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Stock Sales Versus Asset Sales

For the sale of a company, the parties involved can choose to structure the deal as an asset sale or a stock sale. An asset sale is when a company sells all of its assets or a portion of them. In this type of deal, the seller remains the legal owner of the business but no longer owns the assets sold. Under a stock sale, the buyer purchases equity from the selling company’s shareholders. There are several different reasons for sellers and buyers to pursue one type of transaction over the other.

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Webinar: Life After the Business Sale: How to Stay Wealthy

November 6th, 2018 at 10:00-11:00 am EST

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In this webinar, we will be tackling the really fun topic, the one that is really in every seller’s mind - what to do with all that money you get from the sale of your business. Our Benchmark International host, Clinton Johnston, will be joined by BNY Mellon Wealth Management’s Christopher Swink, a specialist in assisting business owners with their transition into passive investing as part of the sale of their business. Most business owners have grown their personal wealth primarily or exclusively from re-investing their income into their business. In this way, their money has made money for them. Once the business is sold, former owners must come to learn new ways of having their money make money for them. Some of the specific topics we will discuss include:  

  • What returns can a former business owner expect to earn on their cash?
  • How can a wealth manager help me either before I decide to sell or while selling?
  • How important is timing my sale to my overall standard of living after the sale?
  • Is getting some of my cash from the deal later as opposed to at closing really a bad thing?
  • What will my life look like after the sale?
  • How can I draw a safe but sufficient income off of my sale proceeds?

Hosts:


Clinton Johnston
Managing Director
Benchmark International


Christopher Swink
Senior Director
BNY Mellon Wealth Management

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Best Practices When Preparing Your Business for Sale

The decision to sell your business can be incredibly difficult. In addition to the financial capital you have invested in your company, you have incurred an intangible amount of “sweat equity, through the hard work spent building your business and the natural emotional investment made in the company. That’s why, once the decision to sell has been made, it is imperative that proper preparation is put in place  to ensure your goals are met once your company is brought to market. Owners who approach exit planning systematically and methodically are more likely to maximize the value of their business and sell on their own terms.

Schedule a call to speak to an Analyst

Financial Preparations

The primary factor influencing a company’s value is its earnings. It is essential  that the company’s financials present potential buyers with a clear story, allowing them to fully evaluate the company’s production. Presenting your business as efficient, with solid cash flows, a clean balance sheet, and low expense requirements, will position it as an attractive acquisition. There are several steps a business owner can take when reassessing their financials.

First, small private companies’ income statements are typically geared towards minimizing the company’s taxable net income. Although beneficial to the business owner, this approach is counterproductive in the context of a sale. As such, discretionary expenses that are not critical to operations and have not, or will not, impact revenues should be identified and eliminated. This could include owner/shareholder expenses, family-member salaries, fringe benefits or exorbitant perks, and extraordinary one-time expenses. Not only will this exercise maximize net income, but it will also present a normalized picture of the business to acquirers.

Second, organizing your balance sheet is key in preparing for a transaction. Sellers should remove all assets unrelated to their business from the balance sheet, as well as identify excess assets that could be converted to cash without adversely impacting the business. A buyer will not be interested in paying for excess inventory and, as such, this presents an opportunity for the seller to increase the total yield from the sale.

Third, it is important that a seller fully understands the company’s working capital before engaging a buyer. Working capital is often a point of negotiation between the buyer and seller. Buyers expect to receive a “normal” level, and often use low amounts of working capital to drive down the total cash paid at close. Managing working capital requires both time and effort, but it can result in greater efficiency and can lower the total level of working capital buyers expect to have delivered.

Lastly, the reliability of a company’s financial statements is critical in influencing a buyer’s decision. It is recommended that, before going to market, a seller contracts an independent accounting firm to review or audit their company’s financial statements. This will ensure the company is presented in an accurate manner, and will instill a sense of confidence in potential buyers, resulting in a greater level of trust and better valuations.

Operational Preparations

A company’s operations are just as important as financials. Potential buyers will seek to comprehensively understand the business practices behind a company’s earnings. A well-run business, with efficient operations, and good growth prospects will appear more attractive to any buyer. Unfortunately, businesses often have operational issues that could jeopardize a transaction. It is necessary for sellers to identify these issues before going to market and, in any case where the issue cannot be resolved, prepare to address it in a forthright manner.

For example, although a company’s clientele is not directly reflected in its financial statements, a company’s book of clients is a critical point of examination for a buyer. An ideal business has a broad customer base with little customer concentration. Dependency on a limited number of large customers could significantly reduce the marketability of a company. In these cases, it is important that the seller address this issue head on by either diversifying the company’s clientele before going to market, or developing a narrative to mitigate this issue and reassure buyers.

Additionally, a business owner’s level of involvement in the company is an important factor to buyers. They are acquiring the business, not the seller. As such, buyers will want to see a strong supporting management team, indicating the business will continue to be successful long after the owner has left. As a business owner prepares to go to market, it is key that they evaluate their role in business operations and implement a succession plan. 

Lastly, it is imperative that a business owner continues to grow revenues, as well as develop a realistic growth strategy. Buyers are purchasing the current and future cash flows of the business; historical growth, as well as a growth strategy with expansion opportunities, provides a blueprint for what’s to come. Presenting buyers with growth plans that are reasonable and achievable validates the credibility of management, and demonstrating that credibility through continued revenue growth illustrates the quality of the business.

For many business owners, selling a business happens once in a lifetime. When dealing with such a monumental event, a little more preparation today is certainly worth the added value tomorrow. Proper planning and advanced preparation is critical in order to maximize the value of your business and the probability of closing a transaction. Additionally, advice from seasoned professionals can provide you with savings and add significant value. At Benchmark International, we are proud to provide world-class mergers and acquisitions services, and we work hard to ensure your company’s value is maximized and your business is sold on your terms.  

Author:
Theodore Pince
Associate
Benchmark International

T: +1 (813) 898 23557
E: pince@benchmarkcorporate.com

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11 Reasons to Have the Exit Conversation

When the mention of selling your business comes up, you might feel a little uneasy about starting the discussion. Your business is your baby, and the thought of letting go can be overwhelming. The truth is; however, failing to plan is a plan to fail when it comes to your business exit strategy. You need to have an exit strategy in place for your business. Everyone thinks of their future, but they don’t always take active steps in the present to prepare for what they want tomorrow. There are many reasons why you should discuss when and how to exit your business. Here are eleven reasons to have the exit conversation now:

1) Anything can happen at any time – This is so true. We cannot anticipate what will happen unexpectedly. For this reason, you need to have an emergency exit plan in place. What will you do if you have something happen that requires you to step down from your business quickly?

2) Family obligations are taking more time from the business – Business owners run businesses and have families all the time, but depending on the size of your business and the size of your family, you may need to spend more time away from the business. If you don’t have a team in place that can run the business without you for a few days, exiting might be your best bet.

If obligations, such as an ill family member, or a lot of educational or extracurricular commitments for your children are taking from your time, you could experience a negative shift in the dynamic of your business. A strategic partner can help you free up some time for your family while still allowing you to take an active part in your business’s growth. This type of partnership doesn’t require an immediate exit from your business and allows you to discuss an end-goal for this exit strategy with the partner you join.

3) Personal health issues are pulling you away from the business – When your personal health is in decline, it can be difficult to continue running the business. A business owner doesn’t need the undue stress caused by juggling an illness and the company.

Furthermore, if you find your health declining, or the health of a close loved-one, your priorities might change. Your view on where your time needs to be spent might be more focused on your personal relationships versus constantly working on growing your business.

Again, spending your time away from the business will have a direct negative effect on your revenue and daily operations. This makes the goal of achieving maximum value more challenging. Therefore, having an exit plan is essential.

4) You don’t have anyone in place to take over the business – You’re a great leader, and you run your business like a well-oiled machine. However, what happens when you’re gone? You need to have a plan in place. If you find your children aren’t interested in taking over, or if you don’t have any children, or if you don’t have a manager in place to take over, you need to know what you will do when it’s time to leave your business behind.

 

Ready to explore your exit and growth options?

 

5) You are getting burnt out – Running a business takes a lot of tenacity. The burnt-out feeling can creep in slowly and take hold in what feels like an instant. It’s important to balance your work life and home life, and that takes commitment and fine tuning. You need to set boundaries to make it work, and if you don’t have a good handle on taking time for yourself, and you are just barely keeping things afloat, exiting partially might be a good option to help you get back time to yourself and still have your business grow.

6) You aren’t doing what you love – There’s this ambitious view of starting a business. You think you can bring a new concept, service, or brand to the market, and you’re excited and ready to go. Everything starts strong and innovative ideas are flowing. Then, you hit a plateau and find yourself working on administrative tasks.

How did you get separated from doing what you love to do? You aren’t implementing new ideas and performing customer outreach like you used to. You don’t have time to research your competitors and bring new ideas to your business because all your time is tied up in making sure the business stays where it is and doesn’t fall behind. There are solutions for this.

A financial investor can help with those administrative tasks while you seek innovation. After all, no one knows your business like you. You can see where you want it to go, and you are confident you could achieve the next level success if you only had someone in place to do all the extra administrative tasks that have begun to fill your time.

7) The baby boomers are retiring – There are over 70 million baby boomers in the US, and they own more than 12 million businesses in the US. The sales of these businesses will saturate the mergers and acquisitions market in the coming years. More businesses for sale in the market means businesses will be sold for less. Right now, it’s the sellers’ market, but in coming years, it will be a buyers’ market. With more businesses to choose from, buyers will be able to negotiate lower prices for the investments they are considering. You don’t want to lose value because you wait too long. Now is the time to consider your exit strategy.

8) Low interest rates won’t last forever – There have been several changes in the market recently. Unemployment rates are below four percent for the first time since 2000, and it’s only expected to go down further. This is great for the workforce, but for business sales, it means an increase in interest rates. There are four interest rate hikes estimated to take place over the next year. Now is the time to take advantage of the current mergers and acquisitions marketplace.

9) Dry powder is at a record high – Reserves in dry powder have peaked, and this means private equity firms have more cash to spend on transactions. Now is the time to take advantage of this sum of cash waiting to be spent. The tax law created ample opportunity for investors to explore more options. Let yours be the one they choose while the market is still hot. If you can show how your business stands apart from the crowd, you can also negotiate competitive multiples for the purchase of your business.

10) Growing has become a challenge – Your business has grown a great deal, but now you’ve hit a plateau. How can you continue to experience rapid growth when you can barely keep up with your business as it is? It might be time to consider a strategic partner who can bring in a synergistic platform to help take your company to the next level and fulfill the vision you have.

11) You’re ready to slow things down and experience the other luxuries life has to offer – Being a business owner takes a lot of time away from other hobbies, life experiences, and family time too. And now? You’re at a crossroads. You love your business, but you love your family, and you want to experience some other things in life. Retirement isn’t sounding so bad, but you don’t know how to step away.

There are a multitude of reasons to begin the exit conversation for your business. This list is far from all inclusive, but it does illustrate why planning a proper exit strategy is essential as a business owner. The market changes, and it won’t be at its height forever. Starting the conversation is not a commitment to sell your business. You need to have a plan in place, and at least, if you start exploring your options, you will learn what choices you have.

If you are interested in exploring your options and better understanding the current state of the market and what’s expected in the near future, Benchmark International is a mergers and acquisitions firm dedicated to putting our clients’ needs first. We work to find you the best value for your business, and we don’t settle. We search until you find a deal that works for you and your business, both financially and culturally.

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Life After Sale

There are a myriad of reasons why you might look to sell your company: retirement, further resources are required to grow, or it is an opportunistic time. Whatever the reason, this is likely to be the pinnacle of your career as the amount of time and money invested into your business will come to fruition when it sells, securing the future for you and your family.

But what happens after a sale? The business which you have invested years into, and the place where you spent the majority of your time, has passed on to somebody else. You may have made a tidy sum of money from the sale, which many people would be satisfied with as they may never have to work again and be able to live in the lap of luxury, but once the holiday of a lifetime has been taken, what then?

And what about how the company will thrive going forward? This is maybe something that you have grown from the beginning, and you want to see its continued success, as well as ensure the future of your employees who have been loyal to you.

At Benchmark International, we understand that there is life after the sale of a business and so structure a shareholder’s exit to suit both them, and the welfare of the company going forward.

The following are companies which Benchmark International has sold and structured the deal to allow for a successful life after a sale for both the shareholder(s) and the business.
ROC NORTHWEST

ROC Northwest had been established for nine years before the shareholders, Hilary and Glyn Waterhouse, decided to sell. They had built up a company which provided education, residential, and domiciliary care services to young people with emotional and behavioural difficulties, autism spectrum disorders, learning and physical disabilities, and those with challenging behaviour issues, from seven properties throughout the north west of the UK.

They had a vested interest in ensuring that the company was sold to the right acquirer, not just to ensure that the welfare of the young people in their care was maintained, but also to ensure that the staff that had been loyal to them remained in employment. As such, a large number of interested parties were presented to ROC Northwest and the shareholders were able to choose the acquirer which best fit their ideals. Commenting on the acquirer’s plans going forward, Glyn said:

“We actually sold the company to a firm called CareTech Holdings PLC. They wanted to keep our managers, they wanted to keep the staff, they wanted to keep the homes. In fact, they didn’t want to change anything about the business. It was very important because once you start a business from scratch, you want that business to succeed; you’ve got loyalty from your staff, and you want the staff to be in place and have their jobs, so it was very important that we found a buyer that followed that ethos and allowed us to continue the hard work that we were doing.”

The shareholders at ROC Northwest wished to sell the company as they were looking at other business opportunities and wanted to spend more time together as a family. As this was the case, Benchmark International negotiated a seven figure deal with the majority forming a cash payment on completion. Now, Hilary has been able to purchase an equine business and has a total of eleven horses, growing from two.

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Benchmark International Completes Sale of Fast of Florida, Inc to Southern Air & Heat Holdings

International M&A specialist, Benchmark International, has successfully negotiated the sale of its client, FAST of Florida, Inc. (“FAST”) to Southern Air & Heat (“Southern HVAC”), a portfolio company of MSouth Equity Partners, an Atlanta-based private equity firm.

Based in Clearwater, Florida, FAST is a leading provider of heating, ventilation, and air conditioning (HVAC), plumbing and electrical sales, installation, and maintenance services to the residential and commercial markets. In 1972, the company was established as a small air conditioning repair shop by Eddie Vaughan. Eddie’s wife, Melissa, joined the company in the early 1980’s, assisting with administrative duties and bookkeeping. As the company grew, FAST evolved to expand its service offerings in order to remain competitive and add additional revenue streams. In 2005, Mr. Vaughan passed away after a long illness, and Melissa assumed ownership of the business. Under Mrs. Vaughan’s leadership, FAST has continued to experience tremendous growth while continuing to offer the same level of quality service the company was built upon. Today, the company employs nearly 50 people serving Pinellas County, Florida and the surrounding markets.

 

Ready to explore your exit and growth options?

 

Headquartered in Orlando, Florida, Southern Air & Heat is a leading provider of essential maintenance, repair, replacement and new installation services for the residential and commercial HVAC markets. Currently, the Company serves over 100,000 homeowners across its target markets. Southern HVAC is financially backed by MSouth Equity Partners, a private equity investment firm that provides equity capital and expertise to support management teams of lower middle market companies. Founded in 2007, MSouth manages $1.3 billion with three active funds, and is the successor to Cravey, Green & Wahlen, which was founded in 1984.

President of FAST, Melissa Vaughan, stated, “Benchmark International played an instrumental role in helping me to exit my family legacy business gracefully. The team did an outstanding job of marketing my business toward motivated buyers, and ultimately finding the perfect fit in Southern HVAC. I would like to thank the Benchmark transaction team for the extraordinary effort in making this transaction a reality.”

“Our focus was to find the acquirer that shared FAST’s passion and commitment to providing a personalized level of service while retaining the culture that Melissa has worked so hard to preserve,” said Trevor Talkie, Senior Associate at Benchmark International. “FAST is a compelling addition to MSouth’s growing HVAC platform, and we are truly honored to have worked alongside Melissa and her team toward this successful outcome.”

Tyrus O’Neill, Director at Benchmark International added, “After the journey Melissa has been through, we’re happy to see the process reach an ideal end result. On behalf of Benchmark International, I’d like to wish both parties the best of luck moving forward.”

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Why Engaging in 2018 is Advantageous for your Business

As we embark on the year 2018, it is important to acknowledge the advantages of engaging your business for sale. Mergers and acquisitions was strong in 2017 and is expected to continue full steam ahead moving into 2018. You can count on Benchmark International to stay on top of current trends to bring you the highest level of professionalism in the sale of your business.

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Benchmark International has Successfully Facilitated the Sale of Canaide Inc to Apprio Holdings, LLC.

Benchmark International has successfully facilitated the sale of Canaide, Inc. to Apprio Holdings, LLC.

Canaide, Inc., hereinafter referred to as Canaide, is a revenue cycle management firm located in Central Florida. They are a provider of outsourced, self-pay services to hospitals across the Southeastern United States. The acquirer, Apprio Holdings, is a provider of specialized technology solutions, particularly for the Health, Defense and Homeland Security markets. They are headquartered in Washington, D.C. and now have 11 total offices from coast to coast.

Art Seypura, owner of Canaide, stated, “Benchmark made the sales process timely and seamless. We went to market just a few short months ago and they quickly found a great cultural fit that would allow me to step away quickly from the helm while partaking in future growth under the guidance of Apprio.”

Benchmark International Director, Dara Shareef, stated, “We are really excited that we were able to successfully locate a buyer for Art Seypura and Canaide. Every facet of this process, from engagement to close, went smoothly thanks to the dedication and effort from both the sell-side and buy-side teams.”

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Benchmark International Negotiates Sale Of Nefco, Inc. To North American Filtration, Inc.

Benchmark International has successfully negotiated the sale of Nefco, Inc. (“NEFCO”) to North American Filtration, Inc. (“NAF”). The transaction represents the conjoining of two leaders in the water and wastewater treatment industry.

Based in Palm Beach Gardens, Florida, NEFCO has been a major provider of engineered fiberglass products to the water and wastewater treatment industry since 1993. The company designs and develops unique baffle systems, launder cover systems for algae and odor control, as well as effluent troughs systems, weirs, scum baffles and other treatment plant infrastructure.

For over 20 years, NEFCO has been committed to finding innovative ways to improve productivity in municipal, industrial water and wastewater treatment plants worldwide. With a current presence throughout the United States and Canada, NEFCO remains dedicated to continuing improvement and growth.

 

Ready to explore your exit and growth options?

 

Based in South Carolina, NAF was founded in the late 1970’s. While a number of the NAF family companies operate in the wastewater treatment space, the NAF family continues to grow each year through new acquisitions of other industry-leading providers. NAF currently employees over one-hundred employees across four locations, and has recorded thousands of installations on six continents.

Benchmark International’s Trevor Talkie acted as the lead on this transaction and was successful in pinning down the needs of both parties involved, “Benchmark’s ability to create a competitive bid process for our client was instrumental in this transaction.” Talkie stated, “On behalf of Benchmark International, achieving our client’s goals and objectives regarding their exit strategy has been a thoroughly satisfying experience, and we are extremely pleased with the outcome.” Director, Tyrus O’Neill, added, “Earle [Schaller] has built a tremendous business, and it is clear that NEFCO is a perfect fit for the North American Filtration portfolio of companies. We would like to take this opportunity to wish both parties the best of luck moving forward.”

NEFCO, Inc. President and Founder, Earle Schaller, stated, “Benchmark International’s hands-on approach during all aspects of the transaction process was fundamental in our successful deal closing. I would like to thank the transaction team at Benchmark International, for without the diligence and dedication of each member there, we strongly feel this end result could not have been achieved.”

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STERLING PROPERTY SERVICES ACQUIRED BY VESTA PROPERTY SERVICES

Benchmark International, acting on behalf of Sterling Property Services, LLC (“Sterling”) and its shareholders of Bonita Springs, Florida, USA, successfully facilitated the sale of Sterling to Vesta Property Services (“Vesta”).

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