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 >>
Benchmark International has successfully facilitated the acquisition of AM Engineering, Inc. (“AME”) by Fremont-Wright, LLC (“Fremont-Wright”).
AME is a Florida-based business headquartered in Sarasota. AME specializes in civil engineering and land surveying projects for large and small-scale land development, water distribution systems, wastewater collection facilities, roadways, parking facilities, and site grading. AME offers both engineering and surveying services for residential and commercial clients. The sale to Fremont-Wright creates new growth opportunities for the business.
Fremont-Wright is a holding company based in Memphis, TN, and specializes in aerial and land survey, as well as civil and structural engineering. Its companies – Triton Engineering, I.F. Rooks, Colbert Matz Rosenfelt, and Harmsen – also offer services such as photogrammetry, environment management, volumetric services and utility design. Fremont-Wright serves the institutional, mixed use, commercial and residential industries. This acquisition fits well with Fremont-Wright’s continued nationwide growth strategy.
Shawn Leins, president and one of the owners of AME stated, “We are excited to join the Fremont- Wright team and look forward to continued growth and success.”
Regarding the deal, Transaction Director Leo VanderSchuur at Benchmark International stated, “It was a pleasure to represent AME in this strategic transaction. On behalf of Benchmark International, we wish both companies continued success.”READ MORE >>
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 >>
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
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 >>
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.
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.
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.
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.
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 >>
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.
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.
The outlook for the global construction market for the year of 2019 remains positive, with an expected five-percent sector-wide growth in revenue. Robust economies, low interest rates, and increased infrastructure spending are key factors behind the increased confidence. The world’s fastest growing market is the Asia Pacific region, due to growing investments in China and India’s construction sectors. In North America and Europe, growth is being driven by new technologies in already strong construction markets. Also, a number of South American and Middle Eastern countries may see their markets recover in the coming year and have the potential for growth in the future.
Mergers and acquisitions for the construction industry are poised to follow the vigorous deal activity of 2018. Construction tech startups raised $1.27 billion in venture funding in the first three quarters of 2018 alone. Public companies were seeking growth. There was increased interest in individual sectors such as energy. Private equity firms were actively buying and selling. Another significant factor was a need for ownership changes due to a growing retirement-age population. These trends are predicted to continue throughout 2019.
Construction technology startups are expected to continue to have a considerable impact this year. This industry segment has seen more than $10 billion in funding over the past 10 years, with most of the money coming from early-stage venture capital deals. As these tech companies evolve, bigger firms are making full acquisitions. One strategic reason behind these large acquisitions is for companies to procure more talent in a more efficient manner, which in turn is anticipated to drive business growth.
Society is seeing a heightened focus on infrastructure upgrades and the creation of smart cities. In 2016, smart-city tech spending reached $80 billion globally. By 2021, spending is expected to grow to $135 billion. Smart cities use Internet sensors and other technologies to connect elements across a city to gather data and enhance the lives of its residents. Partnerships between private and public companies are helping governments incorporate new technologies in an increasingly urbanized world. The advent of smart cities was initially seen in Europe, and now the U.S. has begun to integrate technology into urban infrastructure.
The quickly growing modular construction market is projected to reach $157 billion by 2023. The capability to build taller modular buildings is reaching new heights, with some buildings stacking up to almost 20 stories. This offsite type of construction is addressing certain industry needs, such as the need for skilled labor, the need for affordable housing, and the need to complete projects more quickly.
A rapidly emerging trend that many investors are watching closely is connected construction. Companies are incorporating technology into construction sites to save time and money. Bluetooth connectivity is driving the emergence of new worksite tools that can be tracked, monitored, and even deactivated. Mesh networks are enabling sites to be fully connected to wireless networks in order to streamline processes around obstacles in the way of man-hours, status updates, supply deliveries, blueprint consultations, and more.
These emerging technologies have prompted several recent acquisitions, just to name a few.
- Autodesk Inc. purchased construction productivity software company PlanGrid for $875 million.
- Autodesk also spent $275 million to buy BuildingConnected, a networking platform of more than 700,000 construction professionals.
- Trimble bought construction software company Viewpoint from Bain Capital for $1.2 billion.
Enlist Our Expertise
If you are interested in buying, selling, creating a growth strategy, or even devising an exit plan for your business, contact Benchmark International to get the expertise that is proven to make successful deals happen around the world every day.
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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.
“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 >>
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.READ MORE >>
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.
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.READ MORE >>
You may not have considered selling your business and moving onto the next project, as perhaps it is growing at an acceptable pace and you have no pressing reasons to sell. Nevertheless, it may be worth considering an exit if you can identify with any of the following:
Your Business is Making you Exhausted
There are a number of reasons why your business could be making you exhausted. Perhaps you only started it for the money and you don’t love what you do, or the lifestyle of an entrepreneur hasn’t met your expectations. Whichever way, you feel apathetic towards the business and dealing with it is tiring.
While you have no need to sell, if you feel burnt out by your business it is worth considering doing so – you are doing the business no favours by sticking it out as the business could suffer as a result of not having someone at the helm who wants to drive the business forward.
If your business is steadily growing, then it may be a good time to consider an exit. A buyer is likely to pay over the odds for your company if it is on a growth curve as they can reap the rewards later down the line.
Equally as attractive to a buyer is a business operating within a growth industry. Even if your business is not seeing the growth, if the industry you operate in is thriving, a buyer could be interested due to the opportunities available.
You’ve Received an Offer You Can’t Refuse
A buyer has approached you and offered to buy your business for a handsome sum of money. You weren’t thinking of selling but, as you might not receive an offer like this again, this is perhaps a good indicator that you should sell.
Nevertheless, it’s always beneficial to take your business to market even in the event of such an offer, because if one party is willing to offer this for your company, then there’s no reason why others wouldn’t value your business the same, or maybe even higher.
You Want to Take Advantage of Low Capital Gain Tax
Capital gains tax is at historically low levels; therefore, it is a good time to sell. While this is not the only reason you should sell, if you feel yourself identifying with other reasons on this list, then now may be a good time to take advantage of this.
You’ve Been Offered a Better Job Opportunity
This might seem strange – you are your own boss and now you are going to be an employee. However, there are many merits to being an employee – for example, a regular, and probably better, income and being free from the demands and liabilities involved in running your own business.
You Don’t Have the Correct Skills to Grow the Business
As a business grows, more and different skills are required to keep the business growing than when you initially started. For example, you might be a great salesperson, which was extremely beneficial when setting up the company but, now, leadership is required in different areas. You could possibly learn these skills, or employ more people to take on these new leadership roles, but if you feel like you don’t have the energy to carry on with the business, this may be another indicator that it’s time to move on.
While the above points may be a good indication that it’s time to move on, it’s unlikely that one of these alone will compel you to sell. Instead, you might decide to sell because of a mix of these reasons, coupled with other factors such as economic conditions. When this time does come, Benchmark International can help by discussing your exit strategy and assisting you in finding the best buyer for your needs.READ MORE >>
When selling your business, dealing with the various types of buyers present in today’s market is both a curse and a blessing. It’s a blessing in that, aspects of your business that may not appeal to a certain buyer type may appeal to, or at least not be an issue with, other types of buyers. But a hundred different curses almost offset this large benefit. What do different buyers prioritize? How do you appeal to two or more different types of buyers at the same time? How do different buyer types run their decision-making processes? Which buyer types should you pursue? How do you even know what type of buyer you are dealing with?
In a world with only one type of buyer, the company sale process is greatly simplified. They might all like to hear the company’s story the same way. They might look at the financial statements the same way. They might all operate on the same timeline with the same seasonal variations. And, they might even be susceptible to being found in the same place from time to time. But, what is currently driving the robustness of today’s M&A markets are in fact the imbalance between the number of buyers and the number of sellers in the arena. And this, in turn, is largely driven by the increasing diversity of buyer types now competing with one another for that limited supply of opportunities.
In today’s market, one of the worst moves a seller can make is to market to only one type of buyer or, even worse, run a process expressly excluding one or more types of buyers. The success of any current sale process relies on a much more sophisticated approach to marketing, than was the case a decade ago - one that catches the interest of all buyer groups simultaneously and excites them for the opportunity to investigate further. The first step in exploiting this development is to identify the strengths, weaknesses, and priorities of the various buyer types. This webinar will start with this analysis and then move quickly onto strategies for playing to various buyer characteristics.
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:
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.
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.
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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:
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.
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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.
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.
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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:
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.
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.
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Benchmark International is pleased to announce the transaction between Southampton based consultancy, Device Access, and Berlin based research and consulting institution, IGES Institut.
Founded in 2010 by Michael Branagan-Harris, Device Access supports medical device organisations across the world secure market access into the NHS.
The IGES Institut, founded in 1980, is the core of the IGES group. It is a research and consulting institution for health and infrastructure, conducting over 2,000 research and consulting projects since its establishment.
The acquisition allows IGES Group to continue its European expansion, servicing the growing global medical devices market in which Germany and the UK constitute core markets.
Following the acquisition, Mr Branagan-Harris will continue to be the CEO of Device Access and will additionally lead IGES’ UK business activities as Country Manager, in order to bring the countries’ two markets closer together.
IGES Director, Professor Bertram Häussler, said: “UK is an important country for the development and application of medical devices. Furthermore, it has traditionally been seen as a European beachhead for global companies to launch into Europe. The aim of this acquisition is to strengthen these connections and make them usable for all our international clients.”
Mr Branagan-Harris said: “Device Access and the IGES Group unite extensive knowledge of approval, market launch and reimbursement of medical devices, and their cultures fit outstandingly. The deal strengthens our respective market positions and build the potential for our growth in the European markets.”READ MORE >>
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.
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.
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.
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.READ MORE >>
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.
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.
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.
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.READ MORE >>
Federalism has always posed challenges for middle market M&A. While compliance with federal laws and regulation does not typically lead to issues in acquirers’ due diligence on middle market companies, the companies do often have problems with those pesky out-of-state state-level issues. Experience indicates that this is true for a variety of reasons. First, many of these companies have only recently expanded into other states and, as is common in a growing business, operations often get ahead of back office tasks (such as compliance). Second, owners of middle market businesses are often selling precisely because they realize that their businesses have grown to the point that they require additional overhead expenses that the owners are not interested in dealing with. Third, ever states’ rules are different and ever-changing and it is very hard to get a handle on six, or a dozen, or 49 different sets of rules and shape a business compliant with each set. Fourth, and nobody likes to admit this, states can be a bit lax on enforcing their rules, especially on out-of-state companies. Acquirers are well aware of these facts and, as a result, dig deep on state-level issues in their due diligence.
While very few business owners are attorneys, most have at least a vague sense that when they establish a “physical presence” in a state, they need to start worrying about that state’s laws. Most probably also realize that physical presence is a bit fuzzy and that each state interprets the term differently but the US Constitution places a limit on the breadth of that definition due to the Interstate Commerce Clause. So, this has always been a nebulous issue but at least there was a bit of a bright line test around when a company might have to start thinking about looking at the rules in a new state for things such as income tax, collection of sales tax, workers compensation and the like.
Ah, things were so much easier before 2018.
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Then, on October 1, 2018, the Supreme Court issued its ruling in the case of South Dakota v. Wayfair Inc., et al. South Dakota was attempting to require the online retailer Wayfair to collect sales tax for online sales for which goods were shipped into the state’s boundaries. Wayfair had a very strong case that it had no physical presence in the state and therefore the state could not force it to do anything, especially not collect taxes for Pierre. The state argued that it had a very powerful statute that said even without physical presence it could force companies to collect sales tax on sales made into the state if the seller had an “economic presence” in the state. Wayfair responded that decades of Supreme Court rulings indicated that this statute violated the US Constitution as an unfair restraint on interstate commerce. The Supreme Court stepped in and changed its mind.
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Since that day, the bright line with regard to when to start worrying about a state has been erased – at least with regard to sales tax. And, in the four months following the opinion, states have begun to rub that big eraser across other areas of law as well. The next to disappear is likely state income tax, then perhaps use tax, workers compensation, and unemployment insurance. As of the writing of this article, of the 45 states that have a sales tax, all but eight have already passed the economic contacts test for sales tax. (That sure didn’t take long.) How many middle market companies (selling items subject to sales tax) have adapted their practices to this tsunami of a tax change? From what we’ve seen, just about zero. How many acquirers have adjusted their due diligence process? Let’s say the adoption rate there is at least as fast as those of the 45 states - and that is being generous to the states.
The results on M&A already include (i) longer due diligence, (ii) acquirers demanding larger escrows and holdbacks, and (iii) purchase price adjustments. The longer middle market companies go without getting up to speed on the new reality, the larger the potential penalties on the business once the acquirer gets hold of it and therefore the larger the issues will become in the deal process.
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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.
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
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.
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.
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.
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.
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.
Since the early 70’s, Nashville has been considered a hub when it comes to the health care industry. Nashville has developed and changed the landscape of the industry in the past 50 years. The development of the community began with Hospital Corporation of America (HCA). Largely through hundreds of mergers, acquisitions and well as new companies, we’ve seen industry trends set in Nashville, as well as startups and spinoffs bringing different sectors of the industry to Nashville.
Before the Hospital Corporation of America, most hospitals were non-profit or affiliated to a religion. In 1969, one year after inception, HCA became a publicly traded company. This changed the landscape of the industry for good. Through an abundance of M&A transactions, HCA now owns and operates more than 170 hospitals in 20 states across the country. In 1995, the Nashville Health Care Council was established, understanding the Nashville health care industry was responsible for $3.7bn in revenue at the time, while providing 53,000 jobs. Today, the council reports $92bn in annual revenue generated, all while providing more than 570,000 people employed around the globe by healthcare companies based in Nashville. There are over 900 companies that directly provide health care services, or are in some way involved in the industry. These numbers are massive, and spurred a ripple effect around the country causing more private equity spending to focus into the industry. This effect has led to eighteen publicly traded healthcare companies calling Nashville their home, while enticing more than $1bn in venture capital investments over the past decade. The leaps and bounds made during the past 50 years are obvious, as the entire landscape of the industry has complete changed. During 2006, Bain Capital, Kohlberg Kravis Roberts & Co. and Merrill Lynch completed a $33bn leveraged buy-out of HCA. This was the largest leveraged buy-out to date and spurred an unprecedented amount of investment in the industry. In 2011, HCA returned to the public market in the largest US private equity-backed IPO to date ($3.79bn raised). HCA’s chain system business model was emulated by hundreds of not-for-profit hospitals throughout the country, and they are considered to be the trailblazer of the industry.
The M&A landscape continues to change the healthcare industry to this day. Through the first half of 2018, the healthcare sector saw deal value increase to $315bn, up from $154bn in the same period the previous year. The healthcare sector ranks third in terms of total deal value. From a valuation perspective, healthcare M&A transactions were at an all time high in 2017. A large driver within the space was within the senior housing and care marketplace. The number of announced transactions is on pace to set a new record, but the dollar amount of these deals will not exceed the record. While this shows the hyperactive nature of the marketplace, these deals are occurring as smaller transactions rather than the mega-deals we’ve seen in the past. This is a very attractive marketplace for sellers all things considered. Private equity groups accounted for a large uptick in spending during Q4 of 2018. Financial buyers are notably optimistic about the healthcare market, with 120 total deals announced in the final quarter of 2018. This bodes well for 2019 with 2018 in the rearview, healthcare continues to expand due to high valuations, a very large number of transactions, and an increasingly attractive marketplace.
For the third year in a row, the number of small business transactions reached record numbers, as reported by BizBuySell. Financial performances of the small businesses are increased year over year, as well. 49% of sellers said their businesses performed better in 2018 compared to 2017, and another 36% had similar figures comparably. With financial performance increasing, the value of the transactions inevitably grew. The medium asking price for small businesses in the US grew 10% from 2017, a clear indication that buyers are willing to pay more for businesses with a proven financial track record and promising futures.
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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
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
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 >>
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.
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.
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.
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.
Benchmark International is pleased to announce the transaction between two water and waste water logistics firms – Dial-A-Loo and Universal Tanker Solutions.
Based in Tyne & Wear, Dial-A-Loo has been operating for almost 30 years as a supplier of commercial and domestic water and wastewater logistics, alongside portable toilet hire, to clients across the North East that operate in the construction and shipbuilding sectors.
Offering similar services to Dial-A-Loo, Universal Tanker Solutions provides a waste water removal and non-potable water delivery service to domestic, commercial and industrial clients.READ MORE >>
Benchmark International has successfully facilitated the acquisition of T3 Technologies, LLC (d/b/a T3 TigerTech) to Bluestone Government Solutions, LLC. Benchmark International worked diligently to find a buyer that was an ideal candidate to ensure the goals of the sellers were met, from both a financial and corporate-fit perspective.
T3 Technologies, LLC (d/b/a T3 TigerTech) is a diversified government contractor specializing in project management, predictive and big data analytics, program data management, and supply chain management for multiple government agencies.
DonZacherl, CEO of T3 said, “The Benchmark International team was very professional, responsive, and provided great guidance during our transaction process. Having Benchmark on our side, and focusing on the details of the transaction process, allowed our management team to continue to concentrate on the day-to-day running of
Bluestone Government Solutions, LLC provides information technology, agile development, big data analytics and geospatial intelligence services to public entities. It supports the federal agencies within the intelligence community and the greater DoD, along with
AudraFrizzell, CEO of Bluestone Government Solutions said “We are very excited about the acquisition of T3. The company comes with an experienced management team that has been at the core of its success.”
Benchmark International was able to procure a buyer for T3 Technologies, LLC that met its financial goals, was an ideal cultural fit, and also provided the buyer the additional resources it had been searching for. Benchmark International corresponded with numerous potential investors, and the owner of T3 Technologies had several
in-person meetings prior to being introduced to the representatives from Bluestone Government Solutions, LLC.
READ MORE >>
Benchmark International has successfully advised on a deal between the group of Pellings companies (Pellings LLP, J & A Pellings and Pelling Limited) and RSK Group Limited, which marks RSK’s ninth acquisition in as many months as well as its largest acquisition to date.
Pellings, a group of companies which provide a complete spectrum of architectural services, building surveying, project management and related professional services for housing, education and healthcare projects, have 125 staff and four offices covering North, West, South and Central London.
RSK is an integrated environmental, engineering and technical services consultancy, which has 36 international offices, more than 2,700 employees and an annual turnover of £200m. It is currently actively investing in Europe, the Middle East, India, Africa and former Soviet Union countries, and has an active client base of 7,000 organisations spread across these regions.READ MORE >>
Benchmark International has advised on the transaction between NRG, a supplier of motors and controls for gates and barriers, to Indutrade.
NRG is a specialist supplier of drives, motors and controls for industrial, commercial and residential doors and shutters, also offering a range of gate and barrier automation. Customers are manufacturers and installation contractors of doors, shutters and gates in the UK and Ireland.READ MORE >>
Benchmark International has successfully facilitated the transaction between Intec UK, a specialist recruitment business in the energy and power sector, to NRL Group, a recruitment company with a c£170M turnover.
Intec has more than 35 years' experience, placing both temporary and permanent candidates with an engineering and technical skillset in various industries, offering a full complement of recruitment services.READ MORE >>
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.
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.
So you’ve made the big decision – you’re going to sell your business. This is likely a stressful time for you as have probably spent a lot of time and resource building up the company and may be nervous about seeing it pass over to new hands. So, from here on in, you would like to minimise the amount of stress involved by avoiding any mistakes which can easily be averted. The following are common mistakes to avoid and how Benchmark International can help:
Only Pursuing the Largest Acquirer
Surely pursuing the largest acquirer is in your best interests as they will be able to afford a premium for the company?
While they may be able to pay a premium for the company, they may not necessarily do so. An acquirer is likely to pay a premium for your company because there are synergies in place such as similar markets, products or customers that could be combined, but a large acquirer typically does not need to make the acquisition to enter these markets. An acquisitive party could also benefit from economies of scale and, therefore, will pay more for the target, but a large acquirer is unlikely to benefit from this. Even if a large acquirer is willing to pay a premium, they may absorb operations into their own company, which can cause complications for the handover, particularly if you are loyal to existing staff.
How Benchmark International Can Help: Look at all aspects of the deal and how it can benefit your company. Benchmark International can assist with sourcing the best fit for your company.
Not Looking at the Bigger Picture
You’ve just received an offer from a potential acquirer – on the surface of it, it looks good, surpassing your expectations. However, the structure of the deal as a whole needs to be considered, not just the total value. For example, the consideration could be deferred, or contingent on future earnings, meaning you are not receiving all cash upon completion. It is also important that if you do decide on a structured deal, that these elements are protected, ensuring you receive the consideration.
How Benchmark International Can Help: Benchmark International will thoroughly analyse all offers received, negotiate earn-out protections and can assess any contingent targets to ensure that the seller is able to maximise the consideration received.
Not Creating Competitive Tension
It can certainly be a benefit to enter into the M&A process with potential acquirers in mind, perhaps one of these has even approached you at some point. However, even though it may be tempting to dive straight into a deal with an acquirer that wants you and complements your company perfectly, it is still vital to create competitive tension by generating interest from other potential acquirers. If the acquirer in mind can sense that they are the only one with an offer on the table and that you are anxious to sell to them, they could take advantage of this with a low offer.
How Benchmark International Can Help: Benchmark International will employ an approach where all potential acquirers are approached and exhausted before accepting any offers.
Using an M&A Sector Specialist
This may seem like an odd ‘mistake’ to make – why wouldn’t you want to use an M&A specialist operating specifically in your sector, surely you don’t want a generalist?
The reasoning behind this is that a general M&A firm will be able to think outside the box and target a large pool of acquirers, not limiting itself to those just in your sector.
How Benchmark International Can Help: Benchmark International has a vast and growing number of contacts giving you the best chances of receiving multiple offers, as well as significant experience across a broad number of sectors, leveraging this to identify the areas where the greatest synergies can be exploited.
Leaving it Too Long
To obtain the best price and right fit for your company, it is crucial to enter the market at the right time. It is important to strike a balance between seeking to sell when the company is on a growth curve, but also not missing the window of opportunity in the market cycle. Equally, it is important not to sell when you become desperate (e.g. you are looking at retiring soon) as acquirers could become aware of this and lower their offer accordingly.
How Benchmark International Can Help: Look at selling earlier than anticipated, not when you want an imminent exit. Benchmark International can best advise on when the right time is
Neglecting the Day-to-Day Running of the Business
M&A transactions can be time consuming, but it is important not to let it get in the way of running the business. If an acquirer is interested in the business because profits are increasing, or a new product is due to be released to the market, for example, and this does not come into fruition because you have taken your eye off the ball, then this could lead a buyer to renegotiate, or call the whole deal off.
How Benchmark International Can Help: The pressure of selling your business can be alleviated by Benchmark International as it will handle negotiations, leaving you to focus on running your company.
Not Negotiating Effectively at Critical Stages
Offers may go back and forth between yourself and the potential acquirer and at this point you are in a good position to negotiate. It is not until the Letter of Intent (LoI) is signed that the advantage swings to the buyer. Although the LoI is not typically legally binding it does usually stipulate a period where the seller cannot pursue further leads in the market (an exclusivity period), so competitive tension is lost. It is important, therefore, that you are completely happy with the terms (which can include such things as price, length of the exclusivity period etc.) before the LoI is signed to avoid either having to back out of a deal that could have been lucrative or being tied to a lengthy exclusivity period.
How Benchmark International Can Help: In all stages of negotiating, Benchmark International will do this on your behalf with your best interests in mind.
T: +44 (0) 1865 410 050
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Over 88% of business owners think their business will stay in the family. In fact, only about 30% of family-owned businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond. As baby boomers are heading for retirement, who is going to take over the businesses the boomers are looking to sell?
Today’s business owners are faced with multiple factors when deciding the right time to sell. The perfect time can be tricky to predict as several economic considerations need to be weighed. The majority of business owners begin this thought process when nearing retirement age, but is this too late? The most important considerations are current economic statistics, market conditions, and industry trends. These are good predictors of a sellers’ market and shows the types of buyers and private equity companies ready to invest. Buyers are looking for businesses in the growth and maturity stages of their business life cycles. During these stages, operational bottlenecks are becoming managed and demand, profits and lasting customer relationships have been built. Business owners sometimes have the tendency to postpone selling until operations and profits begin to decline. This is a costly mistake for any business owner wanting to maximize their company’s value.
Sellers should strive to put aside personal feelings anchoring their decision-making process when considering their exit strategy. When considering selling, business owners should focus their attention on asking is my business in a financial incline, is my staff in place able to succeed without me, do I have a diversified client structure, and are my capital expenditures under control?Business owners need to consider these objectives now and determine if a sale is the right decision. Economic environments quickly change and in order to achieve a premium sales price, a favorable market is the key. Currently, multiples are at a historic high with limited quality businesses available for sale. Baby boomers are holding on to their businesses and aren’t willing to sell until they have to.
This can be a hard-personal decision to make for owners who have built their companies from infancy. Owners are conflicted with their decision, asking did I do the right thing, did I maximize my company’s value, will my employees be taken care of, and what is next in my life.Before considering the sale of your business, define both the internal and external factors and remove any hidden traps that cloud your decision-making process and can result in missed opportunities. By having a written exit plan, an experienced team of advisors, and patience, business owners will realize the full value of their life’s work.
Here at Benchmark International, we understand the emotional and physical stress that accompanies the decision to sell. Our experienced advisors assist by providing an outside perspective to business owners and by identifying suitable conditions in the M&A sector. Our responsibility is to ensure our clients are presented with all the facts and strategies to move forward. Benchmark International values close relationships and ensures that our clients are fully prepared to make the right decision when the day comes.
T: +44 (0) 1865 410 050
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On November 06, 2018 Benchmark International professionals attended the 17th Annual M&A Advisor Awards in New York City and walked away winners. The award ceremony is part of a larger summit hosted by M&A Advisor that is dubbed ”the country’s premier gathering of professionals engaged in M&A, restructuring and financing.” Industry leaders, watchers, and influencers travel from around the world to participate in this renowned professional-development summit and to be recognized for their accomplishments.
Benchmark International is pleased to announce that its Managing Director, Kendall Stafford, has been awarded with the title of “Investment Banker of the Year.” Stafford was one of eight finalists for this award, and went up against other outstanding individuals in the M&A realm. Stafford is an exceptional leader on mergers and acquisitions transactions, and Benchmark International is elated to say she is a prime example to the philosophy that we leave no stone unturned.
“The award recipients represent the finest in the M&A industry in 2018 and earned these honors by standing out in a group of extremely impressive finalists,” expressed Roger Aguinaldo, Founder of The M&A Advisor. “From lower middle market to multi-billion dollar deals, we are recognizing the leading transactions, firms, and individuals that represent the highest levels of achievement.”
The recognition of the 17th Annual M&A Awards hosted by The M&A Advisor is additional support to the claim that Benchmark International truly strives to provide the best service to its clients. Benchmark International was also recognized earlier this year at the Emerging Leader Awards and the 10th Annual International M&A Awards, both also hosted by The M&A Advisor; the leader in M&A recognition globally. Benchmark International’s Transaction Director, Luis Vinals, was named an Emerging Leader, and Benchmark International won Regional Deal of the Year for North America for the acquisition of Gasco Affiliates, LLC by Tech Air, and also won Financials Deal of the Year for the acquisition of Silexx Financial Systems by the Chicago Board Options Exchange.
When it’s time to sell your business, you want a team on your side that will bring you the most value for your business in every facet. Benchmark International works with clients on every front, from emotional needs, to monetary needs, to cultural needs for business owners looking to exit their businesses. Call today to find out how Benchmark International can help you.READ MORE >>
We have just released our latest edition of The Mark, a place where we share insights in the M&A industry and featured opportunities.
As we look back on activity in 2018, there have been upward trends in certain sectors for M&A activity, which have included healthcare and technology, which have, in turn, attracted interest from private equity firms.
This issue also discusses the many decisions that arise for a seller in the M&A process, from the type of buyer to choose to when the optimum time is to sell, as well as the pitfalls that can occur in the M&A process and how these can be tackled or prevented.
We hope you find this edition of The Mark insightful and informative, one day assisting you with decisions when selling your business, along with our friendly and helpful team at Benchmark International, who are here to help wherever you are in the world.
Some Articles Included:
- Looking to Buy a Business? 4
- Top Mistakes to Avoid When Selling 6
- The Winning Hit 10
- Guest Author: Christopher Swink of BNY Mellon Wealth Management
- When is the Right Time to Retire? 12
- Five Ways to Value Your Business 16
- If Business Valuation Was a Science 18
- Why have interest rates been so low for so long?
Why are they rising now? Why should you care? 22
- Guest Author: Alan Gorlick of Gorlick Financial Strategies
- Featured Opportunities 26
- Meet the Heroes Behind the Deals 34
- Preparing Your Business for Sale 36
- How to Avoid Leaving Money on the Table When Selling Your Business 40
- Guest Author: Bob Rasmussen of Bradley Law Firm
- Why Now is the Time to Sell Your Company 50
- Strategic vs Financial Buyers 58
Thanks for reading. Please like and share!READ MORE >>
Determining the value of your business is not as simple as looking at the numbers, applying tried and tested formulas, and concluding. Were it that straightforward all business valuations would be virtually identical. The fact that they are not is sure proof that valuation is not a science, it can only be an art.
If Mergers and Acquisitions (M&A) was as straightforward as calculating the theoretical value of a business, based on historical performance and using that to determine market value I would need something more constructive to do with my time.
Valuation is not as primitive as we have been led to believe. Whilst transaction values are commonly represented as a multiple of earnings this is merely the accepted vernacular used to report on a concluded transaction and almost never the methodology used to arrive at the value being reported.
The worth of a business is often determined by the category of buyer engaged. Financial buyers can add significant value to a business in the right stage of its life cycle but may not assume complete ownership, thereby delivering value for the seller simultaneously with their own. The right strategic acquirer for any business would be one that can unlock a better future for the business, and is willing to recognize, and compensate, a seller for the true value the entity represents to them.
Comparing the experience of so many clients, over so many years, and avidly following the outcomes of all the transactions published in South Africa there is little dispute that businesses are an asset class, like any other, and that the best value of all asset classes are only ever realized through competitive processes irrespective of whether the acquirer has financial or strategic motives.
1. The itch of business valuation
Simplistically, for the right acquirer - one seeking an outcome that extends past a short-term return on their initial investment - valuation is more a function of the buyer's next best alternative, than it is a businesses’ historic performance.
It would be naïve to think that the myriad of accepted valuation methodologies have no place in the process but identifying, engaging and recognising the benefits of the acquisition for a variety of strategically motivated buyers is essential in determining value in this context.
Considering a variety of appropriate valuation metrics, the parameters applied and then being able to balance these against the alternative investment required to achieve a similar outcome is where the key determinant of value lies. This is a complex process that unlocks the correct value for buyer and seller alike and it is a result that is rarely achieved without engaging with a wide variety of different acquirers and being prepared to "kiss a few frogs"
The most valuable assets on the planet are only ever sold through competitive processes where buyers have the benefit of understanding and determining value in the context of their own motives, having considered their available alternatives. It is for this reason that when marketing a business, it should never be done with a price attached.
2. An aggressive multiple
Whilst conventional wisdom is firm on industry average multiples, case studies abound, and the business community is regularly astounded by stated multiples achieved when companies change hands.
Beneath the glamour, the reality is that multiples are rarely used as a determinant of value, but almost without exclusion applied to understand it. Multiples represent little more than a simplistic metric that reflects an understanding of how many years a business would need to reliably deliver historic earnings in order for the acquirer to recoup their investment.
In the same way as a net asset value (NAV) valuation would unfairly discriminate against service businesses, multiples discriminate against asset rich companies. For strategic acquirers, with motives beyond an internal rate of return - measured against historic earnings - valuation is sophisticated. It relies on an assessment of whether the business represents the correct vehicle to achieve the strategic objectives, modelling the future returns and assessing risk. Valuation in these circumstances will naturally consider it, but places little reliance on the past performance of a business constrained by capital or the conservatism of a private owner to formulate the future value of such investment.
Whilst there are Instances where the product of such an exercise matches commonly accepted multiples, there are equally as many valuations that, on the face of it, represent unfathomable results.
3. A better tomorrow for the buyer
It would be irresponsible to advocate that that return on investment is not a consideration when determining value - corporate companies and private equity firms typically all have investment committees, boards and shareholders that assess the financial impact of any transaction. It is rare that such decisions are ever vested with a single individual, or that the valuation is derived from their personal desire to own a company or brand.
The art of valuation requires a reliable determination of the synergies between buyer and seller and an accurate assessment of the risks and benefits of the investment. Risk and reward are inherently related and skilled negotiation is required to find solutions that mitigate, or de-risk a transaction for buyer and seller alike, in order to underpin the value
of a transaction.
Financial buyers can be very good acquirers, especially in circumstances where they are co-investing alongside existing owners, staff or management to provide growth funding. When seeking a strategic partner for a business the acquirer should always be unable to unlock value beyond the equivalent of a few years of historical earnings. It is for this reason that the disparity between valuations by trade and financial buyers exists, and why determining the appropriate form of acquirer for any business is a function of the objectives of the seller.
4. Passing-on the baton, or living the legacy
The motives for a sale can be varied and extend from retirement to funding and growth, from ill-health to a desire to focus on the technical (as opposed to management and administration) aspects, of the business.
Value for buyers and sellers comes in many different forms. For sellers it is their ultimate objective that determines whether they have achieved value in a transaction. For sellers it may be as simple as the price achieved or it could extend to value beyond the balance sheet as diverse as leveraging the acquirer’s BEE credentials, unconstrained access to growth capital or even to secure a future for loyal staff.
For both local and international buyers alike, the intangibles may be as straightforward as speed to market in a new geography who would otherwise not readily secure vendor numbers with the existing customers of the target business. An acquisition may be motivated by access to complimentary technology, skills or distribution agencies to diversify their own offering. Whatever the motives, an assessment of the future of the staff will always be an important aspect to both parties.
There are few, if any businesses, that are anything without the loyal, skilled and hardworking people that deliver for the clients of a business. The quality of resources, succession and staff retention are all factors that weigh on a decision to transact. Navigating the impact of a transaction on staff is a factor that cannot be ignored and the timing of such announcements can be meaningful.
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The first question you will probably want to ask when thinking about selling your business is – what is it actually worth? This is understandable, as you do not want to make such a big decision as to sell your business without knowing how much it could command in the market.
Below are five different ways a business can be valued, along with which type of companies suit which type of valuation.
Multiple of Profits
A common way for a business to be valued is multiple of profits, although this typically suits businesses that have an established track record of profits.
To determine the value, you will need to look at the business’ EBITDA, which is the company’s net income plus interest, tax, depreciation and amortisation. This then needs to be adjusted to ‘add-back’ any expenses that may have been incurred by the current owner which are unlikely to be incurred by a new owner. These could be either linked to a certain event (e.g. legal fees for a one-off legal dispute), a one-off company cost (e.g. bad debts, currency exchange losses), are at the discretion of the current owner (e.g. employee perks such as bonuses), or wages/costs to the owner or a family member that would be more than the typical going rate.
Once the adjusted EBITDA has been calculated this figure needs to be multiplied; this is typically between three and five times; however, this can vary – for example, a larger company with a strong reputation can attract towards an eight times multiple.
This provides an Enterprise Value, with the final ‘Transaction Value’ adjusted for any surplus items, such as free cash, properties and personal assets.
Asset valuation is suitable way to value a business that is stable and established with a lot of tangible assets – e.g. property, stock, machinery and equipment.
To work out the value of a business based on an asset valuation the net book value (NBV) of the company needs to be worked out. The NBV then needs to be refined to take into account economic factors, for example, property or fixed assets which fluctuate in value; debts that are unlikely to be paid off; or old stock that needs to be sold at a discount.
Asset valuations are usually supplemented by an amount for goodwill, which is a negotiable amount to reflect any benefits the acquirer is gaining that are not on the balance sheet (for example, customer relationships).
This way of evaluating the value of a company simply involves taking into account how much it would take to establish a similar business.
All costs have to be taken into account from what it has taken to start-up the company, to recruitment and training, developing products and services, and establishing a client base. The cost of tangible assets will also have to be taken into account.
This method for valuing a business is more useful for an acquirer, rather than a seller, as through an entry valuation they can choose whether it is worth purchasing the business, or whether it is more lucrative to invest in establishing their own operations.
Discounted Cash Flow
Types of companies that benefit from the discounted cash flow method of valuing a business include larger companies with accountant prepared forecasts. This is because the method uses estimates of future cash flow for the business.
A valuation is reached by looking at the company’s cash flow in the future, and then discounts this back into today’s money (to take into account inflation) to give you the NPV (net present value) of the business.
Valuing a business based on discounted cash flow is a complex method, and is not always the most accurate, as it is only as good as its input, i.e. a small change in input can vastly change the estimated value of a company.
Rule of Thumb
Some industries have different rules of thumb for valuing a business. Depending on the type of business, a rule of thumb can, for example, be based on multiples of revenue, multiples of assets or of earnings and cash flow.
While this method may have its merits in that it is quick, inexpensive and easy to use, it can generally not be used in place of a professional valuation and is instead useful for developing a preliminary indication of value.
To summarise, the methods of valuation can very much vary in terms of complexity and thoroughness, and different industries will find different methods more useful than others. A good M&A adviser can best suggest which way to value your business, as well as help to counter offers in the latter stages of the process with an accurate valuation in mind.
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A merger is very similar to a marriage and, like every long-term relationship, it is imperative that mergers happen for the right reasons. Like many things in life, there is no secret recipe for a successful transaction. While the strategy behind most mergers is very important to obtain the maximum value for a business, finding the right reason to execute a merger could determine the success post-acquisition.
When two companies hold a strong position in their respective areas, a merger targeted to enhance their position in the market, or capture a larger market share, makes perfect sense. One of the most common goals for transactions is to achieve or enhance value; however, buyers have different reasons for considering an acquisition and each entity looks at a new opportunity differently. The following points summarize some of the primary reasons that entities choose the mergers and acquisition route.
- Increased capacity
When entertaining an acquisition opportunity, buyers tend to focus on the increased capacity the target business will provide when combined with the acquiring company. For example, a company in the manufacturing space could be interested in acquiring a business to leverage the expensive manufacturing operations. Another great example are companies wanting to procure a unique technology platform instead of building it on their own.
- Competitive Edge
Business owners are constantly looking to remain competitive. Many have realized that, without adequate strategies in place, their companies cannot survive the ever-changing innovations in the market. Therefore, business owners are taking the merger route to expand their footprints and capabilities. For example, a buyer can focus on opportunities that will allow their business to expand into a new market where the partnering company already has a strong presence, and leverage their experience to quickly gain additional market share.
Diversification is key to remain successful and competitive in the business world. Buyers understand that by combining their products and services with other companies, they may gain a competitive edge over others. Buyers tend to look for companies that offer other products or services that complement the buyer’s current operations. An example is the recent acquisition of Aetna by CVS Health. With this acquisition, CVS pharmacy locations are able to include additional services previously not available to its customers.
- Cost Savings
Most business owners are constantly looking for ways to increase profitability. For most businesses, economies of scale is a great way to increase profits. When two companies are in the same line of business or produce similar goods or services, it makes sense for them to merge together and combine locations, or reduce operating costs by integrating and streamlining support functions. Buyers understand this concept and seek to acquire businesses where the total cost of production is lowered with increasing volume, and total profits are maximized.
The above points are merely four of the most common reasons buyers seek to acquire a new business. Even if the acquirer is a financial buyer, they still have a strategic reason for considering the opportunity.
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The due diligence process is one of the final steps in an M&A transaction where the potential buyer does its obligation to best confirm and verify the seller's company data and relevant information. This information typically includes but not limited to: financials, IT, operations, legal & compliance, insurance, corporate bylaws, contracts, customers, among other important information. Typically, the due diligence process follows the execution of a letter of intent (LOI), a non-binding document outlining the intent of both parties to commit to the transaction.
Once the LOI has been executed, the buyer will request a list of items to be shared by the seller with the intention of disclosing the selling company’s key details that could uncover risk buyer. As mentioned before, items can range all the way from financials to operations to insurance to contracts, among others. In cases where the seller owns the real estate, additional documents pertaining to the real estate, such as: deeds, mortgages, tax documents, owners’ insurance, etc. will need to be provided. Given today’s advancements in technology, once the due diligence request list has been sent to the seller, the team leading the deal will proceed to open what we call in the M&A world a “virtual data room” or a “data room.” These two terms are referred to as online portals that hold and store the information requested by the buyer with high levels of security only available for certain parties, including: buyer, seller, M&A attorneys, CPAs, advisors, among others. The data room allows activity within the room to be tracked and archived so there is a file of the information exchange after closing should any issues arise.
Once the due diligence starts, it is highly recommended for the buyer to hold, at the very least, weekly meetings or calls with the seller to discuss outstanding items or any questions that may have arisen from the process. As the due diligence process progresses, the buyer will become more familiar with the seller’s company. For an instance, should the buyer find any items that may play against the seller in the due diligence process, the buyer may use this to lower the valuation of the business which may ultimately result in a lower offer price.
In addition, this process can result as a discovery of potential opportunity to better structure the deal, find real synergies among parties, review any benefits and challenges for potential system integrations, and any associated risks that may arise from the result of this potential acquisition.READ MORE >>