheless, you need to keep this momentum going to watch the company flourish. To do this, it’s a good idea to have plans and goals for the upcoming year, setting aside time to break down your goals into smaller steps with these to be actioned monthly, or even weekly. If these tasks are scheduled, and you ensure they are actioned, then this helps to make sure these goals are accomplished.

 

Encourage Innovation

If the day-to-day has become monotonous and the business is plateauing then you might want to encourage innovation to take the business in a new direction. To innovate it is useful to listen to both your customers and employees, as well as encourage your employees to take risks and think outside the box. This way, new ideas can be created and prevent the business from stagnating.

 

Take Some Time Out of the Business

Taking some time out of the business can help you to recharge. Whether this be scheduling time for yourself each evening, making sure you take time off at the weekend, or going on holiday, taking time out can help you to take a step away from the business and refresh, helping to stimulate fresh ideas.

 

READ MORE >>

What if you’re a business owner in the process of transitioning your business or considering a transition? How do you handle it?

Picture this for a moment: you’re up to bat with two outs, two runners on base and the Florida Championship on the line.  Base hit up the middle scores one, possibly two, but if you pop up, ground out or strike out, it’s game over.

Is transformation important to your business?

If you could visualize yourself in that situation, chances are you’re feeling a little nervous.  Especially if you’ve never been there before.  What if you’re a business owner in the process of transitioning your business or considering a transition?  You’re up to bat with two outs and two runners on base – how do you handle it?  Ideally, we’d all like to confidently drill the first pitch deep into the outfield to win the game, but what happens when the thoughts and concerns about the transition and life after the transition get in the way?  Things might not work out as planned. 

In the decades of serving high net worth and ultra-high net worth individuals and families, our team has worked with many who have made their wealth through the sale of the family business. Many of them were faced with a number of overwhelming thoughts and feelings: stress, anxiety, frustration, confusion and worry.  Here are some of the questions we’ve often heard:

  • Will this wealth be enough to sustain me and my family? How do I know?
  • What about taxes? What’s the impact to me?
  • How in the world am I going to invest this money to serve me and my family?
  • What about my legacy and charity – how does all this fit in?

Finding the answers to these questions requires preparation.  Unfortunately, many business owners are unprepared to address the complex financial decisions that need to be made for both themselves and their families both before and after the sale.  Many would rather wait and leave the planning to another day.  But a lack of planning and preparation has killed deals that should have closed, broken up families, and, in rare occasions, landed business owners in the hospital due to stress.

At BNY Mellon Wealth Management, we follow a collaborative, holistic, team-based approach to each business owner and family that we serve.  Leveraging the strength and expertise of our global firm, we help provide clarity by working with business owners to implement:
Wealth transfer and tax mitigation strategies

  • Pre- and post-sale cash flow optimization
  • Pro forma net worth statements and estate flow projections
  • Custom post-transaction investment strategies
  • Family governance and next generation education plans
  • Strategic philanthropy

Proper planning takes time, and having the right team of experienced professionals is critical to success.  Armed with an experienced team who can assist with planning and preparation, you too can confidentially step up to the plate and win the game. 

Author:
Christopher Swink
Senior Wealth Director
BNY Mellon Wealth Management
T: +1 (813) 405 1223
E: christopher.swink@bnymellon.com
Visit the BNY Mellon Website

READ MORE >>

How to Avoid Leaving Money on the Table When Selling a Business

The sale of a privately-owned business is often the most significant financial event in the life of the owner. It marks the culmination of years of hard work and converts paper wealth into real wealth. It is a one-time opportunity with no do-overs. Every business owner surely desires the best economic outcome, yet, time and time again, business owners leave money on the table by not adequately preparing for the sale of their company. This article suggests five actions that private business owners can take to avoid leaving money on the table when selling their business. 

READ MORE >>

What Funding is Available to Grow my Business?

When you are ready to take the steps to grow your business, you need to determine the funding you can receive to help make it happen. Many different funding options are available, but how do you know which is right for you?

The first method that comes to mind for many people is borrowed funds. There are multiple options for gaining funding through lenders, including Small Business Administration (SBA) loans, traditional bank loans, micro-loans, and online business loans. SBA loans and traditional bank loans typically take months to secure and the repayment terms can run up to twenty-five years with interest rates varying. Micro-loans and online business loans can take less time to secure but they carry higher interest rates than bank loans and may have pre-payment penalties. Additionally, even if you get a loan, business growth is not guaranteed. If the borrowed funds are not used wisely, you can end up paying back money with interest that never helped you make any additional money in the first place, just digging you further into debt.  

Do you have an exit or growth strategy in place?

Another method of funding is retained earnings. This approach uses a combination of operating cash flow and profits left in the business to fund your growth plan. Using retained earnings avoids adding debt and interest payments. You also stay in full control of your company by not involving outsiders in your business. However, use of retained earnings can be a very slow process if you must wait and build up the funds you need. You also run a major risk of not having the finances necessary to keep your company operating from a healthy perspective. 

Private equity is a way to acquire funding by selling shares in your company to outside investors. Through this long-term growth strategy, you avoid getting involved with a bank and you minimize your risk. With venture capitalists or angel investors, you also gain the benefit of added expertise and personal interest in the success of the business. One aspect of using equity capital is that shareholders will be expecting a return on their investment. This could result in the consideration of a merger with another company or having the company acquired by a larger company. 

Many companies choose to use mergers and acquisitions strategies because the growth is more imminent. Instead of waiting years for the business to grow itself, merging with another company can double the company’s size, reduce competition, and increase profitability. Merging with another business also gives you the advantage of acquiring intellectual property and expanding innovation. 

Working with an experienced growth partner such as Benchmark International will help you figure out the best direction for you, whether it is a merger, an elevator deal in which you retain a stake in the business, a cash-on-completion arrangement, or a complete exit strategy. There is a range of options available depending on how you want to see your company transformed. The best strategy will also depend on the state of your company and the current market. It is important that there is careful consideration of the cultural fit between the two companies and a firm understanding of how to manage expectations. Having the right connections around the world in various sectors is also a key attribute you want in your representation because it opens up a wealth of opportunities. 

The right partner can maximize value and make your vision a reality for the business that you have worked so hard to build. Benchmark International can be relied upon as a leader in the global landscape to get you the results you deserve. Ready to explore your exit and growth options? 

READ MORE >>

The Best-Kept Secrets for Business Growth

Expand your reach.

By finding ways to increase your exposure to the world, you can give your business the momentum it needs to grow. Examine your marketing plan. Broaden your social media footprint. Immerse yourself in the trade by publishing articles and having a strong presence at trade shows. Think of creative ways to interact with customers and target markets to generate buzz and get people talking. The extent of the opportunities available to you will vary depending on your company’s industry, but you will want to be sure you are doing everything you can to reach as many people that you can.   

Embrace change.

Doing business a certain way may have gotten your business where it is today, but you should not be afraid to make some changes. Is there a new process or department you can implement? Is there a sales opportunity you are missing? Are there adjustments you can make to save time or money? Always be open to hearing new opinions, ideas, and ways of doing things. Markets can change quickly and you will want to adapt seamlessly. By closing the door on change, you could be closing the door on growth. 
 

Value relationships.

It is just as critical to maintain existing relationships as it is to cultivate new ones. You will want to network in new circles and expand your horizons. At the same time, you will want to show your long-term customers that they are important to you. After all, they have been with you through it all and are partially responsible for your success. Stay engaged with them and focus on their needs. Your track record of lasting relationships is a reflection of your company and its values, making doing business with you more appealing to new customers. Those relationships can also be a source of referral of new business opportunities.
 

Get a boost through mergers and acquisitions.

Consider using mergers and acquisitions strategies as a smart option and faster route to generate growth. While greatly beneficial, pursuing a merger or acquisition can also be quite complex. This is especially the case if you are planning to expand into a global market, which presents its own host of challenges. Ready to explore your exit and growth options?

You will need to determine if you need a cost synergy or a revenue synergy solution. For example, buying direct competitors to increase your company’s size and decrease competition is a revenue synergy. So is adding value by purchasing companies that are market adjacent to your own. This method can help you add new talent or gain ownership of intellectual property. In contrast, a cost synergy solution reduces costs through consolidation of overlapping entities. Getting this right can result in a valuable deal for all parties involved.

Major deals include a large amount of small details, such as timing, tax planning, and logistics. Additionally, if you plan on leaving the business as part of the transition, you need assistance crafting your exit strategy. Consult a resource that has vast knowledge and experience in all of these areas. By partnering with a reputable mergers and acquisitions firm, it will be easier for you to navigate these complicated waters and ensure that you find the best strategy for your company’s growth.

Schedule a Call

READ MORE >>

Top 10 Places to Retire in 2019

Are you considering selling your company and retiring? Once you have an exit strategy planned, it is time to think about where you will spend the best years of your life. We have compiled a list of inviting destinations to inspire you to make the most of your retirement.

Ready to explore your exit and growth options?

New Zealand
Relocating to New Zealand has the power to change your entire outlook on life. It is home to a pristine environment, quaint communities, and amazing weather. There is plenty of sunshine and little variance between summer and winter temperatures. The unique landscape offers black sand beaches, expansive mountains, glowing caves, and delightful wildlife such as seals, penguins, and dolphins. The island nation is also home to world-class wineries, mind-blowing golf courses, luxury sailing, and exclusive spas

Monaco
The gorgeous French Riveria is home to this ultra-glamourous city-state that is often noted as one of the best and safest places in the world to live. Settle in among the worlds VIPs and high rollers in this tax haven of luxurious real estate and natural Mediterranean beauty. The climate is quite temperate, the location is in close proximity to all of Europe, and the healthcare is first-rate. Monaco has quite the gambling and cultural scene, and you can expect to be surrounded by luxury homes, vehicles and yachts.

The Dalmation Coast, Croatia
The scenery in Croatia is breathtaking along the crystal clear waters of the Adriatic Sea, with lush mountainside forests and spectacular castles. The country offers a rich culture, with Gothic and Renaissance architecture showcasing a unique background of centuries of heritage. The local cuisine is delectable and the country is also boasts a renowned wine region. From skiing to sailing to diving, there is a wealth of things to do while you enjoy all four seasons.

Algarve, Portugal
One can live quite well in this culinary paradise on very little money. Rent is inexpensive, the area is safe, English is widely spoken, and the scenery is rich with churches, pagodas, temples, mosques, and British-colonial buildings. The cost of healthcare is also low. Malaysia is one of the top five countries in the world for medical tourism with several private hospitals that are internationally accredited.   


The Cayman Islands
The Cayman Islands may be one of the most relaxing countries in the world in which to retire. Spend your days basking on pristine white beaches, indulging in the hundreds of restaurants, and taking in the vibrant cultural scene. The tropical climate, clean air, and high quality medical care make the country ideal for a healthy, stress-free lifestyle. It is also quite possibly the safest of the Caribbean Islands, with one of the lowest violent crime rates in the world.

Costa Rica
The tropical climate is a big attraction for anyone looking to move to Costa Rica. But the region offers much more to consider. Gorgeous beaches, rainforests, and mountains compliment the bustling cities and quaint towns. There is excellent medical care, modern infrastructure, a rich culture, and a laid-back way of life. It is truly one of the most peaceful places in the world. You’ll also find a very welcoming expat community and irresistible real estate opportunities.


Santo Domingo, The Dominican Republic
Enjoy a relaxed Caribbean life balanced with the benefits of a growing economy. The country’s infrastructure has improved greatly over the past 10 years. It has two international airports to accommodate convenient travel needs. Plus, the area offers a uniquely sophisticated European lifestyle with incredible dining, shopping, culture, and history. Whether you’re strolling the cobblestone streets alongside glass skyscrapers, or sailing around the thousands of miles of aquamarine coastline, Santo Domingo is a place of worldliness, charm and excitement.

Did you see the Top 10 Places to Retire in 2018?

Abruzzo, Italy
Located in central Italy, Abruzzo is comprised of beautiful small cities that are abundant with culture and warm, friendly faces. Considered the most romantic corner of Italy, the sprawling countryside is sprinkled with vineyards, orchards and groves. You’ll have access to amazing cuisine, majestic castles, and picturesque parks. Beaches and mountains are both nearby, and it is only a one-hour drive to the metropolis of Rome.

Malta
Enjoy a warm and sunny climate along with a luxurious lifestyle on the Mediterranean island nation of Malta. It is Europe’s smallest country but it is big on culture and things to do. Imagine yourself dining al fresco along the coast while basking in beautiful sunsets, or sailing around the islands while taking in the enchanting architecture. Malta is also home to many organized groups for expats, offering horseback-riding clubs, running clubs, dinner nights, and more.

Dubai, United Arab Emirates
BelIf you’re seeking an extravagant lifestyle, Dubai is definitely one destination to consider. Every inch of this city is built with luxury in mind. Make your home at the top of one of the world’s most majestic skyscrapers and overlook this spectacular oasis in the desert. Or settle into a luxury villa in a gated community on iconic Palm Jumeirah island. Here you’ll find plenty of glitz and glamour, a popular boardwalk, beach clubs, spas and a nightlife scene. Dubai is also a great location for making new business connections.

If you’re ready to start planning your retirement, contact Benchmark International for help with your exit strategy.
Ready to explore your exit and growth options?

READ MORE >>

How Can I Expand My Business Internationally?

Expanding into new markets around the world is an exciting opportunity for business growth. But where do you start? There are several factors you will need to consider when undertaking a venture of this magnitude.

First and foremost, you will need to determine if expanding into a new country will be profitable. Identify your target market and assess the need for your commodity in that market. Perform a product gap analysis or SWOT analysis to determine demand and how your product or service stacks up to local products. You basically need to determine whether anyone will buy it, so it can be a wise move to test your product in that market before going any further.

Create a localized business plan to evaluate your preparedness for the venture, and set reasonable goals for the process. Expanding into new markets is akin to starting something new and it’s going to bring a new set of challenges. Consider if you need to create a new executive team to help manage the transition or if your existing team can hit the
ground running.

One of the most important steps you can take in expanding to a new market is to make sure you take the time to understand the country’s culture. Etiquette, language, and business culture can vary greatly and impact the success of your endeavor.For example, make sure your product or business name translates appropriately into the native language.

You will also need to think about the country’s logistics and how you plan to distribute your product or service. Consider legal regulations, tax laws, insurance needs, banking transactions, transport costs, data protection, and labeling requirements. You should also protect your intellectual property by looking into trademarks, patents, and design rights. Hiring an international business consultant can help you avoid any pitfalls and ensure that all your bases are covered.

Taking a product into new markets also means understanding the ins and outs of exporting. The good news is that it’s often in the best interest of most governments to boost exporting, so seek out ways that they can help you with market research, trade support, and exportation training programs. This information is typically available on government websites. You can also contact trade commissions, chambers of commerce, and other organizations
for assistance.

If you plan to acquire an existing business, you will need the proper guidance from an experienced business acquisitions firm to help find the best opportunities and broker a successful deal. There is plenty of due diligence required to adhere to local laws and make sure the terms of the acquisition suit all parties involved. At the same time, the right acquisition can be quite advantageous and reduce some of the risk that comes with an international venture. The business to be acquired has existing infrastructure in place and understanding of the local market’s regulations and relationships, offering some stability to a complex process. A sound strategy can make all the difference when buying a company.

There is a great deal to manage when expanding a business internationally, but you don’t have to do it all alone. World-class business experts with strong global connections, such as Benchmark International, can help you analyze the market, navigate the process, and tackle the world.

READ MORE >>

Upcoming Webinar: 12 Biggest Mistakes Sellers Make in the Term Sheet

Date:
Tuesday, February 12th at 10:00am - 11:00am EST

Register for Webinar

Details:

Maximizing value isn’t only about the headline price. It’s about getting the deal right, using your leverage when you have it, and knowing where you stand in the deal at all times. 

Sellers lose more money at the Term Sheet stage than in any other part of the process. Buyers know the ins and outs. They know how to best use the Term Sheet and the process that surrounds it to make their offers look better than they might end up being. For sellers, this is typically the least understood part of the company sale process. This experience gap is unfortunate for sellers because it results in not only lost value but at times the loss of the entire deal; a loss that comes after a great deal of financial and emotional investment. 

For sellers to truly maximize the value of their business in a sale, they must look beyond the headline number that usually appears in the first paragraph of the Term Sheet and understand the other key value drivers in the rest of the document. If the headline number was the only key term, Term Sheet’s would be one paragraph long. This quick introduction will concentrate on the 12 most common sell-side errors in the Term Sheet process.

Hosts:

Clinton Johnston
Managing Director
Benchmark International

Register for Webinar

READ MORE >>

How to Deal with State Income Tax when Calculating EBITDA

As we all know, EBITDA is not defined under either accounting’s Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).  What’s worse is that there is no other evenly mildly authoritative source that delves into the specifics of the definition beyond much more than a one-word description of each letter’s meaning.

Despite its murky definition, EBITDA remains the lengua franca between buyers and sellers when discussing valuation of privately held companies. Regardless of the true manner in which the seller sets the minimum price for which she will part with her business and whichever of the likely more academic methods the buyer has used to determine its maximum purchase price, the parties tend to lob multiples of EBITDA back and forth across the negotiating table.

While the exact meaning of each letter in the acronym is worthy of its own discussion, there is perhaps no more frustrating issue than how to deal with state income tax in the “T” portion of the term. The frustration arises because some parties refuse to acknowledge that what is so eminently clear - that state income taxes should be treated in an identical manner to the treatment of federal income taxes.

Want to talk with a Benchmark specialist? Schedule a call here >

The very purpose of using EBITDA in these discussions is to place the concerned enterprise in neutral position with regard to capital structure, accounting decisions, and tax environments.  This is why, and all parties do agree on this point, federal income taxes would always be added back to earnings when making this calculation. The proponents of not adding back state income tax are never able to explain why differing treatments would result in better serving the objective of using EBITDA.

State income taxes, like federal income taxes, are only due when a business is profitable.  A business’s profitability is effected by, among other things, its capital structure (because more debt means more interest and interest reduces income and is therefore a tax shield whereas dividends do not and are not) and its depreciation (because, again, depreciation reduces earnings and serves as a tax shield). These factors have the same effect on state income taxes as they do federal income taxes.  Thus, the amount of federal and state income tax a business pays in a given year will vary depending on the quantity and rate of loans outstanding that year and the method and amount of depreciation employed (i.e., the entity’s capital structure and accounting decisions).  The amount of state income tax paid in a given measurement period is no more or less a function of the business’s operations than is its federal tax paid over that same period.

Further, while also not defined under GAAP, “profit before tax” (PBT) is a term more commonly used by accountants than EBITDA, appearing on a fair number, if not the majority, of companies’ routine income statements.  As accountants will always take this measurement before including the expense of both federal and state income taxes, why should the same logic not apply to EBITDA?  EBITDA is, of course, simply PBT minus interest, depreciation and amortization charges.

Proponents of disparate treatment suggest that the state income tax is an unavoidable cost of doing business. But this argument fails for two reasons.  First of all, it is not unavoidable. As discussed above, high debt levels and aggressive depreciation can allow the minimization or avoidance of state income tax (just as they can for federal income tax).  But more significantly, it is not the job of EBITDA to take out only the “avoidable cost of doing business.” Eliminating 401k matching, reducing salaries, renegotiating a better lease, or relocating to smaller premises may also be ways to reduce the cost of doing business. Yet no one proposes adding benefits, salaries, and rent to EBITDA because they are wholly or partially “avoidable”.

Continuing with this logic, state income taxes are avoidable by changing domicile just as federal income taxes are avoidable by changing domicile.  Ask Tyco, Fruit of the Loom, Sara Lee, Seagate or any of the other 43 formerly US companies that the Congressional Research Service identified as redomiciled for this purpose in the decade leading up to the 2014 election.  Would the EBITDA of any of these companies not have included an addback for federal income tax because it was an “avoidable cost of doing business”?

Ah, state income tax, the poor runt of the litter in the world of finance. Too small to be taken seriously, too complicated to be understood, and too varied to warrant the time.  Five states have no such tax on corporate entities. Most of the other 45 do not impose it on entities making federal S-elections.  Those who do impose it do so in many different ways.  And the names are so confusing, often being called by another name that allows the state’s development board to claim they do not have a state corporate income tax. Capped at 6% or less in most states, it pales in comparison to the 35% federal rate. (Though Iowa hits double digits at 12%, it is the only state to do so and there exists no documented record of anyone ever buying a business in Iowa.) How unfortunate that this scrawny beast seems to raise its head so uncannily when a deal is on the line, in those final days when the parties are so close yet so far away on valuation and the closing hinges on the fate of this oft-misunderstood adjustment to earnings.

READ MORE >>

Retirement Tips for Business Owners

Planning for retirement can be a daunting task, but if you follow some basic principles and seek the proper help, the process can be reassuring and even empowering. 

Start with the numbers.

The first step you will want to take in planning your retirement is to figure out how big of a nest egg you will need in order to live comfortably. Once you set your goal, you can assess your current position and determine how much time you will need in order to meet that goal, and any additional steps you’ll need to take to make it happen. Consider the amount of income you expect to earn over your remaining working years and how much you want to contribute to retirement plans. A quick Google search for online retirement calculators can give you an easy starting point. 

Determine your company’s valuation.

Before you can thing about selling, you need to know what your business is worth. Your company’s cash flow, market value comparable to other companies, and precedent transactions are all factors in business valuation. You’ve worked hard to build your business and you shouldn’t have to make compromises when you want to retire. Consulting a company broker such as Benchmark International will help you get an accurate picture of your company’s worth and take the next steps in selling your business in the smartest way possible and with the smoothest transition. After all, you want your freedom to retire, but you also want your employees to be taken care of and your core business values to remain in tact.

Schedule a call to speak to an Analyst

Invest early.

It’s crucial to start investing in your retirement as early as possible. Whether it’s a 401k or an individual retirement account (IRA) or both, investing sooner means earning more interest. 401k plans have higher maximum contribution levels and a preselected list of limited investment choices. IRAs allow you to invest in a wide variety of mutual funds, exchange-traded funds (ETFs), and individual stocks and bonds. 

Another option to consider is a Simplified Employee Pension (SEP) plan. It gives the business owner a vehicle to contribute to their employees’ retirement savings as well as their own, with easy setup and flexible options for funding. Annual earnings are not taxed and it grows tax-deferred, and there are no maximum contributions. 

Most importantly, all of these options allow your money to grow tax-free. If you have already begun to invest, take a step back to look at your investment plan and see if you need to make it more aggressive to achieve your goal within the expected timeframe. Consulting a financial expert can help you choose what type of retirement plan is right for you and create a blueprint to make the most of it. 

Strike a balance.

Saving and investing are not one and the same—and you’ll need to do both. Place money into a savings account that has slow but guaranteed growth. As a counterbalance, invest money in an investment account that carries some risk. While there’s always a risk you can lose your principal, the return may be quite high if invested wisely.

Diversification of your financial portfolio is also an important component of your retirement plan. Factor in goals, risks, and think about how to reduce vulnerabilities. The younger you are, the more aggressively you can invest. Consulting a financial planner can help you easily determine what is right for you.

Get exit planning advice.

You’ve put everything into building your business. When the exciting time comes to move on from that business, you’ll want to start planning your exit strategy sooner rather than later. Think about how you would like to see the business make a successful transition. Think about increasing the value of your business and selling at the right time. The smartest way to do this is to partner with a trusted M&A firm such as Benchmark International to help you make your dreams a reality. They will help with your company valuation and offer a winning strategy tailored to your specific needs, and even help you find the perfect buyer. Even if you only wish to partially retire, creating an exit plan opens up your options and gives you peace of mind for when the time comes for a transition.  

Take the next step.

If you are ready to plan for your retirement and create a successful company exit strategy, call Benchmark International today.

Schedule a call to speak to an Analyst

READ MORE >>

Is The End Near?

For the last several years, the saying has been “There’s never been a better time to sell.” Multiples have been high. Buyers have been plentiful. Debt has been cheap.  Optimism has run strong. The truth is, it is undeniably still a great time to sell; it’s never been better.  But …

It takes time to sell and for the first time since emerging from the Great Recession, certainty about whether or not the later part of the new year will be a good time to sell- the best ever – is down. Anyone who says they can predict these markets is a fool.  But the probability of a turn is certainly high and increasing as we begin this year.

The good news is that the signs indicate not an immediate downturn but rather one that can still be beaten to the finish line. Selling a business should take six months to a year. Thus anyone moving out now on a process should be able to take advantage of these good times – if they get started fast and, more than ever, move diligently and place a higher emphasis on certainty of close when selecting their winning bidder.

The change in the tea leaves really began in November and accelerated throughout December. Some of the key indicators include:

  • In a December Duke University poll, almost half of responding U.S. CFO’s stated that they believed a recession was likely to occur in 2019. Even more compelling, more than 80% of those CFO’s felt recession would strike by the end of 2020.[1]Right or wrong; the respondents to this poll are the key influencers of the amount of M&A activity generated by strategic buyers – and those most responsible for bad deals. If the economy does sour, or they simply believeit is going to sour, they will not be sticking their necks out for adventuresome acquisitions at record multiples.
  1. The public markets provide several signs.  The first is the relative comparison of the large caps, to the midcaps, and then to the small caps. The M&A market for privately-held companies can essentially be seen as a microcap extension of the public markets. While we all know the public markets did not do well last year, what most have not commented upon is that in the last four months of the year, according to the Wall Street Journal, (2) large caps were down 5.5%, midcaps were down 8.6% and small caps are down 16.4% going into the last trading week of the year.We’ve not yet seen the extension of this extrapolated line into the private markets but one must wonder how long the trickle-down effect will take.  Smaller companies tend to do well at the beginning of an upturn and larger cap companies do better at the end.
  • Debt is becoming a more attractive alternative for investors. This will be problematic to the sellers of businesses for various reasons. Most obviously, M&A buyers are large consumers of debt. They use it to buy companies. If they must pay more for their debt, they have less money left in their accounts to offer sellers. Less obviously but probably more significantly, the historically abysmal returns debt has offered for much of the last decade have led many typical debt investors, including insurance companies and pension funds, to provide equity to private equity funds. Flush with this extra cash, PE funds have been on a buying spree which is commonly stated to be the driving force behind today’s frothy valuations. As those investors shift back to the more normalized bond markets, private equity will have less energy and vigor for aggressive bidding.
  • The financial press seems to be of the mind that the artificial boost to strategic buyers provided by the recent tax cuts has run its course. Is this a fair assessment or simply “Trump-bashing”? We have no idea but we all know that in the markets, sentiment is often more important than reality. Perhaps the fact that 2018 saw increasingly attractive results for sellers was a result of those tax cuts carrying the bull market on around for one last lap. Again, we are not talking certainties here, just indications and probabilities.
  • The strong dollar has dampened the ability of foreign buyers to compete in the US markets.With yet another class of buyers lowering their activity levels, it may not be long before the laws of supply and demand kick in and the equilibrium point on the old supply and demand curves shifts down and to the left.
  • China has largely gone home. As 2018 proceeded, the Chinese government tightened its grip on the export of capital. In the last half of 2018, the US government began to make Chinese investors feel unwelcome as well. Numerous high-profile deals were killed in a very visible fashion as a result of regulatory interference on both sides of the Pacific. These included, most notably, the purchase of Recurrent Energy Developments operations by Shenzhen Energy in August and then Broadcom’s acquisition of Qualcomm.  According to CNN Money, Chinese investment in the US fell by 92% between the first half of 2018 and the first half of 2017 – 92% - and has been declining steadily since the second half of 2016.[1]Add to this the late 2018 US-China financial cold war and China’s slowly increasing realization that it has been splurging on debt that is now coming due and proving hard to pay down, and the spigot is now approaching the closed position.
  • Forecasted growth of companies in the US public markets has taken a definite downturn. The S&P 500 saw collective growth of 7.3% in sales and 8.2% in profit year-over-year in the third quarter. The Wall Street Journal has been consistently predicting over the last three months that those same figures in a year will have fallen to 5.4% and 4.1% respectively.[1]While the private markets are not the public markets, both are selling that intangible asset known as future cash flows and if buyers feel the big companies can’t continue to deliver outsized returns, they are likely to share at least some of that sentiment when it comes to the private markets.
  • Divided government might bring an end to the pro-business approach demonstrated over the last two years. The people that matter state that decreased regulation, lower taxes, and a more tolerant enforcement environment have benefited their businesses and increased the prices they are willing to pay for companies. But a period of more compromise is now inevitable and the uncertainty of the 2020 elections will likely only grow and bring with it a sense of increased risk that will affect valuations.
  • All good things must come to an end. We have enjoyed a ten-year bull market in M&A, both private and public.  That qualifies as “long in the tooth” to be as polite as possible.  It seems that 4% GDP growth is not sustainable. Unemployment can’t go any lower. Further tax decreases seem unlikely. The federal deficit and debt are growing. Interest rates are not likely to drop. Confidence and sentiment could not be higher than they were three months ago and are in fact a bit lower now than they were then.

The good news is that we’ve seen absolutely no indication that the market for private companies has yet been affected by these indications. Furthermore, changes in valuation, whether favorable or unfavorable, have not historically occurred rapidly. If there is to be a drop in multiples, it will be perhaps not gradual but at least measured. That said, the probability we now face is that we are more likely than before to look back from a spot twelve months in the future and say “I remember when it, was the best time to sell.”

Author:
Clinton Johnston
Managing Director
Benchmark International

T: 1-813-898-2363
E: Johnston@benchmarkcorporate.com

READ MORE >>

2019 is the Year to Put Your Exit Strategy in Motion; Here’s why:

M&A Activity has remained steady over the last year, but can the same be expected of the years to come? A closer review of the annual activity for 2018 indicates that the peak of the M&A cycle is slowly coming to a plateau. It’s time for business owners to reflect and decide whether riding out the next few years is truly worth it.  

Here’s what we know about M&A activity and what we can predict based on current trends. Year over year, the total number of completed deals has been on a slow and steady decline from 2015 to 2018. In 2015, there was a total of 16,566 deals completed. Whereas, in 2018, there have been 10,734 deals completed so far. Although there has been an impressive total deal value of more than $800 billion completed in deals so far in the US for the 2018 cycle, that value is a decrease from previous years.  

What business owners have to look forward to in the coming years is a bit of uncertainty, especially following the anticipated 2020 presidential elections. 2019 is expected to be another great year for M&A transactions, but it may very well be one of the last for this incredibly hot activity we have experienced recently 

Following the 2016 elections, there was a short pause in activity followed by a quick uptick and a wave of transactions. The 2018 midterm elections were an indication of the coming “blue tsunami” predicted in 2020, with the Democratic Party taking hold of the House of Representatives. A change in political leadership can unsettle the ship that so many have been sailing upon for the last four years. President Trump’s 2016 campaign was centered on economic surety, and that surety brought a wealth of support for M&A transactions to follow. Should a new leader be at the helm of the nation following elections, volatility in the market is certain 

In addition to an anticipated election, there is no denying that the successful economic swing that has taken place thus far has also had an effect on the current market standing. A fourth interest rate increase is anticipated before the end of 2018, and three additional hikes are estimated to take place in 2019. Buyers will be wearier of transaction decisions as interest rates increase. They will not want to pay high valuations as those seen in previous years because the purchase risk will increase as a result.  

Now is the time for business owners to act before the market shifts from a sellers’ market to a buyers’ market. Steadily increasing interest rates will give more power to buyers in transaction negotiations. Business owners should keep this in mind before they decide to wait a few more years to put their exit plans in place.  

Moreover, the market is predicted to become somewhat saturated over the next decade as more adults are coming to retirement age. Baby Boomers make up approximately 60% of privately-held businesses in the in the US, and this means the number of businesses on the market are going to increase a great deal.  

As a result, valuations for businesses will likely decrease. Buyers will have many options at their disposal for their ventures, so they will have a higher competitive advantage against sellers. Sellers can take advantage of the current market and get ahead of the game now.  

A transaction can take anywhere from one year to eighteen months to complete on average. Getting a business on the market sooner rather than later will give sellers the power to take advantage of lower interest rates and getting a deal locked in before the market is filled with a myriad of new businesses.  

A sell-side mergers and acquisitions firm helps business owners derive the most value for their businesses in a sale. Benchmark International is a firm with decades of experience and a wealth of dedicated professionals who are looking out for our clients’ best interests in a transaction from start to finish. If you want to learn more about where the market is headed and what your options are, we can help you formulate an effective exit strategy now. 

 

WE ARE READY WHEN YOU ARE. 

Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.

Schedule a call to speak to an Analyst

Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com

Europe: Carl Settle at +44 (0)161 359 4400 / Settle@BenchmarkCorporate.com

Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkCorporate.com

 

ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.

Website: http://www.benchmarkcorporate.com
Blog: http://blog.benchmarkcorporate.com/

READ MORE >>
1 2
»

Subscribe to Email Updates

Recent Posts

Follow Us on Twitter