Growing a company once it has reached a certain plateau of success can be challenging. Mergers and acquisitions are a powerful tool for boosting the growth of an existing company—especially cross-border M&A. As a business owner, you should consider the different ways your company can benefit from an international deal.READ MORE >>
A Seller’s Market Versus a Buyer’s Market
In a seller's M&A market, excess demand for assets that are in limited supply gives sellers more power when it comes to pricing. Such demand can be generated and galvanized by circumstances that include a strong economy, lower interest rates, high cash balances, and solid earnings. Other factors that can instill confidence in buyers—leading to more bidders willing to pay a higher purchase price—include strong brand equity, significant market share, innovative technology, and streamlined distributions that are difficult to emulate or recreate from scratch.READ MORE >>
As the owner of a Software as a Service (SaaS) company, there are several strategic steps you can implement in order to drive growth and maximize the value of your business.
1. Expand GeographicallyREAD MORE >>
The Benchmark International team is proud to announce that our chairman, Steven Keane, has been named International Chairman of the Year in the 2021 Global Business Awards given by Corp Today Magazine.
London-based Corp Today is a business enterprise magazine that focuses on emerging businesses and the world’s leading and fastest-growing companies, as well as their style of doing business and manner of delivering effective and collaborative solutions to strengthen market share. Their reader base consists of 138,000 C-level executives, VPs, Consultants, VCs, managers, and advisors.
The publication’s dedicated team of in-house researchers handpicked all of the 2021 winners based on merit and not popularity. Their stated goal is to recognize the best in the business.
We salute Steven for earning this prestigious recognition, as he certainly deserves it. CEO Gregory Jackson stated, “Steven’s exceptional leadership is a testament to the greatness that our company continually aspires to achieve, never settling for anything less than the very best. It’s just how we are wired at Benchmark International. Congratulations, Steven.”
READ MORE >>
If you are considering selling your company, you should be aware of a certain menace that could have you in its crosshairs. There are direct buyers out there who intentionally prey on business owners, attempting to acquire a company by blindsiding its owner with big promises and, more importantly, taking advantage of their lack of guidance from a seasoned M&A professional. These buyers purposely look to avoid competition for a company because competition drives valuations higher, and they want to make an acquisition on the cheap—in addition to other shady maneuvers.
Bait & Switch
Some buyers will attempt to pull “bait & switch” tactics. To initially intrigue a seller, the buyer will present a high dollar amount. As they conduct due diligence and get the target more and more committed to the deal, they begin chipping away at the value until they reach a price and terms that are far more favorable for the buyer. This is typically an exhausting process for the seller and can lead to plenty of regret. If the deal falls apart, the seller may be reluctant to restart the process with another buyer, thinking the process will just be the same. In reality, it could have been completely different for the seller if they had a reputable M&A specialist on their side from the beginning.
In the GAMECHANGERS (ACQ5) 2021 GLOBAL AWARDS, Benchmark International has been named the International Mid-Market Corporate Finance Advisory of The Year.
The ACQ is a leading corporate news publication serving the sector since 2003, with a global audience of more than 261,000 subscribers. The GAMECHANGERS (ACQ5) GLOBAL AWARDS celebrate achievement, innovation and brilliance, recognizing the most outstanding organizations and professionals in the world.READ MORE >>
It’s no surprise that the COVID-19 pandemic slowed M&A deal activity overall in 2020. According to data from PitchBook, more than 2,000 transactions closed for a value of $336.8 billion in Q2 of last year. That represents a 41 percent decline in the number of deals from Q1. Yet, deals did pick up in the second half of the year, which is likely to continue, as businesses are poised for improved economic conditions that leave COVID-19 in the rearview mirror.READ MORE >>
As a business owner, maybe you haven’t given much thought to selling your company. Or maybe you’ve bounced the idea around but not too seriously. It’s pretty common for business owners to think, “I have years before I plan on selling my business. Why would I worry about that now?” Well, here’s the thing. Life is unpredictable. Just look at how prepared the world was for the COVID-19 pandemic. We think it’s safe to say that no business owner was prepared for that.
But being prepared for the unexpected isn’t the only reason that it is important to have your business in “sale ready” shape at all times, even if you’re not ready to sell. If the company is not in ready condition, it could cost you financially. And it goes beyond that. Always operating your company as if you are ready to sell accomplishes several very beneficial objectives. It ensures that you are operating at peak performance with a focus on profitability at all times, and it helps you avoid being too late to the game to make the necessary changes to be ready to sell. A person’s priorities in life can change quickly or even gradually over a span of years, and you might not have the time to correct any issues that would impact the valuation of your company and, ultimately, its sale price. It’s important to remember that properly preparing a company to go to market can take years. When push comes to shove, if you end up in a situation where you need to sell, not being ready can be a costly mistake.READ MORE >>
Working capital, also referred to as net working capital, is the measure of a company's liquidity, operational efficiency, and short-term financial status. It is the difference between a business’s current assets, its inventory of materials and goods, and its existing liabilities. Net operating working capital is the difference between current assets and non-interest-bearing current liabilities. Typically, they are both calculated similarly, by deducting current liabilities from the current assets. So, essentially, if a business’s current assets total $500,000 and its current liabilities are $100,000, then its working capital is $400,000. But there are a few variations on the calculation formula based on what a financial analyst wants to include or exclude:READ MORE >>
Maybe you’re not sure if you are ready to sell your business, but you’re curious about what you could learn if you put it on the market. You can always put your company on the market at any time, but you should understand the right way to do it, and everything that you need to consider.READ MORE >>
The COVID-19 pandemic has impacted businesses of all sizes, affecting the value of many of those businesses. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was created by the U.S. government to get businesses through the pandemic, and includes the Paycheck Protection Program (PPP), which is designed to give private businesses access to cash so that they can continue to pay employees and cover other expenses, such as health insurance, rent/mortgages, and utilities, over a 24-week period. The loans contain provisions for forgiveness as long as the company meets certain requirements and certifications. The PPP loan and its associated forgiveness have impacted how company valuations should be determined for the recipients.
For company valuation purposes, there needs to be an understanding of the reasons that the business got the PPP loan. The loan could indicate that the company has been under duress. Because of this, past financial statements may not accurately represent the future of the business.READ MORE >>
When a company is sold, it can have major effects on employees, customers, clients, and suppliers. Uncertainty stokes fear in most people, as they wonder about their security and their futures. Even top management can feel as though they failed at their jobs when the company is being bought out. For these reasons, it is important that the messaging and transition planning is handled very carefully and thoughtfully leading up to an acquisition—especially considering that the majority of acquisitions fall through. Announcing the news too early can cause widespread unrest over a deal that never happens
Communication is everything in this situation, but it needs to be planned. Before announcing a single word about the sale of the company, you should have a solid plan in place. A consistent message is critical and the distribution of the information should be carefully coordinated both internally and externally to avoid misinformation and confusion. Your plan should clearly outline intentions, steps, timelines and how the process will affect all parties. Predetermine what will be conveyed by whom and when. Figure out how to address questions that you are unable to answer and consider all potential scenarios for all parties involved. And always remember how critical confidentiality is during this time. You do not want details leaking to the press before you are ready to go public.READ MORE >>
How Private Equity Works
Private equity firms raise financing from institutions and individuals and then invest those funds into the buying and selling of businesses. Once a pre-specified amount is raised, the fund closes to new investors and is liquidated. All of the fund’s businesses are sold within a set timeframe that is typically less than ten years. The more successfully a PE firm’s funds perform, the better its ability to raise money in the future.
PE firms do accept some limitations on their use of investments under fund management contracts, such as the size of any single business investment. Once the money has been committed, investors have nearly zero control over its management, unlike a public company’s board of directors.
The leaders of the companies within a private equity portfolio are not members of the PE firm’s management. Private equity firms control its portfolio companies through representation on the boards of those companies. It is common for a PE firm to ask the CEO and other business leaders in their portfolios to invest personally. This offers a way to ensure their level of commitment and motivation. In return, the operating managers can get significant rewards that are linked to profits when the company is sold.
With large buyouts, PE funds usually charge investors a fee of around 1.5 to 2 percent of assets under management, plus 20 percent of all profits (subject to achieving a minimum rate of return). Fund mostly profit through capital gains on the sale of portfolio companies.
How Private Equity Improves ValueREAD MORE >>
The free online trading app known as Robinhood has proclaimed to be “on a mission to democratize finance for all.” It was intended to open up the Wall Street stock market to the average American for investment “on their own terms,” with more easily digestible financial information readily available to novice investors. The app was designed to “let the people trade” and make the financial system more accessible for everyone, until things took quite a turn, all due to a fledgling brick and mortar video game retailer known as GameStop.
The amateur traders using Robinhood became pitted against the hedge fund honchos when they started buying up options and shares of GameStop (GME), enlarging those bets and also making large trades of other stocks, such as AMC Entertainment, Tootsie Roll, and BlackBerry.
How It All Happened
Professional hedge fund investors had been short selling shares of GameStop, essentially borrowing shares of stock to sell, and then buying them back later so they can return them. This lets them profit if the stock price drops (betting that the company will fail). If the stock does not continue to fall, investors are forced to cover their position or buy more stock to minimize their losses.READ MORE >>
As a business owner considering the sale of your company, you may be asking yourself, “When is the right time to sell?” The answer is simple. The time is now.
The global recovery is underway, and 2021 has given us several reasons to be highly optimistic, and these reasons are why you should take action.READ MORE >>
Though every business will go through changes as it evolves, being acquired by a business is perhaps the one that can be the most stressful for its employees. There can be much uncertainty for a company that is acquired. If not handled properly, the buyer can lose some of their people (along with their customer relationships, institutional knowledge, etc.) that made the company successful. Managing the change positively during this tumultuous time can reduce a mass exodus after a sale is completed.
Key employees may be worried about whether their jobs will be intact after an acquisition. Perhaps they feel their role won't be needed, or the buyer will want to use their people to perform their functions. At the same time, the buyer may be worried that these key employees will leave. Leaders and other influencers within organizations set the tone for a company's culture, innovation, and strategic initiatives. Losing them reduces the value of the company they are acquiring.
One key to reducing uncertainty for the acquired company’s employees is first to create readiness for change. People will resist change unless they are ready for it. On the other hand, when they are open to change, employees are more likely to accept everything that comes with it. These employees will be an essential part of the transitional period after the acquisition. Getting their buy-in will pave the way for creating a stronger company in the future.
In their book Developing Management Skills, Whetten and Cameron suggest four ways to create readiness when leading positive change:
Benchmark best practice and compare current performance to the highest performance
Within the context of an acquisition, it's possible (likely even) that each of the involved organizations can perform certain functions better than the other. This may be one of the catalysts behind the acquisition. In that respect, synergies can be experienced when buyers and sellers learn each other’s best practices and implement improvements. Improvements can mean doing things better, faster and/or cheaper.
Institute symbolic events to signal the positive change
Symbolism can have a significant impact. The authors indicate that to be "successful in leading positive change, you must signal the end of the old way of doing things and the beginning of a new way of doing things." This can be accomplished in a variety of ways and can be elaborate or more reserved.
Create a new language that illustrates the positive change
Changing the way people talk about the change that is occurring is vital. If negativity abounds, positivity must replace that language. Taking the time to reframe things with a positive outlook can impact how employees view change.
People are typically against change because of the unknown. Finding common ground and having people participate in the change helps. Converting resistors is especially important because they have a way of influencing the rest of the team. Proactively identify the employees most likely to undermine the change and help them get on board first. They will, in turn, help persuade other employees.
Helping people understand the importance/urgency of the change that is happening through the acquisition will increase the likelihood they will stay and help ensure a smoother transition of ownership. The key is conveying that the company's employees are an essential part of the company's success going forward and preparing them for the change they will experience.
Benchmark International Buyer Profiles
Want to be the first to know when new opportunities come to market that fit your acquisition criteria? Create a buyer profile today. While you're there, be sure to check out all the resources we've created specifically for buyers, including opportunities, on-demand webinars, buyer events, and our latest edition of The Mark magazine.READ MORE >>
The Beginning of the End
The turbulent year of 2020 is finally in our rearview mirror. While so many lives have been lost and everyday life is still far from normal, effective vaccines for COVID-19 are being distributed, offering hope for a near-term end to the disruption we’ve endured for the past year.
Markets have begun to respond with optimism for the highly anticipated return to normal, but we’re not at the finish line quite yet. Mass distribution of the vaccine will take time, and people and businesses are still suffering as the virus is spreading at record-high levels and restrictions are being reinforced. This means that, yes, our world remains suspended in a state of uncertainty, but we have good reason to believe that the global economy will continue to recover, and mergers and acquisitions will lead the recovery. Research indicates that 53 percent of US executives plan to increase M&A investment in 2021. Some sectors have fared rather well during the pandemic. But how well—and how quickly—the overall economy recovers will depend on factors such as virus containment, fiscal and monetary policy, and inflation.
Virus containment remains the main priority for economic recovery to succeed. However, there are other possible risks to market performance. A lack of adequate policy support could occur due to concerns about mounting government debt. The technology conflict between the US and China is likely to continue even under a more traditional Biden administration, and the impacts are expected to take years to manifest. The decisions made by the two countries will affect regional economies and the businesses that operate within them. Other geopolitical factors could also shift investor attention away from recovery, but they are considered rather unlikely at this time.READ MORE >>
Many business owners believe that enlisting an expert in their industry is the right way to go when selling their companies. But if you want to rake in the most value for your business, there’s a better way.
There is no question that mergers and acquisitions are complicated and subject to constantly changing market conditions and industry trends. An industry expert might know plenty about a particular industry, but they are not experts on selling and buying businesses. A mergers and acquisitions firm is.READ MORE >>
It is not uncommon for a company acquisition to be viewed as a simple transaction that means transferring the business from one owner to another. But rather than just allowing the business to simply carry on as is under new leadership, a merger or acquisition should be viewed as a solid strategy to boost the company’s overall health, productivity, and bottom line. While M&A transactions can serve as great solutions for exit strategies, they can be so much more than that. M&A should be regarded as a powerful tactical opportunity.
Often times, M&A deals are considered to be a way to get out and cash out with instant gratification. But what else might be possible when a deal is carefully crafted to deliver sustainable returns and support a powerful legacy for the business in the long-term? M&A done right can translate into great success for a company and, ultimately, its leadership.READ MORE >>
In early 2020, there was plenty of optimism for investment opportunities and growth in the sports sector prior to the COVID-19 pandemic, which has since caused disruption in nearly every sector around the world. Financial uncertainty has been a large factor in addition to issues surrounding player contracts and broadcasting rights. Mergers and acquisitions activity in the global sports world has experienced a downward trend but there is hope on the horizon.
Amidst COVID-19 delays, Italian football (calico) has had its share of off-the-field matters this year. In August, the Italian club A.S. Roma announced the completion of a takeover by Texas-based Friedkin Group: an 86.6% stake in for €591 million, a large decrease from the previously agreed upon figure of €750 million prior to the pandemic. This lower price demonstrates how lost matches, sponsorship, and broadcasting income all impact the valuation of sports clubs. In light of these decreasing valuations, PE firms could be motivated to seek out bargain M&A and financing opportunities.
Italy’s Serie A has also embraced private investment. In September, its 20 clubs agreed to create its own media company financed partially by PE funds in order to better organize the sale and promotion of the league's TV rights. The move is designed to improve governance and increase revenue, especially abroad.READ MORE >>
No one knows for sure how much longer the COVID-19 pandemic will be affecting our lives and our businesses. But we do know that mergers and acquisitions are still happening, deal activity will pick up, and the way we approach due diligence in a post-COVID world has the power to make major differences when it comes to selling a company. While there are new obstacles to consider, there are also significant opportunities to identify and create value, and help companies outperform the market.
READ MORE >>
- Joint Venture: When two or more parent companies form an entity together with a business objective, sharing in the risks and returns, and retaining their individual legal statuses. It can be an equal joint venture, in which both parent companies own an equal portion of the entity, or it can be a majority-owned venture, in which one partner owns a larger percentage of the company. A joint venture can help to save money, combine expertise, or enter new markets. It is not a partnership, consortium, or merger.
- Equity Alliance: When one company purchases a specific percentage of equity in another company.
- Non-Equity Alliance: When two companies enter into a contractual relationship, which allocates resources, capabilities, assets, or other means to one another.
The most expensive mistake in selling a business is to undersell it. A qualified intermediary can add significant value to a transaction simply by virtue of experience.
Putting this into context, buyers are fit for transactions, they conclude deals in multiple jurisdictions and often have dedicated teams that focus exclusively on mergers and acquisitions. Business owners may typically have done a transaction or even two in their careers, but most often they have not yet sold a business and can benefit enormously by having a seasoned sell-side advisor on their team.
Whilst there are very broad categories of advisor; no two intermediaries are the same. In selecting an advisor there are some fundamental questions to ask that will help establish whether the firm will meet your specific needs and requirements.
1. Who will manage my deal?READ MORE >>
Now that Biden was named the President-elect, what does this mean for mergers and acquisitions under a Biden administration? The good news is that mergers and acquisitions activity is expected to increase regardless of the election results. Many experts predict that M&A activity will return to pre-pandemic levels in the next year, and that the market will be favorable for the next few years.
President Biden’s proposed tax plan raises the corporate tax rate from 21% to 28%, which would likely make M&A deals more expensive. Biden has also voiced support for an increase in capital gains taxes, which could impact M&A activity. The proposed plan would tax long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6% on income over $1 million, and eliminates step-up in basis for capital gains taxation. Sellers may be anxious to complete deals prior to 2021 to dodge higher taxes and potentially lower valuations, and to avoid having increased capital gains taxes cut into profits from a deal.
The Biden plan also restores the top individual federal income tax rate from 37% to the pre-Trump rate of 39.6%. It also promotes tax provisions to penalize the exporting of jobs overseas and to incentivize investments in new infrastructure and green energy, transportation and manufacturing, and establishes a minimum tax on corporations with book profits of $100 million or more, structured as a 15% alternative minimum tax, to prevent them from paying no taxes. The plan also offers tax credits to small businesses for adopting workplace retirement savings plans and creates a Manufacturing Communities Tax Credit to reduce the tax liability of businesses that face workforce layoffs or a major government institution closure.
It is important to note that getting tax code changes enacted into law requires congressional leadership and the White House to work together to reach consensus. This can be challenging, and can also take a considerable amount of time, meaning that there may not be immediate tax implications for M&A. But you still may not want to wait until 2021 to sell your company. Here’s why.
Strategic partnerships or alliances can be very effective business tools and are important to the health and growth of a company. They can enhance capabilities, and open up shared access to new markets, channels, intellectual property and lowered risk. But they can also be complex. Once you form this type of partnership, it takes some effort to maintain it and ensure that it is a win-win for both parties involved. By taking the right steps and having a clear vision for your long-term strategic partnership, you can help it create value, thrive, and boost your business.
Narrow Your Focus
There are many businesses that you could form a partnership with, but you have to narrow it down to what makes the most sense. What partners serve similar customer bases that make sense? For example, if you have a landscaping business, consider partnering with a nursery or a landscaping supply company. You’ll be serving the same buyer and can pass on referrals while streamlining the process and relationship for the customer.
See Both Sides
A strategic partnership, like any relationship, needs to work for both sides in order for it to flourish and yield mutual benefits. When you’re pitching the alliance to a potential partner, consider the benefits for them and present them clearly.READ MORE >>
Culture Affects the Bottom Line
When a company demonstrates that it’s thriving with happy and motivated talent, it is more likely to garner a higher business valuation when going to market for a merger or acquisition.
There is a proven link between culture, employees, productivity, and profit. Research shows that:
- Businesses with satisfied employeeshave been noted to outperform competitors by 20 percent.
- Happiness leads to a 12 percent boost in productivity and companies with strong cultures see a 43 percent increasein revenue growth.
- When employees are engaged, absenteeism falls 41 percent, productivity rises by 17 percent, and turnover is cut by 24 percent.
Exit planning is how business owners prepare to depart from their private company and maximize its value through a merger or acquisition to increase shareholder value or transition the company to serve other objectives. It basically arranges for you to leave your company on your own terms. Unfortunately, many business owners do not recognize the value in professional exit planning because they do not see their company from the perspective of a potential buyer, resulting in significant loss of value when exiting the business.
A solid exit plan clearly defines the business owner’s objectives, and lays out a comprehensive strategy that accounts for all personal, business, financial, legal, and taxation aspects of reaching those objectives, including leadership succession and the future of the business. These objectives include the maximization of value, mitigation of risk, conducting an expedient transaction, and finding the right investor to take over the business in its best interests. The strategy may also cover worst-case scenarios, such as illness or death of the business owner. Quality exit planning usually should take place around 10 years prior to transitioning the business, to allow for value strategies to flourish.
Why It’s So Important
READ MORE >>
Dustin Graham, Managing Partner at Benchmark International, Cape Town, virtually chatted to innovators and business owners about the critically necessary planning for their exit and their worth at the recent SA Innovation Summit.
The SA Innovation Summit is the largest startup event in Africa, and brings together top entrepreneurs, investors, corporates, and thought leaders to inspire sustained economic growth across Africa. The Summit provides various platforms for developing and showcasing African innovation, as well as facilitating thought-leadership.
The interaction between Dustin and Jonathan Smit, founder of PayFast, is well worth a listen.
2020 has certainly served up its share of uncertainties and economic concerns thanks to the COVID-19 pandemic. There seems to be a popular attitude that once 2021 arrives, everything will simply return to normal. If you are considering selling your company, you may not want to wait until next year. Here’s why.
Some Things Haven’t Changed
Regardless of the pandemic and economic concerns, certain factors remain constant. Investors sitting on plenty of capital are always seeking opportunities, no matter what is happening in the economy.
First, it is important to note that there was a record-setting amount of capital raised in 2019.
- Across 1,064 private equity, venture capital, infrastructure, and real estate funds, an astounding $888 billion was raised.
- Globally, PE firms raised more money than any previous year, closing on almost half a trillion dollars.
- More than $300 billion was raised in U.S. private equity alone.
- More than $100 billion in capital is still unspent in funds that are six years or older.
- In the U.S., venture capital funds saw a huge year for investment realizations, and exit value more than doubled year-over-year. This cash will eventually be distributed to limited partners and investors are likely to reinvest it in new funds.
It could easily be a seller’s market in your sector. Plenty of businesses have seen valuations rise because their services are in higher demand in the current environment. If your business is fortunate enough to fall into this category, selling now can be critical to getting maximum value.
Additionally, tens of thousands of Baby Boomers are still reaching retirement age and many of them are also business owners. Those who own companies that have suffered due to the pandemic may be more likely to consider retirement and an exit strategy because they don’t want to put in the time, effort and money to rebuild their business at their age. They could flood the market at any time, meaning you will be facing increased competition, giving buyers the upper hand. This scenario can also result in a lower valuation for your business. It is another solid reason you should consider starting the M&A process sooner rather than later.
We Know the NOW
Nobody can say for sure what the future holds for the economy, but we do know what the state of it is today. When we know and understand what is certain right now, we can make educated decisions based on current circumstances. These circumstances include political factors, trends within your sector, what your competition is doing, buyer demand, as well as current market values, tax rates, and interest rates.
- Right now, the U.S. is seeing the lowest interest rates in its economic history. On September 16th, the Federal Reserve left the target range for its federal funds rate unchanged at 0-0.25%, and signaled that it would keep them at that level through at least 2023.
- At this time we also know the current tax environment. We can only expect that taxes will increase in the long term in order to overcome the growing debt burden that has been created in 2020 because of economic damage caused by the COVID-19 pandemic.
While you might feel that waiting until 2021 will allow you to sell your company for more money, that is not necessarily the case. There is no proven data to support that theory, and you could actually end up selling your company for a lower valuation because you chose to wait. Also, the right timing depends heavily on the activity in your sector. What type of business you own can constitute the best time to sell, even during a pandemic. It could actually be the perfect time.
You Can’t Prepare Too Soon
Timing is everything when it comes to selling a business. And sure, 2020 seems to have turned everything upside down, but we also cannot predict what 2021 holds. Optimism for the future is somewhat human nature during a long-term crisis, but questions surround the timing and availability of a vaccine for the virus, and how quickly the economy will fully recover.
It is important to note that plenty of businesses are still being bought and sold in 2020. If you put off a sale too long, you could run the risk of missing out on a great opportunity to get the most value for your company. But at the very least, you should not put off the preparation for a sale. It can take several months to years to complete a merger or acquisition. Even if you are unable to sell this year, starting the preparation process now can position you for a seamless transaction down the road. You should engage now to ensure that your company can be put on the market at the beginning of 2021. When the process is done correctly it can take 30-60 days just to get a business on the market, and a total of 6-12 months to close a deal. Waiting until January to act could put you at a major disadvantage with buyers on market at the beginning of the year.
Preparing now will also position you as a more patient seller, versus one that is panicking to unload your business without a solid exit plan. Buyers will see you as desperate, leading them to offer you less money. If you demonstrate that you have been carefully preparing for a sale and have done your due diligence, you are likely to garner a higher sale price.
Another advantage of preparing for a sale is that it can put you in the position to test the market. Maybe you are not sure if you should sell. So, why not put your business out there and see what kind of offers come back? You might be surprised at what emerges. If you still don’t want to sell, you can simply take your business off the market and wait for a better time. However, if you choose to do that, you do run the risk of appearing that you are not a serious seller in the future. Working with a reputable M&A firm can help steer you through the process and protect you from making common seller mistakes. They will also help you control the narrative, so that your business remains positioned in a positive light no matter what decisions you ultimately make.
Let’s Start the Conversation
Our M&A experts at Benchmark International know how hard you have worked to build your business. Even if you are not sure if you are ready to sell, reach out to us and we’ll help you figure out what is best for you, your company, your family, and your financial future.READ MORE >>
As the world still faces the COVID-19 pandemic, businesses in the financial services sectors are preparing themselves for life after coronavirus. This includes the management of credit risk for borrowers, and turning to digital strategies to drive revenue growth.
Insurance and Innovation
The COVID-19 pandemic is forcing the entire insurance sector to implement and leverage digital platforms that enhance customer experiences as a key part of their business strategies in a transformed world in which people are working remotely and driving their vehicles less often. The pandemic has led insurance companies to implement premium relief efforts, offer payment deferral plans, and expand coverage, but these companies are also turning to more digital strategies, emphasizing online customer experiences at a time when more and more transactions occur online versus in person. Consumers are demanding new products such as cyber insurance, more modern life insurance options, and usage-based car insurance. Middle-market insurance companies have always been a bit technologically behind the big players, but they now must adopt new innovations in order to merely keep up with convenience, simplicity, mobility, and modern interfaces that customers have come to expect.
Banking and Lending
Financial institutions are in a position where they need to understand borrowers’ needs and current financial states more than ever. They must also find new ways to measure performance through the rest of 2020. They have already provided assistance to many small and mid-size businesses during the crisis, some of which will be forgiven. Loan modifications have been provided to help businesses survive, and there is likely to be some loan losses. As the economy begins to recover, banks will be able to get a better understanding of borrowers’ financial states, knowing that it will take some time for businesses to bounce back. Deciding whether to lend more credit will be a difficult decision for financial institutions, especially for harder hit sectors such as hospitality and retail. Understanding the recovery of these industries as a whole will be critical through the use of data and payment activity monitoring.
Family offices are private wealth management firms that serve high-net-worth individuals and their families by offering a total outsourced solution to managing finances and investments. There are nearly 2000 of these types of firms around the world, with more than half in the U.S.
These firms have typically relied on physical offices to conduct business. Now in the wake of COVID-19, a shift to virtual family offices has become a necessity during a time where remote work has become commonplace. This has been a challenge for many family offices because most simply do not have the appropriate technology and infrastructure to result in a seamless transition to a virtual office. These businesses will be forced to evolve technologically into the rest of 2020 and beyond. As outdated technology is replaced with better performing innovations, family offices will become more mobile and agile, as well as better equipped with more adequate cybersecurity. Connectivity is also a timely issue, as Millennials will be inheriting family wealth in the future and they demand immediate access to data without disruption and with more transparency. This digital transformation to virtual family offices will also allow for a leaner staff that can deploy resources more quickly.
The events of 2020 have led capital markets to affect businesses in different ways. Underwriting slowed for high-yield borrowers. Mergers were put on hold. Stock markets have been up and down, and a record number of securities and their values have been exchanged. As financial conditions improve, confidence combined with cheap credit will have companies seeking liquidity to get through the rest of the crisis. Corporations have been tapping into the public debt markets at high rates. While this generated profits at the start of the recession, bonds are less likely to be issued as businesses restore their reserves and establish liquidity that will be needed into the future.
For the rest of 2020 and into 2021, investment banking associated with M&A activity will continue to be tied to the economic recovery amid a softer deal pipeline. When the economy finally bounces back, there will be opportunity for a backlog of deals, boosting advisory revenues.
Data and Private Equity
In the time of COVID-19, certain private equity trends have emerged and are expected to be here to stay. People are still paramount, but how they work has changed. Data continues to be more important to deal making to determine the areas for greatest earnings impact. Datasets will track strategic movements and metrics within companies to gauge their performance. Remote workforces will allow competitive PE firms to source key financial talent from entirely new geographic regions. Firms are also expected to outsource more of their back-office work functions and instead focus on front-office responsibilities.
Ready to Sell?
If you are a business owner who is considering making a move, our M&A experts at Benchmark International would love to discuss how we can help with the sale, exit or growth of your company.READ MORE >>
The COVID-19 pandemic and the resulting government responses have had a significant impact on consumer spending, with retailers closed for months and shoppers staying home starting in the early part of 2020, with the timing of closures varying by country. Many consumers continue to stay home, even as most businesses have reopened. Online shopping has surged due to the pandemic. In the U.S. and Canada, e-commerce orders are up 146%.
Household consumption increased over the summer and is forecast to continue. Certain consumer behaviors that were newly formed during the earlier stages of the pandemic are expected to permanently influence spending habits. Retailers will need to clearly understand these behavioral shifts as they navigate the immediate future, and into the long term if they plan to succeed amid the new normal.
Digital as Key Driver
READ MORE >>
As globalization becomes more common in our world, many businesses are choosing to take advantage of the growth opportunities that lie in expanding into new markets. But expansion can be a significant undertaking for small and middle-market businesses, with many moving parts. As a business owner, you need to fully assess and understand the risks and rewards that expansion can present for your company. The following steps outline areas on which you should focus, and which elements of your business you should have ready in order for an effective expansion into new markets.
Before expanding your company into new markets, you must have a comprehensive understanding of what the overall impact on your business will be. Conduct market segmentation and product gap analyses to assess whether your product or service will sell in the target market and do a SWOT analysis to see how it stacks up against local competitors. You need to know if there is a need for your company and if anyone will buy what you are selling. You will also need to consider how large the market is and how long it may take to reach your target sales numbers.READ MORE >>
The COVID-19 pandemic has created an urgent demand for testing, treatments and a vaccine from life sciences and biotech companies. It has also changed the deal-making landscape in this sector. Advances in genetic sequencing have led to the development of new immunotherapies and approaches to medicine that has lowered risk and boosted M&A value and volume.
Over the past five years, biotechnology M&A activity has generated hundreds of completed deals and hundreds of billions of dollars in aggregate value. Leveraged buyouts accounted for one fifth of all acquisitions completed in three of the past four years. The compound annual growth rate of the biotech market is 7.4 percent, on pace to reach $727.1 billion by 2025. There are currently upward of 100 experimental COVID-19 treatments and vaccines in development, including 11 being studied in clinical trials.
The life sciences sector is the key to a solution for COVID-19, from testing improvements to vaccine candidates. In April, Moderna Therapeutics was given $500 million from the U.S. Department of Health and Human Services to accelerate development of its mRNA vaccine. Over the past ten years, public and private sector researchers across biotech have collaborated to greatly reduce the lag time between genetic sequencing of a virus and running human trials. With academia partnering with governments to speed up development, it is expected to be positive for the long-term strength of the sector.READ MORE >>
You have worked so hard to build your business and when retirement is finally on the horizon, it is a very exciting time. But it can also come with many questions. These tips will help you navigate the ins and outs of retirement so that you can live your best life.
Keep Making Plans
Just because you are approaching retirement, it doesn’t mean you are retiring from life. Keep planning for your future. Consider five-year plans and goals. Think about taking college classes or acquiring new skills you have always dreamed about. Getting another degree, learning something like playing an instrument, or learning a new language can be great ways to keep your juices flowing and open up new opportunities in life.
Explore the Best Places to Retire
The world is brimming with amazing places to consider for your retirement years. Maybe you are perfectly content staying where you are. But have you even thought about the possibilities? Check out our article about some of the greatest places to retire…and be inspired.
Have a Solid Financial Plan
This includes investment options, taxes, and more. There are many ways to invest, such as mutual funds, stocks, bonds, real estate, dividends, CDs, annuities, and exchange-traded funds. Additionally, having an exit plan can ensure that your future is protected. Prior to exiting your company, mergers and acquisitions strategies can help you grow your business and maximize its value for a sale, laying the groundwork for worry-free retirement wealth. Experienced M&A advisors can help you make the most of this. You will also need to consider how much you will need to pay in taxes after you retire. This is something you will definitely want to get right. Some estimates suggest that for each 1% error in effective tax rate, you face an 8% error in your final savings balance.
Maintaining a routine can be a major game changer for keeping your sanity in retirement. You no longer need to go to the office. So what do you do? It is easy to find yourself meandering and not knowing what to do with yourself. That’s why it’s important that you stay busy and have some sort of structure to your everyday life now that you are no longer on the clock. Engaging in activities such as volunteering, gardening, and exercising can keep you healthy, happy and regimented.
Maintain a Youthful Perspective
They say age is just a number. And there are actually studies that support how mental attitude can improve overall health and even reverse the effects of aging. Thinking young can actually help keep you feeling and functioning as young. It helps to stay inquisitive, continue to develop and improve yourself and expand your horizons. Falling into a rut after retiring can be detrimental to your state of mind and your physical health. It can also be very helpful to maintain social relationship with younger people to keep up with changing perspectives, get inspired, and hear about more than gripes regarding the aches, pains, and medications associated with aging.
Map Out Your Legacy
In addition to the impact you will be leaving on the world through your professional endeavors, you will want to make plans for your estate to determine what you wish to leave for your heirs. This is when a financial planner can be of great help. You will need to think about estate taxes, appropriate inheritances, and the roles of your family if they will be taking over your business.
Consider Catch-Up Contributions
You already know that there is a limit to how much you can save in your IRAs or 401(k)s. But did you know that once you reach the age of 50 in the U.S., the IRS allows you to make additional catch up contributions that are beyond annual contribution limits? It’s a way to make it easier for savers over the age of 50 to boost their retirement savings.
Understand How to Protect Yourself from Fraud
Fraudsters are known to target people over the age of 60, especially in today’s digital society. Stay educated on what scammers are up to and know how to discern between what may be real and what may be fake regarding emails, texts, phone calls, and the physical mail. A good rule of thumb is to remember that if it sounds to good to be true it probably is. Also, unsolicited offers can be common traps. Other things you can do include not answering robocalls, not clicking on pop-up ads or email attachments, being skeptical of free offers, and not paying up front for promises.
Think Long Term
Today’s life expectancy rates are much higher than they used to be just decades ago. You should plan your retirement with a long future ahead. This is not only good for your mental wellbeing, but also important for your financial future. Consider that your savings will need to last longer. Your healthcare costs may be higher. Search for retirement calculators online to help you get a better picture of what your needs will be.
Get a Dog
The many benefits of having a dog to health and wellness are well documented. Dog owners have been proven to enjoy lower blood pressure and stress factors, and need fewer doctor visits than those without pets. Having a dog can also help to keep you active and engaged with other people. Plus, all that unconditional love releases beneficial hormonal chemicals such as serotonin and oxytocin that are proven to fight depression and make you feel good.
Ready to Retire?
Contact our M&A experts at Benchmark International to start the conversation about selling your company, planning your exit strategy, and getting on the road to a prosperous retirement.READ MORE >>
Many factors can impact middle-market M&A deal making, but one of the most significant issues that can affect closing is a valuation gap between the seller and buyer. This tends to be more common during a seller’s market because business owners with successful companies are inclined to wait for the best offer, versus a buyer’s market that occurs when there are fewer buyers, which motivates sellers to jump at an offer. Unrealistic expectations about valuation multiples often stem from the comparison of a mega deal to a middle market deal—a situation under which the same multiples are typically not going to apply.
There is also often a disparity between what a seller needs to maintain their retirement lifestyle and what value can be extracted at the time of the sale. There may be differences between a buyer’s offer, what they pay, and what the seller ultimately receives, as taxes are always a factor in a transaction. Additionally, the timing of the deal and the perception of risk regarding future growth and earnings flow for the business can play a major role in the size of the valuation gap. Selling a business is a highly complex process and it comes with great emotional implications for a seller. Emotional ties coupled with overt optimism can easily cloud one’s vision when it comes to the actual value. As a business owner, you put in a great deal of work starting your company and building it into what it is today. In contrast, selling that business is completely unchartered territory for most owners. When you are looking to sell, you need to be realistic regarding the company’s current value and its growth rate, and what the buyer will be getting out of their investment. Buyers are not going to recognize the hard work you put into starting the business in the same light that you do. All that work you did in the beginning is not on their radar—they are going to be focused on their returns.
Valuation gaps also result when private equity firms and strategic buyers compete for quality investments and relatively inexpensive financing is available. This can be both good and bad for middle-market business owners. Significant buyer interest creates considerable competition for quality deals, which is great. But at the same time, if the market is hot and demand is high, unrealistic valuation expectations and skewed perspectives can result in a valuation gap.
This is why a thorough evaluation of a business is so crucial to the M&A process. A good M&A advisor will take meticulous steps to best determine an accurate current business enterprise value, while also managing the seller’s expectations of a valuation range before going to market. So, if you are a business owner, and you plan to approach buyers without professional M&A representation, you need to understand company valuation gaps, your intrinsic risks as a seller, and how to bridge these gaps. This can require a great deal of education on your part and can be very time consuming. Or you can simply enlist professional M&A advisory expertise and have the peace of mind that the fate or your business is in the best possible hands. The best advisors will work diligently on your behalf to help you attain your goals for your business and your financial future. It requires a team with proven experience, resources, and best practices to successfully navigate the many legal, accounting, due diligence, and marketing considerations involved in arriving at an accurate and realistic company valuation and getting a quality deal done.
Engage Our Expertise
Our top-notch M&A analysts at Benchmark International can help you with your company, from creating growth strategies to selling it for maximum value. Set up a time to talk with us and we can determine what solutions are best for you and your business.READ MORE >>
The COVID-19 pandemic has brought about disruptions for businesses operating in the fashion, beauty and home furnishing sectors. This is because of complicated global supply chains and reliance on discretionary spending by consumers amid record unemployment levels. Keeping these types of businesses adaptive is crucial to their recovery and long-term success.
Supply Chain Disruption
“Nearshoring” is a term that describes the relocation of the production of goods so that they are moved geographically closer to consumer-dense regions such as the U.S. and Europe. This has been an attractive option for fashion and home furnishings companies, yet the cost of displacing established supply chains and vendor relationships have prevented them from making the move. But the landscape could be changing due to COVID-19, geopolitical turmoil, and antiquated supply chain practices.READ MORE >>
Business and professional services (BPS) firms are facing increased uncertainty amid the COVID-19 global pandemic. This climate is resulting in less investment and more reliance on revolving credit to maintain access to cash for operating expenses, and keeping priorities on payroll and workforce decisions. Companies with strong liquidity will shift to growth strategies and digital transformation. Also, with a greater need for mobility in a more remote-working world, there is a greater emphasis on cybersecurity, especially for government contractors and law firms.
Government Contracting: A Hot Market for Acquisitions
Government contracting is a significant moneymaker, especially in the United States. These firms rely on the needs of the government and the availability of financial resources for public investments. Government spending is often used to stimulate the economy during a slump. Through the first two quarters of 2020, government spending held steady, with health spending peaking along with the COVID-19 response, with billions going to national interest agencies and programs related to the pandemic.
The middle market in government contracting is comprised of several small, technically specialized service providers that offer high growth opportunities for larger companies that are seeking more capabilities and specific contract access. The pandemic slowed deal flow in the first half of 2020, but deals still happened with transactions expected to continue in the second half of the year. Private equity firms are seeking stable streams of cash flow and government contractors are relatively insulated from recession, making them a solid target for strategic investment and bolt-on acquisitions. M&A activity in the government contracting space is forecast to continue into 2021 as the sector (with the exception of aerospace) has been less impacted by the coronavirus and there is a need for more consolidation in the market.
Cybersecurity is paramount for government contractors for obvious national security reasons. In July of 2020, the U.S. Department of Defense issued the Cybersecurity Maturity Model Certification (CMMC) to build upon cybersecurity best practices from established industry standards with the goal of reducing cyber-risk among its contractors. Other departments of the government will likely do the same, prompting contractors to prepare for it in advance.
The big commercial tech companies typically draw the top tech and cybersecurity talent, making it challenging for government and its contractors to attract talent and offer competitive salaries. During times of increased unemployment due to a pandemic, many skilled workers are seeking out less risky positions. Government contractors should jump on this opportunity to attract young, tech savvy talent.
Law Firms: Challenges and Opportunities
Due to the pandemic, law firms have had to deal with furloughs, layoffs, pay cuts and reducing expenses while finding new ways to boost revenues while working remotely. Liquidity equals agility in uncertain times, so firms should seek to expand their credit lines while making the most of government assistance options.
Human capital remains the single biggest asset for law firms. Working remotely has brought about new challenges for attorneys and staff as they juggle the demands of working, parenting and caregiving. Investing in programs, technology, and other ways to support staff is more important than ever. Amid cutbacks and a lack of contact with colleagues, talent needs to know they are still valued and connected to the firm’s success. Firms also need to take this time to assess what lessons have been learned from remote working regarding obstacles, delays and infrastructure needs and how they can address needs, especially in regard to digital support.
Security and privacy are major issues for law firms operating remotely as they need their files and records to be accessible from outside the office. A digital security strategy is key even once the pandemic has passed, as no one knows for sure what the new normal will look like. Once security is implemented and established, focus can shift to maintaining client relationships and creating revenue growth into the future. Investment in mentoring programs and empowerment of staff can help grow the business and identify new opportunities to support the firm once the pandemic is over and the economy is ready to bounce back.
If you are thinking about a merger or acquisition for your business, please reach out to our M&A dream team at Benchmark International to discuss how we can help you accomplish great things.READ MORE >>
Next-generation 5G networks are widely viewed as one of the most impactful and anticipated technological developments in current times. With super-high speeds of 100 times faster than that of 4G networks, 5G is expected to bring broadband connectivity to 10 times the wireless devices and usher society into a digital industrial revolution that will open up new possibilities, innovative applications, reduced energy consumption, and economic growth.
The Impact of the 5G Value Chain on the Global Economy for 2020-2035
- Up to $13.2 trillion of goods and services through 2035
- $2.1 trillion in GDP growth
- 22.3 million new jobs
*According to a study commissioned by Qualcomm Technologies, Inc.
When Will 5G Finally Be Available?
READ MORE >>
The world economy’s appetite for cross-border mergers and acquisitions continues to grow in popularity amid globalization and the emergence of new technologies. These types of global deals offer their fair share of risks and rewards. So how do you know if it’s the right strategy for your company? While there is no magical equation to answer that question, you can take the time to understand what you will be faced with in a cross-border transaction, how it may make sense for your particular business within your sector, and what precautions you will need to take.
Motivations for Cross-Border M&A
There are several different reasons that business leaders turn to cross-border deals to address their needs and benefit their companies. These objectives include:READ MORE >>
The real estate industry, both commercial and residential, is undergoing transformation due to the effects of the COVID-19 pandemic. People are working from home, traveling less, and some are migrating to smaller cities. Digitalization is becoming more prevalent, as owners, developers and managers of properties are seeking out virtual and touchless solutions to ensure safety and boost efficiency in a competitive market. Middle-market companies that keep up with the demand for innovation are poised to thrive under these new-normal conditions.
Real Estate Trends Expected to Continue
- Office spaces are being reconfigured to offer more space for each worker.
- Remote work is facilitating home purchases farther away from large cities that are home to corporate headquarters.
- Virtual touring experiences are becoming standard for home sales.
- Hotels are adapting to new measures to ensure guest safety.
- Retail properties are being used for other commercial uses.
- Leasing arrangements are becoming more creative to improve liquidity and cash flow.
- The inability to have in-person property experiences are hampering due diligence efforts.
- The construction sector will continue to employ virtual tools such as 3-D modeling and site management platforms.
Remote Working and the New Office
As millions of office workers have been working remotely to help avoid spreading the COVID-19 virus, employers were somewhat surprised to see that workers were more productive while working from home. Analyses show that average workdays increased in hours and big tech companies announced that remote working would continue into the long-term future. A result of this is that companies are:
- Looking to reduce the cost of office space.
- Providing more space per worker for any necessary in-person collaboration.
- Using video conferencing setups in small team rooms to bridge home and office work.
- Implementing thermal scanners, improved ventilation, UV light for cleaning and other safety measures.
Property owners and managers of office spaces have been able to continue to collect rent payments during the pandemic. However, as unemployment rises and the economy remains uncertain, it could impact the financial markets, making property and mortgage payments more difficult. Additionally, pension fund managers for large unions often invest in office markets due to their stable rents and cash flows, but if tenants cannot pay rent, pension payments may be cut.
Residential Real Estate
Residential home buying is also changing due to the coronavirus. Prior to the pandemic, Millennials were already willing to sacrifice job opportunities to buy homes in secondary cities in search of affordable housing. A study by Redfin showed that more than 50 percent of workers in major tech hub cities would move elsewhere if their company offered a remote work option, with the desire to live someplace less expensive. New tech advancements in a more remote-work-driven world are enabling these workers to pursue both dreams. Major tech companies are recognizing the cost burden that comes with maintaining sweeping campuses in major metro areas and are leading the way in the trend to shift to remote working as more professional services companies follow suit.
How homes are being purchased is also changing. Online home shopping by Millennials was already on the rise before the pandemic, causing realtors to adapt their selling processes. Virtual reality tours and 3D floor plans are becoming standard practice. Appraisers are using drones for exterior photography. Paperwork is reduced and replaced by electronic filing and signing.
Retail Real Estate
Retail property owners have many tenants that have been forced to close due to COVID-19 restrictions and many of these tenants are refusing or unable to pay rent while closed, forcing landlords to devise workarounds and, in turn, struggle to pay their own bills. Retailers were already struggling pre-pandemic due to increasing e-commerce popularity. Now landlords are providing rent abatement periods, rent waivers, flexible payments, and interest-free repayment in order to aid in their tenants' survival.
Hospitality Real Estate
The pandemic has limited non-essential travel, as business travelers are working from home and many leisure travelers are choosing to stay home for safety reasons. The hospitality sector has taken a massive hit under these circumstances amid changing restrictions and stay-at-home orders. As economic loss negatively impacts the hospitality industry, operational priorities are shifting from personal guest experiences to the safety of guests. Economy lodging is being less affected than larger, upscale hotels because essential construction workers are still traveling to job sites in smaller markets while large conferences are cancelled and professional group business travel is being limited. Investments in new technologies by hotel operators are also crucial to the hospitality real estate industry as extensive safety measures are needed. Typical in-person processes are being replaced by digital options. Common areas are being reassessed to offer social distancing. New cleaning and ventilation measures are being implemented. These changes are expected to aid in the economic recovery in this sector.
A new era of technology is playing a major role in the construction industry. Enhanced safety protocols are being implemented in existing commercial buildings. Construction companies are embracing new technologies in the development and management of new projects. Prefabrication and modular buildings, as well as virtual construction methods, are seeing accelerated growth amid the new circumstances due to the pandemic. A recent survey showed that construction executives foresee double-digit
increases in single-trade and multi-trade prefabrication assemblies, as well as permanent modular construction, over the next few years. These construction techniques offer better project schedule performance, lower construction costs, and improved construction quality.
No matter what sector your business operates within, our M&A experts at Benchmark International are eager to discuss your future with you, whether it’s selling your business, growing your company, or devising your exit or succession plan.
READ MORE >>