Many business owners believe that enlisting an expert in their industry is the right way to go when selling their companies. But if you want to rake in the most value for your business, there’s a better way.

There is no question that mergers and acquisitions are complicated and subject to constantly changing market conditions and industry trends. An industry expert might know plenty about a particular industry, but they are not experts on selling and buying businesses. A mergers and acquisitions firm is.

It is not uncommon for a company acquisition to be viewed as a simple transaction that means transferring the business from one owner to another. But rather than just allowing the business to simply carry on as is under new leadership, a merger or acquisition should be viewed as a solid strategy to boost the company’s overall health, productivity, and bottom line. While M&A transactions can serve as great solutions for exit strategies, they can be so much more than that. M&A should be regarded as a powerful tactical opportunity.

Often times, M&A deals are considered to be a way to get out and cash out with instant gratification. But what else might be possible when a deal is carefully crafted to deliver sustainable returns and support a powerful legacy for the business in the long-term? M&A done right can translate into great success for a company and, ultimately, its leadership.

The right time to retire is going to be different for everyone based on individual circumstances and goals. While finances are obviously a major factor in the decision, being emotionally and mentally ready is equally important. Here are some points you should consider if you are thinking about embarking on retirement.

Financial Stability
Retirement hinges upon having the appropriate income to support a comfortable lifestyle in the future. This entails having an accurate and realistic picture of what your expenses will be and how much you will need in order to cover them, including income from your savings, pensions, social security, 401ks, IRAs, and any other assets. The earlier you plan to retire, the more significant your nest egg will need to be. Waiting a few years can help you build up more financial security through tax-advantage investment accounts. So if you love what you do, a later retirement means that you can continue doing it while you shore up your savings for the future. A common algorithm for retirement planning is to have savings that are 25 times the amount of your annual expenses.

No Debt
When heading into retirement, it is advised that you make sure you do not have outstanding debt in the form of high-interest credit cards and outstanding loans aside from a mortgage or car financing, which can be taken into account for your needed expenses. By eliminating debt, your retirement income can be used for current expenses instead of past expenses and offer you added peace of mind.

The Economy
While there is no way to be sure what the future holds, if there are signs of an economic downturn, you may want to hold off on the retirement plans for a bit. This will give the markets time to recover, which will help you recoup your invested assets and retire with a better bottom line.

Culture Affects the Bottom Line

When a company demonstrates that it’s thriving with happy and motivated talent, it is more likely to garner a higher business valuation when going to market for a merger or acquisition.

There is a proven link between culture, employees, productivity, and profit. Research shows that:

• Businesses with satisfied employeeshave been noted to outperform competitors by 20 percent.
• Happiness leads to a 12 percent boost in productivity and companies with strong cultures see a 43 percent increasein revenue growth.
• When employees are engaged, absenteeism falls 41 percent, productivity rises by 17 percent, and turnover is cut by 24 percent.

Having a solid integration plan in place for your company merger is critical to the future success of your business. These tips can help prepare you for the process.  

1. Begin planning from the earliest possible point in time. Outline all of your goals and objectives, employ best practices, and identify any gaps in your plan. Make sure all the key parties involved in the merger are in agreement on the integration plan. You should start implementing the integration process before announcing the deal. This enables you to begin integration immediately versus rushing to make important decisions at the last minute.
2. Create an integration team and clearly communicate the strategy for moving ahead with all necessary parties involved. Assess your key areas of value and designate the teams or persons responsible for these areas, making sure they understand the exit criteria they will need to meet.
3. Make sure leadership roles are clearly defined during and after the merger. You may even want to consider bringing in leadership from outside both companies to benefit from a neutral perspective. Insist that leadership is committed to both the big picture for the company and the details of getting integration done right.
4. Synergy is important in all aspects of the business, but especially in its culture. Commit to one culture and take measures to ensure that it will be preserved.

5. You are going to want your staff to be positive and excited about the merger, rather than nervous and/or cynical. This means you are going to have to sell the deal to them, ensuring they understand why the move will be good for them. Craft an internal communication plan that makes sure that no one is left in the dark at any point along the way. You will want to make sure you keep the overall messaging consistent to manage expectations properly.
6. Have a solid plan for all things IT. This is a critical component of any business. How the technology will be integrated must be completely planned out to avoid any communication breakdowns or loss of important data. Implement a structure to track progress and identify potential risks so that they can be addressed in a timely manner.
7. Understand what type of deal you are making and how it will dictate the days ahead. For example, a scale deal is an expansion in the same or overlapping business. A scope deal is an expansion into a new market, product or channel. All of your integration decisions will be based on this.
8. All sorts of things can crop up and slow down or sidetrack an M&A transaction. Do your best to stick to the timetable you outlined while ensuring that you make smart decisions rather than just following the process for the process’s sake.
9. Just like easing the minds of your employees, you will need to do the same for your customers. Make every effort to ensure minimal disruption for all of your customers and clearly communicate your plans with them to address any concerns.
10. Remember you are still running a business. Avoid becoming so distracted by the transaction that you neglect business priorities such as your customers’ needs. You must keep the company on track and running smoothly if you expect the deal to be a success.

Finally, be sure to celebrate your successes. After an arduous process, employees should feel that their work is appreciated and everyone should share in keeping the momentum going moving forward.

Contact Us

At Benchmark International, our highly esteemed M&A experts are eager to roll up our sleeves and get you a stellar deal for your company. Reach out to us at your convenience.

Successful integration strategies are crucial following any merger or acquisition. Knowing how to execute integration the right way means knowing what failures can be avoided.

Not Seeing the Big Picture
When a deal is underway, it is common for the focus to be on external strategies such as gaining market share and creating growth. But internal focus and maintaining continuity need to be just as important during this time as well. The long-term vision for the company is paramount, and this vision should be aligned between all parties involved throughout the M&A deal process and following completion of the transaction. By not sharing a big-picture strategy for the future, leadership puts the health of the overall organization at risk. All areas of the business are able to work together fluidly when all team members understand the goals for the company moving forward—goals that should be firmly outlined and clearly communicated by management. This should be planned before any M&A deal is completed, not after.

A Lack of Planning
Speaking of planning…the lack of it is a major reason for post-M&A integration failures. And planning applies across the board to pretty much every topic and scenario that can affect day-to-day operations, from HR to project management to revenue projections. Everyone should know his or her roles and responsibilities. All systems should be prepared to keep running smoothly. Proper planning can bridge the gap between a singular focus on the bottom line and daily operational matters, bolstering the odds that the business will run efficiently and prosper. This becomes especially important if the integration is happening cross-border and both cultural and regional issues need to be thought out.

Botched Due Diligence
M&A integrations are prone to failure when the due diligence process is not well executed, which is why deals should never be rushed. Without the necessary due diligence measures, any deal can fall through. The right oversight and research increase the chances of success for a transaction before, during, and after it is complete. Due diligence is critical to uncovering any potential issues so they can be addressed before a sale. It also provides an accurate picture of the inner workings of the business, which aids significantly in the process of integration. Due diligence is hugely important to any merger or acquisition and should never be overlooked or pushed through just to get a deal done.

High Costs of Recovery
Leading up to integration, it is possible to run up high costs that become an issue. This comes back to the topic of planning but deserves to be called out because it can be disastrous. You should be sure that you have adequate resources and bandwidth that can withstand the potential costs of integration. When faced with a challenging integration that could span several years, it can be difficult to recover costs in the long term.

Culture Clash
Cultures within the workplace can vary greatly, especially in cross-border transactions. It is an enormous factor in getting the integration process right. When culture is not accounted for in the integration, it can be both costly and a massive headache. Ideally, the cultures should be similar enough to integrate as smoothly as possible. The merging work environments should be carefully analyzed prior to a deal to achieve an understanding of how the two parties will mesh following the deal. This also means that the leadership team needs to grasp any cultural differences, no matter how minor, in order to be sensitive to any issues that may arise post-integration.

Inadequate Capacity
Deals that involve expansion have certain integration needs of their own. There must be proper assessment of the organization’s capacity to integrate and scale up. This means having enough resources so they can fill in any gaps without being over-extended, leaving you with no room for future growth. These resources include people, time, money, equipment, and space.

Time to Make a Move?
If you are a business owner considering an M&A strategy, our team at Benchmark International would love to hear from you. You can count on us to put our global connections and superior resources to work for you, and our award-winning advisors have the experience to help you avoid any pitfalls and get the integration process right.

Entering into a merger or acquisition is one of the most important decisions a business owner can make, so finding the right M&A advisory firm is equally important. In the news, we frequently hear about massive M&A deals happening between big corporations. Big investment banks typically broker these large-scale deals. These same banks usually cannot be bothered to represent companies in the lower to middle markets because it’s not enough of a moneymaker for them.

Why Do I Need an M&A Advisor?

While you are an expert in your area of business, you likely do not have access to the connections and experience to identify opportunities that will result in the best strategic M&A solution. Partnering with an M&A expert will afford you many advantages. Selling a company is a complicated process and you will be relieved by how much they will tend to the many details and constant requests. A high quality M&A firm will:

• Have established networks that will get you access to the right type of buyers.
• Be skilled at managing expectations on both sides.
• Know how to improve your business and market it appropriately.
• Maintain the highest levels of confidentiality throughout the process.
• Know the right timing for taking a business to market based on experience in that sector.
• Appoint legal and financial services where needed.
• Perform comprehensive due diligence and data management.
• Conduct extensive negotiation and create a competitive bidding environment.
• Finalize a fair and premium valuation of the business to get you maximum value.
• Structure the transaction in terms of legal issues, payments, contracts, shareholders, debt restructuring, warranties, and indemnities.
• Keep you informed at all stages of a deal while keeping you out of unnecessary minutia.
• Assist with any necessary strategic decisions regarding integration, employees, timing, and announcements.

Finding Quality M&A Representation

As an owner of a small to mid-size business, where do you start when you are seeking M&A representation? After all, this is a major life decision and you absolutely want to get it right. M&A advisory services range from big investment banks to small boutique firms. You need to assess what is right for you in several aspects. These are some key considerations for your search:

• Many M&A advisory firms do not have varied expertise that spans local, regional and global levels. Look for a firm that will expand your options through the farthest geographical reach.
• It’s okay to be discerning. Talk to multiple firms and create a shortlist. This is going to be a long process so you should feel comfortable and have a liking for the people you are working with, while you should also feel confident in their abilities to get the deal done right.
• Study the reputations of the M&A firms and look for one that is well known for getting maximum value in deals. Look at what types of deals they have done in the past and if their experience is applicable to your business regarding markets, products, services, and regions? Also, seek out any available testimonials from their clients and look for a firm that has proven strong relationships.
• Pay close attention to the initial discussions you have with them. Do they seem aligned with your goals and motivated to get you exactly what you want or do they seem stuck on going their own direction? You want your M&A advisors to be as aligned as possible with your vision and aspirations for the future. You should feel confident that they are in your corner and not just there to make a buck.
• Assess their ability to create a competitive bidding scenario among multiple parties. Are they known for doing this? Do they have a large enough network and the right resources to make it happen?
• Consider how their fees are structured. Some firms may take a percentage based on deal size. Some may have upfront fees, monthly fees, and registrations fees. You don’t want to be met with surprise costs. Make sure they are transparent about their fees and that their justification for them makes sense. While you do not want to get ripped off, you should also keep in mind that selling your business is a once in a lifetime opportunity and you want to get it right, so this probably isn’t the time to cheap out.
• Look for an M&A advisor that you know will work with you as a true partner. A good firm will offer you constant engagement and welcome active contributions from you. They will make sure you do not miss any details and that you never feel left in the dark. They will also make sure that zero communications are sent to a buyer without your consent and input.
• Make sure you are getting an M&A advisor and not just a business broker. A broker is less likely to offer a comprehensive partnership that details long-term plans and integration strategies that are important to the process.

Are You Ready to Sell?

If you are seeking an M&A partner, we kindly ask that you include Benchmark International in your search. We believe that our award-winning team can offer you all the qualities you desire while getting you the most value possible for your company. We look forward to hearing from you.

Effective management is essential to the growth and success of any business. This is especially true following a merger or acquisition. Through analytics conducted by companies such as Google, we know that certain characteristics and behaviors have been proven to make all the difference in leadership’s ability to get results for the business.

Good Communication & Collaboration
Quality leadership entails listening to staff as well as sharing information with them. Talent that feels both heard and informed also feels included, valued, and motivated. When employees think that their feedback does not matter, or that they are being kept in the dark, they not only feel underappreciated, but they can also lose trust in their leaders. That’s never part of any playbook for success.

Clear Vision and Strategy
Clarity provides the direction that is critical to getting things done, which correlates to the valuation of the company. Management should fully grasp where the company is going and how to get it there. Vision and mission statements are helpful but the leadership team needs to actually believe and uphold what they say.

Adaptability
Leaders of businesses are frequently faced with changes and new challenges. They must be able to adapt to these circumstances quickly in order to be successful. This is especially true in this day and age when technology brings about change more rapidly. Effective leadership will not view change as an obstacle, but rather as an opportunity. When championed by management, this philosophy can be contagious throughout the ranks.

Supportive of Development
It is important that employees understand how they are performing and are given paths to self-betterment. Management should help talent set goals, create timelines to achieve those goals, and regularly evaluate performance. Research shows that 69 percent of high-performing businesses rated company-wide communication of goals as a leading tool for building a team that is loaded with top performers. Also, achievements should be celebrated and rewarded. Even small gestures can make a difference.

No Micromanagement
Building trust, respect, and quality relationships between management and employees means avoiding micromanagement. When staff is micromanaged, they tend to feel the opposite of empowered and it can directly affect morale in a negative way. This also means that your leadership must have the ability—and willingness—to delegate.

Strong Decision Making
When you picture a great leader, you picture someone with strength and conviction, not someone who cannot make up their mind. Leaders need to be productive, results-oriented and have confidence in their choices. They must be able to balance reason with emotion, and know when the timing of a decision is critical to its results.

Empowering Coaching Mentality
Management should foster an inclusive team atmosphere that shows concern for the success and wellbeing of employees. This involves being supportive of staff, finding ways to help them grow, keeping promises, and providing an encouraging work environment.

Relevant Technical Skills
Studies show that technical skills fall at the lower spectrum when it comes to ranking leadership qualities. However, in order to help advise the team, the leadership should possess the proper skills and knowledge that apply to the business. If employees feel that management does not know what they are doing, they will see right through it and will struggle to take leadership seriously.

Time to Make a Move?
If you feel that a merger or acquisition is key to your future, please reach out to our M&A dream team at Benchmark International to arrange a deal that will turn your dreams into reality.

Once you’ve made the difficult decision to sell your company, there comes a time when you must inform those closest to you about the news. Telling your family that you are going to sell will depend on their level of involvement with the company. If none of your family members are employed in the business, sharing your plans will not be quite as sensitive of a subject. In fact, they may welcome the decision because you are about to have more time to spend with them, which is why you should not inform them until you are certain that you are going to sell.

Family Matters

It is an entirely different story if you have family that is on the payroll. Will a family member be taking over the company? How will any staff that is family be impacted by a change in ownership? These types of scenarios are when things need to be handled more delicately.

If a family member is taking over the business, there are several important considerations that can affect how the entire process plays out and how smooth the transition goes. It is important that you are sure that you and the new owner share the vision for the future of the company. If you decide to sell to them, and later learn that they wish to take the business in a different direction, you may not agree and emotions could lead you to change your mind, causing friction in the relationship that can affect the health of the business moving forward, especially if they are an essential part of the management team. Selling to a family member also means that it is important that there is clear and open communication regarding the valuation of the company and how they will be paying for the transaction.

Also, it is not uncommon for family members to feel it is adequate to seal a deal with a handshake, but a strictly verbal agreement can be very problematic. You cannot simply just hand it over. It is crucial that you have a tangible agreement in writing so that everything is clear, on paper, and you can move smoothly towards your exit. You will want it to cover details such as a third-party valuation, amount paid, payment schedules, if you as the initial owner will remain on payroll, and whether you will still be involved in the business and to what extent. It can be helpful to bring in a M&A professional to advise you through this process to ensure you have all of your bases covered and help you avoid making emotionally driven decisions.

Additionally, you need to be sure that the next generation actually wants to take over the family business. Sometimes an owner assumes that their children will take the reins without realizing they have no interest in doing so. Another scenario to consider is whether a family member has a sense of entitlement regarding the business that you may not be aware of. You’ll want to make sure everyone is on the same page. If you plan on selling to a buyer outside the family, and you unknowingly have a family member who thinks they will be inheriting the business, a great deal of resentment can arise and cause stress for employees, and problems within the operations of the company, as well as with the success of any merger or acquisition.

Timing is Everything

Regardless of to whom you are selling the company, the timing surrounding sharing the news is critical. Confidentiality is imperative to the sale process, so you never want to break the news too soon. The process can go many different ways. The deal can fall through, or you could change your mind about partnership or minority investments, or the buyer could take actions that alter the terms of the deal. You may even decide to go with a different buyer. In any case, the due diligence process in any M&A transaction can take several months to years. Communicating the news of a potential sale with too many people too soon can lead to issues such leaked information, distracted employees, and other factors that could end up negatively impacting the final terms or killing the deal altogether. It is best to keep the situation to yourself for as long as possible. By waiting, you are also ensuring that the deal is closer to being finalized and less likely to fail, so you avoid getting people worked up about a sale that is not even going to happen.

Communicate Clearly

In any case, when you share the news with your family that you are selling your business, you will want to be open and honest about your reasons. Talk about the buyer and why you chose them. Discuss your plans for the future. Clear communication can help to avert misunderstandings or misplaced expectations. For example, say that your spouse thinks that you are now going to travel the world together but you actually plan on starting a new venture. Do not assume they know what is on your mind. Being clear and up front about your plans can keep things running smoothly at home.

Let’s Talk About Selling

If you are ready to sell your company, contact our M&A specialists at Benchmark International for the highest level of expertise and guidance. We understand that you’ve spent your life creating wealth and value. We know you want your legacy to be handled with care. We can help you sell for maximum value and get you on the path to the perfect retirement or the next phase of your entrepreneurial life.  

1. Improve & Grow
Investors seek to buy companies that increase cash flow year over year. Obviously, the more profitable and healthy your company is, the higher valuation it will garner. This means that retained earnings (the amount of profit left over after all costs, taxes and dividends are paid) are an important factor, including how they are reinvested in the business as working capital. It also means you should be focused on lowering expenses and increasing revenues, as the efficiency of your operations is going to be a key driver of valuation. Look at the last three years to see if cash flow is trending upward. If not, you should take measures to get the company on the right course. Companies sell for higher prices when they show that they can continue to grow. Your future growth depends on your ability to identify new markets, adapt to changing technologies, and keep your workforce trained. Buyers look for businesses that have goals and a solid plan for achieving them.

2. Value the Power of Marketing
How marketing is defined when it comes to selling a business is twofold, and both are incredibly important. 1) Effectively market your products or services to customers and 2) Effectively market your company to potential buyers.

Create and retain a diverse customer base that creates recurring profits. Evaluate your marketing plan to determine strategies to boost sales, tap into new markets, get a competitive edge, and increase customer loyalty. The more diverse your customer base is, the more protected you will be if you lose a major customer. This insulation is important to buyers.

When you do the first part correctly, you will be in a stronger position to showcase your company’s strengths to acquirers. In order to best market yourself to buyers, it is smart to work with an M&A advisory firm that has the marketing experience and resources to make your company as appealing as possible.

3. Foster a Strong Team
A large amount of value in a business lies in its people, especially if it has few tangible assets. A prospective buyer is going to want to have faith and confidence in the existing leadership team and that they will remain there after your exit. They will also be more interested in a business that is known as a great place to work. Your key talent beyond management is also critical to the success of the company. They should be motivated, informed, and feel that their futures are in good hands so they are not tempted to jump ship because they are nervous about a possible sale. This is why it is crucial that the details and confidentiality of a sale and are handled very carefully. Employees need to be informed and feel included, but they should not be told about a sale until the proper time.

4. Have Detailed Recordkeeping
In order to sell your company, you will need to have all financial records and contracts related to the business for the due diligence phase of the transaction, and this extends beyond tax returns. Shoddy recordkeeping signals to buyers that there could be problems and that the business’s financial performance may not be portrayed accurately. Being transparent and thorough indicates to buyers that you are serious and more likely to be trusted.

5. Remain Invested
Just because you are planning to sell, do not lose sight of the fact that your business still needs you. It is easy to get caught up in the excitement of the M&A process, but you must keep the day-to-day operations running smoothly. Continue to improve and invest wherever possible and you will not only strengthen the overall value of your business but also demonstrate your commitment to its future success. Buyers want to see that you are doing what’s in the best interest of the company all the way up until your exit. At the same time, a business should not be reliant on any one person. While you should remain engaged through a sale, the company should be able to continue to operate successfully AFTER your exit, as well.

6. Get M&A Guidance
You have worked so hard to build your business and its sale may be the most important milestone in your life. You deserve to have the transaction done right so that you get the maximum value possible for your company. Experienced M&A advisors can not only make sure that the process goes as it should, but they have specific strategies and know-how that will get you as much as possible while adhering to your goals for your future and the company’s. Additionally, savvy buyers have solid knowledge of the M&A process and what to look for. Working with an advisory team will demonstrate that you are a serious seller while protecting your interests and getting you the amount you deserve.

Talk to our Experts
If you are considering selling your company, contact the M&A advisors at Benchmark International and tap into award-winning solutions and unparalleled expertise.

As a business owner, you already know that running a company is not a simple task. But growing that business does not have to seem quite as hard as you might think. There are many steps you can take to drive growth without making yourself crazy.

Acquire Other Companies
A quick way to create growth is to identify competitors or businesses in other industries that are complementary to yours and purchase them. An experienced M&A advisory firm can help you easily identify potential opportunities to look at that are worth your time and money.

Know the Competition
Take a close look at who your competition is and what they are doing. Are they doing anything differently? Is it working? What message are they putting out there? What are their weaknesses and how can you take advantage of them? How can you stand out better than them? There are online platforms that can help you uncover the digital advertising strategy of any company. You should also sign up to receive their mass emails and follow them on social media. If you find something that is clearly working for your competitor, it should work for you, too. This strategy does not mean copying whatever they do, just gaining inspiration for your own strategies and being fully aware of what you are up against.

Focus on the Customer
You can use a customer management system (CMS) to track your business’s interaction with existing and potential customers and in turn improve relationships overall. There are many types of CMS software that you can choose from to manage multiple channels. This includes creating an email database to stay directly in touch with customers. Having a CMS can also help you create a customer loyalty program to increase sales. It is far easier and cheaper to retain existing customers than it is to obtain new ones. Offering a clear incentive to choose your company can be a significant method of boosting your sales.

Go Global
Consider expanding your business internationally as a way to generate growth. By moving into new geographic markets, you can take your existing offerings and scale them to other countries if it makes sense for your type of business. Initially, it can seem costly do to so, but it can also pay off in a major way. If this type of expansion is not physically or logistically possible, you can employ digital global B2B platforms to expand your borders without having to actually go to another country.

Consider Franchising
If you are looking to quickly grow a well-managed and thriving business, a franchise model is a way to accomplish this. Yes, franchise costs can be pricey, and the process can be rather complicated. But if you have the marketing savvy and your company qualifies for franchising, you can drive growth quite rapidly.

Look Into Licensing
If it’s applicable to your type of business, licensing is one of the fastest and most effortless methods of growing a company. By licensing intellectual property such as patents, trademarks, or copyrights to others, you can immediately draw on the existing systems built by other companies and get a percentage of the profits sold under your license, which can add up rather quickly.

Expand Your Offerings
What other types of services or products can your business provide? In what other ways can you create value for your clients or customers? Do you have the right team members in place to maximize these opportunities? It can be very helpful to take a step back and look at your business in a different light. Just make sure that you can focus on any new venture without distracting from your core competencies or spreading you or your staff too thin.

Create a Strategic Alliance
Merging with another company is a solid way to reach more customers in a shorter timeframe. You just have to make sure that the partnership makes sense, so you will need to identify businesses that either complement or are similar to your own. Working with an M&A expert can help you recognize the right opportunities and take the proper steps to ensuring the merger is a success.

Let’s Discuss Your Business
Reach out to our M&A aficionados at Benchmark International to talk about how we can help you grow or sell your company. Our unique perspectives can give you a serious advantage in the low to middle markets and help you craft a highly prosperous future.

Throughout and following any M&A transaction, the retention of key staff members is critical to the long-term success of the business. When the structure and culture of a company changes, it is not uncommon for employees to feel uneasy and tempted to explore their options. Companies that practice comprehensive retention efforts are more likely to retain the majority of their senior staff. By getting employees engaged early in the process, it can help mitigate communication problems and promote a more inclusive experience. Additionally, the likelihood that your key staff will remain with the business will aid in your company valuation.

Know Your VIPs

Every company has their most valuable players, and keeping them is crucial for the business’s success. Know who they are at every level of management and how the changes to the business will impact their roles. Consider what you can do to avoid redundancy and ensure that their talent and knowledge will still be in a position to be valued. The earlier you do this, the better. A merger or acquisition can turn everything in an organization upside down. Have your best people tasked with challenges and opportunities. Give them the chance to use their talents and be part of the process in a productive way that works for their individual success as well as the success of the company. Be sure that your assessment extends beyond your leadership team. Look at all levels of the company to see where hidden gems may find an opportunity to shine.

Build Trust Though Communication

Communication is always key to running a successful operation, but it is absolutely paramount during the M&A process. Mergers and acquisitions can make people feel insecure about their jobs. While you never want to reveal information too soon, you will benefit greatly from gaining your employees’ trust by communicating with them about what is happening now and down the road, and what their role in the process will be. Key employees need to understand that their jobs are safe. Share your goals, your strategies, your vision and how you plan to go about running the show moving forward. Talking to them will go a long way in creating and maintaining loyalty to your company. If employees sense that something is afoot and feel like secrets are being kept, they are more likely to feel betrayed and even hostile about the process. 

Think Beyond the Bonus

Retention bonuses for key talent are normal during M&A transactions. They are proven to be effective in the short term, but money does not necessarily make people feel inspired, engaged, or even secure. If someone is “checked out,” they are likely to leave for any amount of pay increase, however small. People who are truly invested in their careers want to be assured that the company is making good decisions, creating a strong culture, and working towards a goal they can support. While money talks, having talent feel enthusiastic about the future can be priceless—and contagious.

Avoid Culture Clash

When a business is acquired or merges with another, there is an inevitable convergence of cultures. Whether the convergence goes good or bad lies in the due diligence process. If you assess what you are dealing with ahead of time, you can anticipate how the cultures will meld. This includes having leadership and top talent working together through the evolution. They drive the culture and should be part of any changes to it. They will also play a critical role in the hiring of any new talent post M&A, and ensuring that the new hires will be conducive to the overall culture of the organization. If they feel empowered to be part of the future, it will go a long way in giving them a deeper understanding of the business and promoting its success in the future. 

Let’s Do This

Your award-winning M&A advisory team at Benchmark International is dedicated to fulfilling your goals as a business owner. Whether you are looking to buy, sell or grow a company, we have the experience, resources, and connections that give you the upper hand and make great things happen. We look forward to speaking with you soon.   

As a business owner, you will someday reach the point when it is time to start thinking about your exit strategy. But how do you know when that point is? Below are five key questions you can ask yourself to help determine if you are ready to begin planning your exit.

1. How is the business performing?
Typically, a good time to sell your company is when it’s performing well and it has a bright future. This is when you can garner high valuations for the business and sell for more money. At the same time, a sale can also save a business that is struggling. You need to assess the health of your company, consider the state of the market for your sector, and decide if the time is right. Keep in mind that it takes time to sell a company, so you will want to factor the timing into your decision.

2. How invested are you?
As you already know, running a business takes hard work and dedication, which can sometimes lead to feelings of being burnt out. Ask yourself honestly how much of your passion is still there. Are you willing to continue to invest in the business? Are you still dedicated to helping it grow? Is your level of commitment what is needed for the best interest of the company, or are you beginning to feel checked out? Be pragmatic about the fact that sometimes a change in ownership can be just what the business needed to reach the next level. This might require checking your emotions at the door and embracing the idea that if you love something, you should set it free.

3. What is your financial situation?
If you are planning to fully retire after your exit, you need to have the appropriate financial standing in order to either maintain your current lifestyle, live a little larger, or be prepared to scale back somewhat. Because the timing of a sale of a business is so important, you will want to consider how you can take advantage of the right timing to get the maximum value so that it makes for a more prosperous exit for you. Your financial standing is also important if you plan on investing in or starting another business. Do you have the means to do so? And how can selling your existing business contribute to your financial situation to make the next big thing possible? Again, this is where timing and maximum value are critical.

4. Are buyers already interested?
Some businesses are always in demand and may get approached by buyers even if the owner is not interested in selling. And sometimes your business can serve a specific need for an acquirer, such as a competitor, for example. Maybe you didn’t think you were ready to sell. But if people come sniffing around, it may be worth taking an acquisition into serious consideration. Businesses that demonstrate solid growth in recent years will sell faster and for more money. It might just be the right time and you had not realized it. Or maybe even a merger can be beneficial for both the company and your bottom line. Some transactions can be arranged so that you retain a stake in the business but do not need to be as hands on in the daily operation, giving you somewhat of a head start on your retirement without having to go all in when you are not quite ready.

5. Have you talked to an expert?
Are you struggling to answer some of these questions? Talking to an exit-planning expert like an M&A advisor can help you sort things out. Maybe you need help with growing your business, or you have no idea what your options are. Maybe you just need help with insights into the market for the timing of a sale. Reach out to the award-winning team at Benchmark International to start the conversation. Whether you just want to dip a toe in the retirement pool, or you’re ready to dive completely into a sale, we can offer you valuable and even eye-opening perspectives, along with compassion and understanding about how emotional the exit planning process can be.

1. Build the Right Team
Creating growth for your company is achieved by having certain goals, and meeting those goals starts with having the right team in place to get it done. Seek out self-starters and highly motivated people who are not afraid to pitch unique ideas or put in extra effort to make things happen. Positive attitudes are important—and contagious. When both your leadership and your staff share your goals and passion for the business, it increases your chances for growth.

2. Be Agile
You want your company to be able to adapt and change course quickly based on changes to the market. If you can extend your business model to meet current trends, you will find more opportunities for growth. The more flexible your business is, the faster you can test different approaches and ideas. Plus, you will be able to move on more quickly if something is not working.

3. Know the Data
The idea of analyzing data may sound boring, but data is knowledge and knowledge is power. Use a customer management system. Take a close look at both existing and potential customers to understand their behavior. How long does it take to convert customers? What causes them to leave? What do they love about you? What is getting their attention? What is your competition doing? The premise is quite simple: when you know what is working, you can do more of it. And you can stop wasting time and resources on what isn’t working.

4. Keep It Simple
It is proven that complexity hinders growth and performance in a business. Stay focused on what you do best and keep those processes streamlined for efficiency. If you are trying to do to many things, it makes it hard to be really good at any one thing. Coming up with ideas outside your area of expertise just to make a few extra bucks is more likely to cost you in the long run.

5. Don’t Underestimate the Power of Marketing
You may have the most incredible product or service, but it doesn’t matter how great it is if people do not know about it. There are many great ideas out there that fail because of a lack of proper marketing support. And some ideas are mediocre but succeed thanks to effective marketing. Many make the mistake of viewing marketing as a nonessential expense. It is worth it to enlist the help of professionals, even if only on a small scale.

6. Continue to Improve
In an ever-changing world, you have to keep up with innovation to remain relevant. Challenge yourself and your team to constantly find ways to get better at every aspect of your business. Think about how you can improve customer relationships. Consider updating technologies to be more efficient. Look at processes to see how they can be done better. It doesn’t matter what it is…if you can do it better, then do it.

7. Form a Strategic Partnership
The right strategic partnership or merger can be a major game changer for the growth of your business because it can help you reach more customers quickly. It can also help to balance weaknesses and strengths. You should look for companies that are similar to your own, but can provide you with beneficial aspects that you may be lacking. Consulting an experienced mergers and acquisitions advisory firm can help you find the right businesses for you to consider.

Let’s Talk
At Benchmark International, our experienced team of analysts is ready to help you with effective strategies to grow your business or sell it for the highest value. Even if you’re not sure about selling at this time, starting the conversation can be beneficial to you in the long run.

You’re selling your business and thinking about hiring an M&A adviser, but you’re unsure of the best way to get the most out of them, and what exactly they can do for you.

The below discusses how to get the most out of your M&A adviser, ensuring the most successful exit strategy for you.

Communicate your goals.

Sellers each have their own goals of what they want to get out of their exit strategy, whether that be achieving maximum value, ensuring staff remain, or ensuring they remain with the company post-sale. Make sure that these are communicated with your M&A adviser to get the most out of them, as they can tailor the process to your needs.

For even the most experienced business people, selling a business can be a new phenomenon as it is something that most people do just once. From this, myths about the M&A process are created, which come to be believed as facts.

The below discusses the most common myths when selling a business, and the truth behind them.

The asking price is what I will receive.

As with buying a home it’s unlikely the price that you put it on the market for is what you will get, whether that be when you receive the initial offer, or when the surveys have been undertaken. When selling a business, the same can happen – buyers will view the asking price as subject to negotiation. After this, the buyer may then try to negotiate again once they have performed their due diligence on the company.

At Benchmark International, offers are on a ‘Bids Invited’ basis. This prevents a buyer viewing the asking price as something that can be negotiated. When it comes to due diligence, the buyer may try to renegotiate the initial price agreed, but Benchmark International will negotiate with the buyer on your behalf with your best interests in mind.

Reorganization is an important part of a merger or acquisition integration process and should be done properly to ensure a shared vision and a smooth transition in the desired timeframe. Unfortunately, research shows that it is not uncommon for this process to take longer than expected because the integration plan was not appropriately focused on the culture, the people, the leadership, and the ultimate goals. Business leaders that employ a solid integration strategy during M&A are more likely to achieve their desired outcomes.

According to research:

• A mere 16% of merger reorganizations fulfill their objectives in the planned time
• 41% take longer than expected
• In 10% of cases, the reorganization harms the newly-formed business

Create a Profit and Loss Statement

First, think about the benefits, costs, and timing of the reorganization. Costs will include employees, advisors, and consultants, but costs will also be incurred in the form of disruption to the business. The last thing you want is for the company’s performance to suffer and for key staff to leave. Setting detailed business targets for reorganization based on the length of the transaction process and its impacts can make a significant difference in the productivity and growth of the company.

Know Your Strengths and Weaknesses

The due diligence process of an M&A deal will reveal a great deal about the business’s strengths and weaknesses, but it is important to make sure no stone goes unturned. You can get a more complete picture by talking to current and former employees, and simply searching the Internet for third party research to see what anyone would read about you when looking up your company. Both internal and external perspectives are important. Armed with these insights, you can then create a plan regarding which areas need your focus based on whether it is a merger or a full buyout. In the case of a merger, both sides will need to have the same informed view of strengths and weaknesses in order to address any issues, streamline the process, reduce costs if necessary, and essentially improve performance.

Create a Reorganization Team

Designate a team of representatives from various levels of management and departments to handle communication and ensure that the needs of each department are heard throughout the transition. This will help employees feel included, minimizing the risk of losing key talent. It will also help you avoid overlooking key details, will help to keep the process more orderly, and will help you address any issues quickly.

Evaluate Your Options

When creating a reorganization plan, consider all of the possibilities within both companies’ methodologies. Any solution is going to have pros and cons, so you will need to assess which alternative is best for your business and achieving your vision. In order to create synergy, you will need to examine both of the organizations’ structures, business processes, management, staff, culture, capabilities, technology, safety processes, and anything else that makes the day-to-day operations run. In a merger, you are ultimately faced with creating a shared culture, and this means ensuring that every aspect of the business is aligned to make this possible. People are people, and if they are not informed of a clear plan and their role in it, it is nearly guaranteed that it will lead to confusion. Figure out the best way to allocate tasks and processes by communicating with the new leadership team about all of the possible options and determining the best structure together.

Get the Previous Steps Right

You have worked so hard to build your business. Reorganization is complicated and you owe it to yourself, your stakeholders, and your staff to get the process right. Of course, you should anticipate hurdles to crop up along the way. Sometimes in M&A deals, certain information does not become available until late in the process. Nearing the end of a deal, you should reassess all the previous steps outlined above to verify that they are solid and decide if anything needs to be modified. This does not mean you need to turn everything on its head if you uncover an issue. By encouraging leadership to inform you of any snags in the new company and addressing them quickly, you can get ahead of major problems.

Enlist an M&A Expert

Please contact our world-class team at Benchmark International to discuss how the right merger or acquisition could benefit your business.

One of the keys to creating value in lower to middle market mergers and acquisitions is the plan for successfully transitioning the leadership of the company. Maximizing value hinges largely upon a solid succession plan that empowers the new CEO to take the reigns, maintain stability, and lead the business into the future.

Finding the right person to assume leadership is important to the company in several capacities, but there are reasons that it will be personal to you as a business owner who cares greatly about the company you have worked so hard to build. The new CEO should actually care about the company and its employees. They should have a proven track record at getting things accomplished versus a history of being asleep at the wheel. And they should leave you with a high degree of confidence that they are going to do the right thing so that you are not left worrying about the fate of the company and whether you made the right call.

As a founding CEO planning your exit, there are some best practices you can follow in your process to find the right candidate and make a seamless transition in leadership and avoid a succession gone wrong.

Consider Structure and Timing
Initially, there are three important factors to determine the circumstances for the incoming CEO. Are they from inside or outside the company? Will they assume the role immediately or work alongside you for a period of time? And will you maintain a presence in the company as chairman or as an advisor? The answers to these questions will affect the transition process.

Get an Executive Search Expert
Do not underestimate the importance of enlisting the help of a quality external executive search professional. They should have proven experience that gives you the confidence that they will identify a replacement that's in the best interest of the company. They should be able to provide certain insights, find candidates that may not be currently known in the market, and prevent the costs associated with the wrong hire. An executive search firm can also save you time, take the burden off of your HR team, and ensure confidentiality through the process.

Consider What They Face
Think about the new CEO's first year and what it may hold from a political and cultural perspective, such as a recession. Could there be problematic circumstances that will make it difficult to make leadership decisions and are they equipped to handle them adeptly based on their experience?

Meet Face-to-Face Onsite
An important part of building trust and bolstering success is having the candidate come to the company's headquarters to meet with you and get an in-person understanding of the business and its culture from your perspective and in your own words.

Foster Relationships
The vetting process can benefit from the candidate's development of relationships with the management team to enable shared experiences. A quality candidate is going to value this effort in establishing trust.

If the new CEO is someone from within the company, think about how they will assume their new role and the responsibilities that come with it. Consider the fact that they are now going to be the leader among their former peers. How will they handle this change and how will it impact their relationships?

Look for the Obvious
You surely want a new CEO with whom you have a good relationship, but the most important relationship will be between them and the management team and the employees. So their personality is going to be a big factor in their ability to succeed. How are they under pressure? What is their vision for the future? Are they comfortable with change? Are they motivated to create growth? Are their values aligned with yours? What about their ego? A candidate may look exceptional on paper and have incredible qualifications, but if he or she does not possess the right people skills for your company's culture, it should be a deal breaker.

Are You Planning Your Exit?
If you think it's time to make a move in the best interest of your company, feel free to reach out to our M&A experts at Benchmark International at any time. Our impressive strategies can be the game-changer you are seeking for your future success.

“I am in a niche market space.” “Who would want to buy my business?” These are just a couple of the concerns that owners have when putting their business on the market for sale, which often leads them to limit the types of prospective buyers. However, business owners should not limit themselves to one particular type of buyer. The various buyer types often have different acquisition strategies and end goals. Receiving offers from each type enables sellers to explore the best of all options. Investment banks commonly group buyers into three main categories: Strategic, Financial, and Individual.

Strategic Buyer

Strategic buyers are typically the first group that owners will think of when deciding who will have an interest in acquiring their business. These are businesses that are similar to the seller’s and can include competitors. Within this category, horizontally-integrating strategic buyers seek to increase their market share through segment expansion, such as adding new regions, new markets, or a new customer base. This could be a buyer that is located on the opposite side of the country seeking expansion through acquisition to reach a new customer base. On the other hand, Vertically-integrating strategic buyers desire to expand their internal capabilities, such as bringing a portion of the supply chain in-house. For instance, a distributor may be seeking expansion by bringing manufacturing in-house. This allows the company to reduce costs and become less reliant on critical or high-risk suppliers. This works for all levels of the supply chain from the manufacturer to the service provider. A strategic buyer can come in many forms, each with their unique set of goals for a transaction, which will drive deal value.

Financial Buyer

Financial buyers are the next main type of prospects buying businesses. The most common buyers in this category are private equity groups. Private equity buyers seek a return on the invested capital for their investors. A private equity group can bring resources that a strategic buyer may not have access to, such as growth capital, strategic management resources, and new growth opportunities. While some of these groups aim to grow the business for a period and then resell the expanded operations for a gain, others seek to buy and hold, with no plans to resell. Typically, these buyers will invest in industries where they have experience and can bring new ideas and opportunities to a business. Sellers often think that private equity groups only look at very large businesses to acquire but that is not the case. Private equity buyers often seek add-on acquisition of all sizes. The add-on can be any business that has synergies with their larger platform companies, which can expand operations, geographic coverage, or fill small gaps in the portfolio. For example, a private equity firm that has a large HVAC platform business may add on several smaller HVAC companies throughout the supply chain. The private equity buyer that is adding on to an existing platform has similar operations in place and can therefore be thought of as both a financial and strategic buyer.

Individual Buyer

The third category of buyers that play a role in the M&A community is an Individual Buyer. These buyers seek businesses to own and sometimes also to operate. Individual buyers span all industries and have various goals for the acquisition. There are many ways an individual can finance a transaction, including high net worth, commercial bank loans, SBA loans, and investment sponsors. When the individual buyer is an entrepreneur that uses funds from investors in order to search for, acquire, and personally operate one company, this is referred to as a “Search Fund” model.  Search Fund investment vehicles often have several operators, sometimes referred to an entrepreneur in residence, simultaneously seeking businesses in which they can take a day-to-day leadership role. The goals, value propositions, synergies and valuations of this buyer group varies significantly, and can often produce the best cultural fit for a departing seller.

There are companies, investors, firms, and individuals, both domestically and internationally, seeking to acquire businesses in all industries and of all sizes. Likewise, sellers have varied goals for a transaction and no single buyer type is guaranteed to align with those goals. There are countless prospective buyers and, by considering all types, a seller and his or her broker will uncover the right buyer.

Contact Us

Contact Benchmark International today if you are ready to sell your company, grow your company, or explore your M&A strategies. Our team of M&A experts will guide you every step of the way and will make you feel at ease that you are going to get the best deal possible.

Author
Nick Woodyard
Associate
Benchmark International

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

While still managing to avoid a downgrade in April, South Africa has found itself at a crossroads of uncertainty since Moody’s Investors Service’s bleak budget reaction that sparked junk status fears for the country.

The speculation about the credit downgrade has been amplified by the fact that South Africa is in the middle of an election year – a factor that has also been blamed for a decrease in foreign investors’ confidence in the South African market.

An analysis of mergers and acquisitions (M&A) activity pre-and-post downgrades in Brazil and Greece suggest that although foreign investment will not end, investors do adapt their investment portfolios to align to the parameters of their investment mandates. 

Government bonds and treasury securities become largely un-investable instruments post a sovereign downgrade. However, statistics suggest that while capital outflows are a reality, some funds do remain behind in these countries, and new funds do flow in. These investments will naturally seek viable and alternative high-return investment opportunities – options often presented by M&A. One theory that emerges from this analysis is that mature economies have more stable but lower growth rates. While developed economies also represent a seemingly lower risk, they do not offer sufficiently high returns.

In order to achieve the required overall return on investment in a risk-on environment following a credit downgrade, fund managers will inevitably still require some form of investment in emerging markets.

In order to understand the impact a credit downgrade has on M&A activity in a country, we compared M&A activity as reported by Zephyr, a Bureau van Dyk company that offers a database of deal information.  

We compared M&A activity before and after a credit downgrade in Brazil, which has a similar economy to South Africa due to slow growth and political instability in both countries, as well as in Greece. The raw data suggests that a catastrophic capital flight is unlikely because the sums invested may be lower and the investment profiles between the countries are different. But opportunity abounds and returns remain strong as there exists a direct correlation between risk and reward.

According to Trading Economics, Moody’s was the first to downgrade Brazil in September of 2014 for political and economic reasons. Fitch Ratings followed suit with a downgrade in April 2015. In July 2015, S&P downgraded the country too.

The Bureau van Dyk / Zephyr data looked only at transactions where the targets were Brazilian companies and considered deals that were both completed and announced each year. The transactions analysed include mergers, acquisitions, institutional buy-outs as well as venture capital and private equity.

It is evident from the data that the volume of transactions was relatively flat after the first downgrade by Moody’s in 2014. The volume of transactions decreased by approximately one-third after the remaining agencies downgraded the country in 2015.

While the total value of transactions reported also decreased, it is evident that the average transaction value in 2017 was similar to 2015.  For example, the average value per transaction in 2015 was R973 million and R929 million in 2017. On a cursory view, transaction values held up well after the Moody’s downgrade.

Analysing the data for Greece, which was downgraded in 2010, the following graph illustrates the effect on both volume and values reported by Bureau van Dyk over a similar period to Brazil.

The data illustrates a clear downward trend in M&A deal values over the period of the financial crisis in 2008, 2009 and well into 2010. While there was an initial slump in volumes and a slight decrease in value immediately after the downgrade in 2010, it is only 2017 that has subsequently underperformed the deal values as they were similar to levels seen in 2010. Again, the average deal size in the period following a downgrade is shown to have increased.

In conclusion

The data analysed makes no currency or inflation-related adjustments. And the data, being Euro-denominated, indicates that the M&A sector remained resilient even after credit downgrade events.

Although Moody’s did not downgrade South Africa to junk, the data from Greece and Brazil does indicate that deal flow will not evaporate should this happen. Volumes may initially drop but average deal values can be expected to increase.

While we continue to work to avoid it and acknowledge the punitive impact thereof, the statistical reality is that a downgrade is not likely to be as detrimental for the M&A sector as otherwise perceived.

Author
Andre Bresler
Managing Partner
Benchmark International

T: +27 (0) 21 300 2055
E: bresler@benchmarkintl.com

If you are a seller or buyer that doesn’t have a lot of experience in the world of M&A, it can be frustrating and confusing trying to understand the terminology that is used. As much as we try not to confuse our clients, it is many times more efficient to use the specialized terms of the profession. To help, we have put together a list of common M&A terminology that we hope will assist you and make the process smoother if you are buying or selling a business.

Acquisition: One company takes over the controlling interest or controlling ownership in another company.

Add-On Acquisition: A strategic acquisition fit for an existing platform/portfolio company.

Asset Deal: The acquirer purchases only the assets (not its shares) of the target company.

Confidential Information Memorandum: Sometimes called “the book,” pitchbook or a deck, the Confidential Information Memorandum is a description of the business including products, history, management, facilities, markets, financial statements and growth potential. This is used to market the business to potential buyers.

Data Room: Secure online website that contains information including contracts, documents, and financial statements of the business being sold. These online data rooms can track who views the information.

Deal Structure: May include seller debt, earn outs, stock, or other valuables besides cash.

Due Diligence: Part of the acquisition process when the acquirer reviews all areas of the target business to satisfy their interests. This includes viewing the internal books, operations, and internal procedures.

Earn-Out: A type of deal structure where the seller can earn future payments based on certain achievements or the performance of the business being sold after the closing. These are often based on revenue targets or earnings.

EBITDA: Earnings before interest, taxes, depreciation, and amortization.

Goodwill: An intangible asset that comes as a result of name, customer loyalty, location, products, reputation, and other factors.

Indication of Interest (IOI): A letter from the buyer to the seller that indicates the general value and terms a buyer is willing to pay for a company. The letter is non-binding to both parties.

Letter of Intent (LOI): A document that lays out the key terms of the deal. LOI’s are typically non-binding for both parties except for certain provisions such as confidentiality and exclusivity.

Multiple: Common measure of value to compare pricing trends on deals.

NDA: A confidentiality agreement that prohibits the buyer from sharing the confidential information of the seller. This is usually signed before the seller provides detailed, sensitive information to a buyer.

Purchase Agreement: The contract that contains all the specifics of the transaction and the obligations and rights of the seller and buyer.

Representations and Warranties (reps & warranties): Past or present statements of fact to inform the buyer or seller about the status and condition of their business and its assets, employees, and operations.

Search Fund: This is an individual or a group that is seeking to identify a business that the individual or group can acquire and manage. Usually, search funds do not have dedicated capital but instead, have informal pledges from potential investors.

Teaser: An anonymous document shared with potential buyers for a specific business that is for sale.

Working Capital: A financial term used as a measurement of a business’s ability to meet its financial obligations over the coming business cycle (which is 12 months for most businesses). It is not defined under Generally Accepted Accounting Principles (GAAP). However, it is commonly calculated using this formula: Working Capital = Current Assets – Current Liabilities.

If you are thinking about buying or selling a business, Benchmark International has a team of specialists that can help answer your questions. A simple phone call or email to us can start the process today.

Author
Amy Alonso 
Associate
Benchmark International

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

The inverted yield curve is a situation that occurs when the interest rates on short-term bonds are higher than the interest rates paid by long-term bonds. It basically means that there is enough concern about the near-future markets that people move their money into less risky long-term investments. Any time this scenario arises, investors get nervous because it typically warns of a recession.

Short-term vs. Long-term Bonds

In thriving economies, bondholders demand a higher yield (profit) for longer-term bonds versus short-term bonds.

• Short-term bonds mature in less than five years and carry a lower interest rate risk. These funds do not yield large returns. They give investors a safe way to earn higher yields than they would with extremely low-risk investments and do not require money to be tied up for a long period of time.
• With long-term bonds, there is a much longer maturity period and people are required to invest their money for greater lengths of time. While these types of bonds yield higher returns, there is also an increased risk that higher inflation could reduce the value of payments, and that higher interest rates could cause the bond's price to drop. A longer-term bond also carries a higher risk of default.Basically, the longer it takes to be repaid, the greater the risk that inflation will swallow your investment.
• Most investors choose to have a mix of both short- and long-term bonds.

Treasury Bonds

Government debt securities are known as Treasury bonds or T-bonds. These types of bonds are considered to be virtually risk-free. They earn fixed interest until they mature (a period of 10-30 years). Once they mature, the owner is also paid the face value of the bond. Treasury bonds make interest payments semiannually and the income earned is only taxed federally.

The Inverted Yield Curve

Treasury bonds help to form the yield curve, which includes the full range of investments offered by the United States government and diagrams yields by maturity. It usually curves upward, with longer-term bonds having a higher yield. The yield curve becomes inverted when long-term bonds are in high demand and the rates are shown to be lower than those of shorter-term bonds.Essentially, in this scenario, investors expect that they will make more money by holding onto a longer-term bond than a short-term one.

The yield curve inversion can also point toward expectations by investors that the Federal Reserve will cut short-term interest rates in an effort to boost the economy.

A Predictor of Recessions

Although it can happen months or years before a recession begins (usually an average of 18-22 months), the inversion of the yield curve has been a consistent predictor of every recession since the 1960s. For that reason, any time it happens, there is heightened anxiety and anticipation of slowed economic growth.

The last time the yield curve inverted was in 2007, prior to the financial crisis and recession of 2008, which was the worst recession since the Great Depression. The yield curve also inverted prior to the recessions of 2001, 1991, and 1981.

In this latest case, the yield curve first inverted in December of 2018, and inverted even further in March of 2019. Then, the 10-year yield hit a three-year low of 1.65% on August 12, 2019.On August 15, the yield on the 30-year bond closed below 2% for the very first time in history. Fears of the ongoing economic effects of the trade war between the United States and China are fueling the market concerns around the world. 

The science of forecasting financial futures is never a 100% certainty, and while the inverted yield curve has proven to be a reliable indicator of things to come, it does not necessarily guarantee that a recession will happen. As of August 2019, the Federal Reserve has said that there is only around a 35% chance of a recession.

What It Means for M&A

An inverted yield curve can have implications for mergers and acquisitions, especially if you are aiming to grow your company.

For example, let’s say that part of your growth strategy requires funding for building expansion or new equipment. Under an inverted yield curve, short-term interest rates become higher than long-term interest rates. Some businesses may find this to be good news because they can lock in a good rate for the long term.

It may be impossible to predict financial futures, but enlisting the help of experience M&A advisors can help you formulate growth and risk management strategies for your company that make the most of available capital for expansion and lower your risk in all yield-curve situations.

Contact Us

Are you ready to make a move? Call our M&A experts at Benchmark International to start the conversation about your growth strategies and future opportunities.

You’ve decided to sell your company, but when is the right time to tell your employees? And what is the right way to tell them? The conversation may not be easy, but if you follow a few simple guidelines, you can ensure that you handle it to the best of your ability.

Have a Plan

You should already have an exit strategy in place when you are selling your business, but that is your own personal exit plan. You should also think about how the process will affect employees. Develop a clear timeline of how you expect the deal to progress and when you will meet with your staff about it. You do not want to come across as confused and unsure about the process. The more confident you are in explaining it, the more confident they will be about it being a good plan for them as well. You may also want to consider when to introduce the new owner. By having the staff meet the new boss, you can dispel a great deal of anxiety. The best time to do this is AFTER the deal is done, in the event that the deal falls through. Otherwise, you are introducing them to someone irrelevant, adding confusion and instability. 

Wait Until the Deal is Done

It can be tempting to share your plans with employees early in the process. But if you disclose your plans too soon, you are opening yourself up to risks that can tank a deal. Employees can get scared into finding another job. Vendors and clients can get nervous and jump ship. These are all scenarios that are not in your best interest, as the health of your business is an essential aspect of a sale. By waiting until a deal is in place, you can avoid telling your employees false information when things are still subject to change.

Tell Management First

Depending on the size of your business, you will likely want to inform key management before telling anyone else in the organization. They are going to need to fully understand the transition because you are going to need their support. They can help you maintain clarity when employees go to them with questions. If management is clear on what is going to happen, they can keep employees calm and properly informed.

Be Accessible

Once you’ve made the announcement, you must remain proactive in answering employees’ questions. It can also be important that they hear any news directly from you versus rumors around the water cooler.

Provide Written Communication

By creating a document that outlines pertinent points about the deal and the transition, employees can reference it following the announcement if they do not recall something. It also provides them with something concrete so that you are not leaving details up to their imagination.

Do Not Overpromise

Once you sell the company, you will no longer have control over what happens in the day-to-day business operations. It is important to express to your employees that you care about their futures and that you took the proper steps of protecting them when brokering the deal with the new owner. However, you want to avoid making promises that you will not be around to honor.

15. Decide the Company's Future

Before planning your exit strategy, you must decide the future course for your business. Do you plan to sell outright? Would you prefer that the company stay within family ownership? Do you want to retain a percentage stake in the company? Is there an employee that you would want to take over? Could a merger or an acquisition be the best move? This is a key decision to consider before embarking on your exit plan.

14. Set a Date

It's never too early to think about when you plan to retire. This need not be an exact date on the calendar, but you should establish a ballpark timeframe that you would like to put the wheels in motion for your exit. Having an idea of the timing will help you get the process started at the right time, whether it's two years from now or 20 years down the road, especially because most transactions take time.

13. Plan for Continuity

If your business will be changing hands when you retire, you should have a solid plan in place for maintaining the continuity of the company's operation. Both employees and customers alike will need to feel that the future is secure, and you should be able to reassure them through a clear strategy for the transition.

12. Use Diversity to Minimize Risk

The more diversity you have in your client and supplier bases, the more attractive and less precarious your business will be to potential buyers. They are going to need to have confidence that the business can grow, rather than falling apart if the sale results in the loss of one or two key clients.

11. Think Big Picture

It is not uncommon for a business owner to get wrapped up in the day-to-day details of running the company to the point where they lose sight of the bigger picture. It is a good idea to take a step back and consider where you want your business to be in the future, how you plan to get it there, and when your exit fits into that plan.

10. Create Your Dream Team

Having a strong management team in place is crucial to any successful exit strategy. Whoever is taking the reins is going to be a significant factor whether you are selling the business to an outside party or bequeathing it to family or an employee. It will also help you rest easier about leaving the company in someone else's hands.

9. Get Your Financials in Order

Before you can broker a sale or transfer ownership or control, you will need to organize financial statements, valuation data, and other important documents about the business. If you are planning to sell, buyers will expect to see thorough documentation about the business operations, profits, losses, projections, liabilities, contracts, real estate agreements (pretty much anything and everything regarding the company).

8. Know Your Target

If you plan to sell your company, you are obviously going to want a buyer who has the financial capacity to take on your business. But money is not the only thing that you should be seeking. You want a buyer who shares your values and your vision for the company. They also should possess the right skill set to maintain the company's success and even grow that success. You should not waste your time with a prospective buyer that doesn't have the chops to take the business in the right direction.

7. Always Listen

Even if you feel it is too soon to sell and someone is reaching out to you, it is always wise to hear him or her out. It could result in a meaningful relationship that can be beneficial in the future. They could also reveal some things about your company that you have not yet considered, sparking new ideas and opportunities in the realm of business acquisitions.

6. Devise Practical Earn-outs

If you plan on getting additional payment as part of the sale of your business based on the achievement of certain performance metrics, be realistic about setting these goals. Falling short of these targets can result in less money for you and enhanced leverage for the buyer.

5. Get Your Tech in Order

Today nearly everything is powered by technology. You use it to help you get organized, but you also run the risk of letting things fall through the cracks. Think about all the logins and passwords that give you access to things that run the business. Establish a plan to streamline your tech while keeping it secure for a transition in management. There are enterprise cyber-security management solutions that can assist with these matters.

4. Know Your Number

Have you asked yourself, "What is my business worth?" When you understand the precise valuation of your business, you will be able to ascertain the difference between a fair sale and a bad deal, and get the money you deserve. This includes a company analysis married with a market analysis. You should enlist the help of an M&A expert to determine the valuation of your business accurately. It is worth it to ensure that you get your maximum value.

3. Put it on Paper

Having the proper paperwork drawn up for legal purposes is important in the event that something were to happen to you so that you can convey your plans and wishes for the business. The task of creating this safety net will also help you plan more clearly for the future. Sometimes there are details you may overlook until you go to put it all on paper. You should outline your plan and make sure any necessary signatures are on file.

2. Assess the Market

Markets fluctuate and can change at any given time. But if you carefully evaluate your industry's outlook and growth projections, you can time your exit strategy for when you can get the most value for your company. If the outlook is not trending toward optimism, you can take the time to consider how you can bolster the value of your business and make it more desirable in the future.

1. Partner With an Advisor

Valuating and selling a company is not easy. Neither is planning an exit strategy. Seeking the help of experts such as an M&A advisory firm can take an enormous weight off of your shoulders. It can also ensure that the exit process goes smoothly, stays on track, and achieves your specific objectives for both you and the company.

Benchmark International can help you establish your exit strategy and broker the sale of your company so that you get every last penny that you are worth. Call us to get the process started. Even if you are not 100% sure that you are ready to plan your exit, we can help you devise strategies to grow your business in the meantime.

When business owners begin the process of selling their business, they may have expectations about the sale process. These expectations can be based on what they have read, what their friends have told them, and what their own needs are. However, the reality of selling a business can be very different from the expectations.

Timing

Sellers tend to think that a buyer will appear at their doorstep ready to transact a deal when, in reality, that is not the case. The sale of a business is a very time-consuming process. M&A transactions can take anywhere from 6 months to a few years to complete, pulling a seller away from the company, which can affect the financial performance and valuation of the business. Hiring an M&A advisor can help take some of the time burdens off of the seller.

Buyers

In our experience, it never surprises us who the buyer is at the end of the day. However, many sellers believe that their perfect buyer is international or a larger company. Again, this is not the reality of it. The ideal buyer may be right down the street or even a member of the seller's management team. When considering selling a business, a business owner needs to seek an advisor or sale process which will provide them with options when it comes to buyers. Not only does this drive up valuations, but it also allows the seller to choose the buyer that is the best fit for their company.

Business Condition

Sellers often assume that their business needs to be in the perfect shape to sell it. Sellers will typically share that they want their business to show year over year growth or a more diversified customer base. While these changes might make the business more attractive to the market, buyers buy companies for different reasons. For example, if a buyer is seeking to acquire a company to gain a relationship with a particular company, then that buyer will see a concentrated customer base as a good thing. Also, sellers will work hard to groom their business and miss out on opportunities within the open market. They work for years to grow their business, only to have the market shift and have their business not gain any additional value. The best tie to sell a business is now. We understand what's going on in the market, both from a micro and macro level, and we are not trying to predict the future.


Answer to Questions

The sale process can be very nerve-racking for sellers because of the unknowns. Sellers often expect their advisors and or buyer will be able to answer all of their questions. However, this is not the case. The sale process is just that, a process. Business owners need to go through the process to discover all the answers to their questions. Buyers are eager to get sellers comfortable with deals, integrations, and any other areas of concern for sellers. An M&A Advisor will be able to guide sellers on when they should have answers to their questions. If the answers are unknown, the M&A advisor can help guide the seller to provide comfort based on the advisor's experience.


Deal Structure

A lot of sellers assume that the majority of deals are structured as all cash transactions. All cash transactions mean when the sale closes, the seller will receive his or her money, and the buyer gets the key to the operations, allowing the seller to leave immediately. However, this scenario is a rare occurrence. Typically, a seller is required to remain with the company for 3-5 years to help with transitioning the business. Sellers in lower middle market deals tend to be critical to their company because processes are rarely formalized, and the relationships that sellers hold are key. Given the time frame for a transaction, the buyer will want to incentivize the seller to remain motivated post-closing. To achieve this goal, the buyer will want to structure the deal so that the seller has an interest in the smooth transfer and future success of the business.

Author
Kendall Stafford  
Managing Partner
Benchmark International

T: +1 512 347 2000
E: Stafford@benchmarkcorporate.com

Growing a Business

By Paul Hawken

In this book, Paul Hawken explains how a successful business is an expression of the individual behind it, along with practical advice, common sense, and down-to-earth ideas. Even though it was written 30 years ago, it remains an excellent and very relevant read, backed by the fact that the author’s own companies are still successful after all these years.

Organizational Physics - The Science of Growing a Business 

By Lex Sisney

The author of this book spent more than a decade leading and coaching high-growth technology companies. In his work, he discovered that companies that thrive do so in accordance with six universal principles. The book covers a blend of important business and entrepreneurial topics in a manner that stands out from other business books.

Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine

By Mike Michalowicz

In this book, the author offers principles to simplify accounting and easily manage a business through analysis of bank account balances. The theory is that a small, profitable business can be more valuable than a large business surviving on its top line, and those that achieve early and sustained profitability have a better chance of maintaining long-term growth.

Explosive Growth: A Few Things I Learned While Growing To 100 Million Users - And Losing $78 Million

By Cliff Lerner

This best seller provides step-by-step instructions, case studies and proven tactics on how to explode business growth. It reveals the detailed growth frameworks that propelled the author’s small online dating startup to grow to 100 million users while coupling humorous storytelling with concrete examples.

Traction: How Any Startup Can Achieve Explosive Customer Growth

By Gabriel Weinberg

Traction is based on interviews with more than 40 successful business founders about their real-life successes. It covers 19 channels that can be used to gain traction for a business, and how to select the best ones for your company. The book discusses topics such as targeted media coverage, effective email marketing strategy, and online search optimization.  

Growing Influence: A Story of How to Lead with Character, Expertise, and Impact

By Ron Price and Stacy Ennis

Growing Influence is packed with relatable human experiences and practical advice on developing the right leadership skills. It chronicles two main characters’ growth as they applied the principles in the book, mixing solid business advice with a novel that is fresh, timely and inspiring.

Ready to Grow Your Business?

Contact us for help with unique growth strategies for your company and how we can partner for your successful future.

If you’ve decided to embark on an MBO, you might have asked yourself, how is this funded? Generally, members of the buyout team are required to invest a sum of personal money into Newco but it would be unusual for them to fund the whole transaction. The equity provided by the management is necessary to demonstrate their commitment to the transaction, therefore it needs to be meaningful, yet it does not have to be too vast – typically representing 6-12 months salary. So, how is the remainder of the MBO funded?

Seller Financing

A common option to fund an MBO, seller financing is where the management team asks the seller to help fund the MBO. This is also known as deferred consideration, as the seller is deferring a proportion of their payment of the purchase price until after completion. While the seller would more than likely prefer the consideration paid in full on completion, often lenders may request that a portion of the sale is financed by the seller, as it demonstrates that the seller has confidence in the management team and the company going forward.

What Is Buy and Build?

When private equity acquires a well-positioned platform company to acquire additional smaller companies, using the developed expertise in a specialized area to grow and increase returns, it is considered a buy-and-build strategy. This strategy is common with private equity firms with shorter holding periods of about three to five years.

Why It Is An Effective Growth Strategy

If a buy-and-build strategy is executed correctly, a great deal of value can be created when smaller companies are combined under the control of a new company.

• This type of acquisition saves time regarding the development of specialized skills or knowledge, allowing for growth and expansion to other markets more quickly and successfully with lower production costs.
• Creating a larger, more attractive company offers a path to exploit the market’s inclination to assign larger companies higher valuations than smaller ones.
• It provides a clear plan when deal multiples are at record levels and there is a need for less traditional strategies.
• Buy-and-build deals generate an average internal rate of return of 31.6% from entry to exit, versus 23.1% for standalone deals.

Getting It Right

The buy-and-build acquisition is not simple to execute. The process demands meticulous planning and due diligence for the strategy to work. The best deals usually employ multiple paths to create value.

• Synergy between the acquirer and the acquired is important to the outcome of the deal. Companies should target existing firms that will be a good fit as a team both tactically and culturally. The human element should always be considered.
• The management team must be an appropriate fit and have experience with these types of transitions.
• There should be a vision in place for where the company will be five years down the road.
• The platform company must be stable enough to endure the process regarding operations, cash flow, and infrastructure (IT integration in particular).
• Sector dynamics should also be considered. Avoid sectors that are dominated by low-cost rivals or mature, stable players. Focus on sectors with many active smaller suppliers and service providers. Consolidation should result in cost savings and improved service.
• While no two deals are the same, there are patterns for getting it right. Those experienced with buy-and-build strategies are more likely to lead to a successful deal.
• It can be difficult to identify private equity firms because of the nature of the way they do business. It helps to have an experienced M&A firm with extensive connections and a proven track record of negotiating successfully with buy-and-build-focused private equity firms.

These reasons are among several as to why it is a sensible decision to enlist the help of an experienced M&A firm such as Benchmark International for your vision for growth. Count on us to help you get your buy-and-build strategy done right.

1. Globalization Isn't Declining—It's Transforming
Arindam Bhattacharya

https://www.ted.com/talks/arindam_bhattacharya_globalization_isn_t_declining_it_s_transforming

Mr. Bhattacharya is a Boston Consulting Group Fellow, Senior Partner in their New Delhi office, and worldwide co-leader of the BCG Henderson Institute in Asia. Hear his interesting argument as to why globalization is not going extinct but instead is evolving due to cross-border data flow.

2. How to Build a Company Where the Best Ideas Win
Ray Dalio

https://www.ted.com/talks/ray_dalio_how_to_build_a_company_where_the_best_ideas_win

Mr. Dalio is the founder, chair, and chief investment officer of Bridgewater Associates, the largest hedge fund in the world. Learn how his strategies helped him create such a successful hedge fund and how you can use data-driven group decision making to your advantage.

3. Why the Secret to Success is Setting the Right Goals
John Doerr

https://www.ted.com/talks/john_doerr_why_the_secret_to_success_is_setting_the_right_goals

In this talk, engineer and venture capitalist Mr. John Doerr discusses the established goal-setting system "Objectives and Key Results," or "OKR," which is currently being used by companies such as Google and Intel.

4. The Global Business Next Door
Scott Szwast

https://www.ted.com/talks/scott_szwast_the_global_business_next_door

Mr. Szwast is the marketing director for UPS, and he has spent 25 years supporting the international transportation industry. In this talk, he explains how the image of global business is misunderstood and why businesses should stop hesitating to consider crossing borders.

5. How to Break Bad Management Habits Before They Reach the Next Generation of Leaders
Elizabeth Lyle

https://www.ted.com/talks/elizabeth_lyle_how_to_break_bad_management_habits_before_they_reach_the_next_generation_of_leaders

Tune in as esteemed leadership development expert Elizabeth Lyle offers a new approach to cultivating middle management in fresh, creative ways.

6. Business Model Innovation: Beating Yourself at Your Own Game
Stefan Gross-Selbeck

https://www.ted.com/talks/stefan_gross_selbeck_business_model_innovation_beating_yourself_at_your_own_game

Mr. Gross-Selbeck is Partner at BCG Digital Ventures, and he has 20 years of experience as an operator and a consultant in the digital industry. In this talk, he discusses the unique aspects of today's most successful start-ups. Also, he shares strategies for duplicating their philosophies of disruption and innovation that can be applied for any business.

7. How the Blockchain is Changing Money and Business
Don Tapscott

https://www.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_money_and_business

Mr. Tapscott is the executive chairman of the Blockchain Research Institute. In this talk, he explains Blockchain technology and why it is crucial that we understand its potential to redefine business and society completely.

8. What it Takes to Be a Great Leader
Rosalinde Torres

https://www.ted.com/talks/roselinde_torres_what_it_takes_to_be_a_great_leader?referrer=playlist-talks_for_when_you_want_to_sta

In this talk, leadership expert Rosalinde Torres describes simple strategies to becoming a great leader, based on her 25 years of experience closely studying the behavior and habits of proven leaders.

9. How Conscious Investors Can Turn Up the Heat and Make Companies Change
Vinay Shandal

https://www.ted.com/talks/vinay_shandal_how_conscious_investors_can_turn_up_the_heat_and_make_companies_change

Mr. Shandal is a partner in the Boston Consulting Group's Toronto office, leading their principal investors and private equity practice. Hear his chronicles of top activist investors and how you can persuade companies to drive positive change.

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

Know Why You’re Selling

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

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

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

Compile the Proper Documentation

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

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

Inventory Your Assets

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

Physical assets:

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

Intellectual property assets:

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

Intangible assets:

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

Enlist the Help of an Expert

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

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

When selling your business, receiving offers is a big hurdle to overcome so, when this happens, it might seem like plain sailing from here. Unfortunately, there is still quite a way to go with the transaction, the first being to analyse the offers on the table, to make sure they suit your exit or growth strategy.

This might not seem difficult, but there are many ways to structure a transaction. Therefore, depending on what you want to get out of the sale of your business, this will influence the type of deal you take. For example, are you planning to retire and need to live off the proceeds of the sale? Or do you want to remain involved in the business?

Consider the below list of ways to structure a deal to find out which is right for you:

What were the reasons you started your own business? Most likely you wanted to pursue a passion but there are a multitude of other benefits that would tempt anyone to start their own business – from flexible working times to calling the shots. But, have these benefits actually become a reality?

If not, then it might be time to look at your work-life balance. Do you find yourself having no time to spend with your family and doing the things you love? Even worse, do you find that it’s having a detrimental effect on your health? For example, if you are stressed, being overworked can lead to a number of health problems such as stress induced insomnia and heart disease – something that needs to be remedied straight away.

1. No one can control the market.

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

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

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

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

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

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

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

5. It’s a marathon, not a sprint.

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

If you’ve received an offer for your business, you have three options – the first being take the offer and sell your business. This is possibly something you have been considering, or it seems too good an offer to refuse; however, you should be cautious in such an event and, if you do want to pursue the offer, make sure you do the following:

Keep the Business Sale Confidential

Confidentiality is very important when it comes to the sale of your business. If it gets out that you are selling your business then this could potentially lose you staff, customers, and suppliers as they could get nervous about an impending sale and the changes that could be in store for them. Therefore, do not discuss anything until a non-disclosure agreement (NDA) has been signed, including whether you are prepared to sell the business.

Make Sure you Stay Focused on Your Business

One of the dangers of the sales process is that it is very time-consuming at the point where you really need to focus on maintaining a good business performance – if business performance dips, then this can give a buyer an excuse to lower their offer.

In fact, this is not the only situation where a buyer might decide to lower their initial offer. The buyer is under no obligation to actually pay this price for your company until you both sign the Sales and Purchase Agreement (SPA) and there are several reasons a buyer might try and chip away at the offer to try and get your business for a bargain price.

For example, when you have accepted the offer and signed the subsequent Letter of Intent (LOI), the buyer can commence the due diligence process, providing them with access to confidential information such as financial documents and contracts for a specified period of time, typically 30-60 days. There are two related problems with this. Number one is the fact that the due diligence process is time-consuming and a resource drain, which could lead you to take your eye off the business. Number two is the buyer can now look at re-negotiating now they have had a thorough look at the ins and outs of your business.

Therefore, after this huge resource drain, you now have an offer on the table that does not meet your expectations as the buyer has chipped away at the price. Either you still take this less than favourable offer, or you turn away from the deal. While it is your prerogative to do so, you have lost time and valuable resources, you have given information about your company to another party, and you have not had your full focus on the business.

So – what are the alternatives to accepting an unsolicited offer?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Interest Rates

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

Regulatory Environment

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

Global Economic Concerns and Geopolitical Issues

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

Industry Consolidation or Convergence of Industries

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

Changes in the Workforce Dynamics/Millennials/Gig Economy

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

Political Trends and Risk/Elections

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

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

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

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

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. 

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

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

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

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

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

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

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

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

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

Author
Clinton Johnston 
Managing Director
Benchmark International

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