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How & When To Explain To Your Employees That You Are Selling Your Business

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.

 

Ready to explore your exit and growth options?

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.

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5 Things Sellers Wish They Had Known Before Selling Their Business

You’ve decided to sell your business. Congratulations! Whether you are retiring, looking to embark on a new business adventure, or wanting to hand off the reins and take a different role in the company, the process of selling a business can be a trying one without the correct preparation and support. Fortunately for you, you can learn from other entrepreneurs who have been in your shoes and have shared the five things that they wish they had known before selling their business.

1) Neglecting to perform pre-transaction wealth planning can result in you potentially leaving a lot of money on the table. Before you sell, consider your family members’ wishes and concerns. Communicating with family members before the sale can help ensure smooth sailing through the deal negotiations. Effective tax-planning to support family members’ needs, philanthropic plans, or creating family trusts can help increase the value gained from the transaction.

2) Don’t underestimate the importance of a good cultural fit with a buyer. While the price is always at the forefront of a sellers’ mind, cultural fit can mistakenly be pushed to the back burner. One of the many things that you have worked hard to create in your business is the employee culture. Most likely, you want to see the close-knit “family” that you have built continue when you are no longer working there. Benchmark International understands that and will help you find that partner. We remain committed along with you to your goal of finding a buyer who will carry on your legacy.

 

Ready to explore your exit and growth options?

3) Skimping on your marketing materials does not pay off in the long run. With confidentiality being of the utmost importance, how can you engage buyers without them knowing who you are? Preparing a high-quality, 1-2 page teaser that provides an anonymous profile of your business is the tool used to locate a buyer confidentially. This is followed by the Information Memorandum, with an NDA that is put in place for your protection. Benchmark International will prepare these high-quality documents and put your mind at ease.

4) Sellers wish they had known how detail-oriented the process would be, how many documents would be needed, and how labor-intensive each phase would be. One of the most crucial pieces of advice that the majority of sellers wish they had known is that you need to have a team. Sellers need to continue running their business as they were before, or operations can really start to slow. The last thing you want is for the value of your company to take a nosedive because you are investing all of your time into a transaction. With the team at Benchmark International as your partner dedicated to the M&A process, you will be free to continue to focus on the growth and operations of your business. We will handle the details for you.

5) Finding a like-minded partner can give a seller a false sense of security that the transition from two companies to one will be easy. You need a trusted advisor that will help you navigate the complexities of integration, giving you insight on some of the other intangibles that need to be negotiated. Those intangibles include the details of your role after the sale, employment contracts, earnouts, etc. With Benchmark International’s vast knowledge and experience in M&A deals, we know what is usual and customary to request throughout the negotiation process and will bring more value to your transaction.

Congratulations again, this is an exciting time for you! With the right partner, it can be a smooth and profitable process as well. Benchmark International has a team of specialists that arrange these types of deals every day. We can answer your questions and help you determine what is best for you, your business, and your exit plan. A simple phone call or email to us can start the process today and move you one step closer to accomplishing your goals.

 

Author
Amy Alonso 
Associate
Benchmark International

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

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The Ultimate Cheat Sheet On How To Sell Your Business

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

Know Why You’re Selling

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

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

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

Compile the Proper Documentation

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

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

Feel like it's a good time to sell?

Inventory Your Assets

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

Physical assets:

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

Intellectual property assets:

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

Intangible assets:

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

Enlist the Help of an Expert

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

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

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The Importance Of Succession Planning

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

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

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

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10 Undeniable Reasons To Sell Your Company In 2019

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

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How To Reduce Owner Dependence Before A Sale

Build your dream team.

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

Ready to explore your exit and growth options? 

Create documentation.

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

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

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

 

Plan your exit strategy.

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

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

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

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

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

Is transformation important to your business?

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

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

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

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

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

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

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

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

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

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

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How Do I Make Sure my Business is Left in Good Hands When I Sell?

Find the right partner.  

Partnering with the best team of experts to help you sell your business is the most important thing you can do when seeking a buyer you can trust. Not making the right choice can cost you time and money. Because you want to sell at the best time, you don’t want to waste time talking to the wrong people. By working with an experienced and globally renowned mergers and acquisitions team such as Benchmark International, you can mitigate the risk of letting an under-qualified broker deal with the sale of your company. You’ll want to make sure the firm you choose has highly specialized experts in your area of industry and the kind of global connections that can find the best buyer for your business.

 Do you have an exit or growth strategy in place?

Stay involved in the process.

Even if you work with an experienced firm to facilitate the sale, you want your relationship to be a partnership. They are going to work hard for you, but you know your business better than anybody. Finding a team that wants you to remain engaged in the process will result in a sale you can feel good about. By staying involved, you are also giving prospective buyers added confidence in their purchase.

Know your magic number.

It is crucial that you have an idea of your company value before putting your business on the market. Any reliable buyer will expect to be given accurate financials about your business. It is recommended that you seek the help of an organization that has the expertise in achieving maximum values for businesses. They will help you assess the value, fix weaknesses, boost strengths, and form your ideal business exit strategy for maximum success.

Be honest.

Represent your company accurately when dealing with prospective buyers. Inflating numbers or trying to cover up issues can result in a failed deal when the actual financials come under review. If you want to trust the buyer with your business, you should expect that they would want to trust you, as well. 

Be prepared.

Being adequately prepared is also an important step in selling to the right buyer. Make sure you have all the documentation in order regarding finances, profitability, real estate, and staffing. Make sure inventory is fulfilled, records are current, and taxes are paid. Being prepared can affect the price your business will command in the marketplace, as well as the level of interest from quality buyers. 

Think ahead.

Do not get so focused on the sale of your business that you are not thinking about the transition period. An experienced partner can help you keep your focus in the right place and ensure that you and the buyer are on the same page, and both are properly prepared for the transition. 

There is plenty to consider when taking on the daunting task of selling a business. Keep in mind that while you are an expert in your particular business, arranging its sale may be beyond your range of expertise. Relying on a knowledgeable team such as your partners at Benchmark International can ensure that you get the value you deserve and sell to a buyer you can trust.

 Ready to explore your exit and growth options?

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Is It Time To Sell My Business ?

Determining whether it is a good time to sell your business is one of the most challenging decisions a business owner has to make. There are innumerable factors that affect this decision and it’s important to not get overwhelmed. A few things to take into account are financial situation, the company’s future/outlook, the opportunity cost of time, and the type of deal structure being pursued.

Financial Situation

Usually, the first factor that business owners consider when making the decision to sell is the financial impact this will have on their lives. It’s important to analyze one’s current lifestyle and how a potential sale would change that – what the payoff would be. Unless a business owner is in a troubled situation, they’ll want to make sure that the decision to sell will not hinder their long-term lifestyle. A hasty decision here can have a catastrophic economic ripple effect. But, selling at a time that maximizes economic profit can potentially result in lifelong financial freedom.

 

Company’s Outlook

If an owner is at a point to even consider selling a business, there’s a high probability that they’ve put in a significant amount of time, effort, and capital into it. Pondering this decision generally stems from a plateau in company growth or changes in the industry landscape. When this stage is reached, one must determine if they are in a position to take the company to the next level or if it is better to move on after building it to this point. It’s important to understand that being aware of “when to get out” is not a slight on the owner. Rather, it is the recognition of an opportunity to pursue other goals. The business has been a large part of life, the employees are important, and the hopes of a successful future is why companies are built. So, the key is to make sure that the “hands” the company is going to be in moving forward satisfy the needs of all the key people that are going to be impacted by a
potential transaction.

 

Time

Letting go of something that has been such a large part of one’s life can be very daunting. The fear that this is “the end of the line” for a business owner is often what doesn’t allow an individual to make a decision with sound judgement. The opportunity cost of time needs to be taken into consideration – that is, what you can allocate time to in life that you were unable to do before. Perhaps an exit can allow more time with family or another business venture; all such options open up more once the full scope of a business sale is analyzed beyond the initial fear.

 

Deal Structure

The type of deal for a business sale is arguably the most important factor when making the decision to sell. The beauty about this is that deals can be structured in almost any way imaginable. Many owners think that selling a business is an “all or nothing” type of transaction. But the reality is that majority of business acquisitions are centered around partial sales and/or long-term seller incentives. It is perfectly reasonable for a founder/owner to retain ownership to “keep some skin in the game” or to have a management agreement that allows them to continue being involved in the company. Owners need to educate themselves on the kind of deal structures most suited for them and understand that the scope of deal types is far more customizable than people realize. 

 

As has been pretty clear, there is no cookie-cutter process behind making the decision to sell a business. Individuals need to take countless variables into consideration when doing something of this magnitude. A great way to begin this process is to narrow down what aspects of the decision are most important to the owner and then analyzing each variable individually. Most importantly, don’t forget that if a deal is thinkable, it is achievable.

 

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Is The End Near?

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

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

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

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

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

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

Author:
Clinton Johnston
Managing Director
Benchmark International

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

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I Want to Sell My Business.  But How Can I Be Sure My Employees Are Taken Care Of?

As an owner of a business, there are often times when the employees of the business can become like an extension of the owner’s family.  Employees are often present during challenging times in the business owners professional and personal life and the owners of the business can often be a stabilizing presence in an employee’s life.  One of the biggest concerns of a business owner is what the welfare of their employees will be upon a successful sale of the business. Often times, the concerns can be placed into four broad buckets,

1.) Will the employees be keeping their jobs?

2.) Will the employees be keeping their same level of compensation?

3.) How will the insurance benefits change, if at all?

4.) How will our company culture change – do we still have team building events planned every    quarter and holiday bonuses we can count on?

The answers to these questions can go a long way in determining whether a buyer is the perfect fit for a business, outside of the fundamental valuation and transaction structure.  Mergers and acquisitions are complicated endeavors, involving an incredible amount of work and attention to detail.  While in the midst of an acquisition, HR Departments are the group tasked with managing perhaps the most valuable part of a company – the human capital.  Granted, some aspects of the transaction are unavoidable, including the letting go of employees in an underperforming division or in a role that will be redundant within the acquirer’s organization.  But, if both buyer and seller can get on the same page and formulate a plan for informing the employees of a change, this will ease the transition and mitigate the fear of the unknown. 

Now, to address the first question that will come to an employee’s mind upon finding out their firm is being acquired – am I going to keep my job?  In the vast majority of transactions, employees will retain their roles and often times an acquisition can be an opportunity for upward mobility within a larger organization.  Timing will be of the utmost importance when it comes to making any type of announcement regarding an employee’s employment status, whether positive or negative. One hurdle to avoid at all costs is raising alarms unnecessarily.  In order to avoid this complication, it’s best to announce a merger or acquisition upon execution of a Definitive Purchase Agreement and the transfer of funds. This ensures that the deal is closed and official and will eliminate the risk of pulling the rug out from under the employees of a recently acquired company.  

When the topic of compensation arises, there are numerous factors at play, including the performance of both the buyer, seller and individual employee as well as the defined compensation structure that already exists within the buyer’s corporate infrastructure.  Having a discussion regarding compensation can also take a different tone – perhaps a buyer can offer employees a more compelling work/life balance, an office space that offers the opportunity to exercise, eat healthy or be in a location that is convenient and offers easy access to post office hours entertainment.  Being able to pitch potential employees on all of the value that a buyer offers aside from the number on their paycheck can help bridge any perceived gaps
in compensation.

Beyond the importance of staying employed and maintaining the current level of earnings, individual employees will also be concerned with their benefits package and whether the buyer offers a more compelling insurance package or one that could be considered a down grade.  In any event, being completely transparent about the pros and cons of the new benefits package will be important in mitigating the fear associated with change.  A buyer who makes themselves available to answer questions that are both qualitative and quantitative in nature will be able to ensure a smoother transition.  This would include providing feedback mechanisms such as one-on-one interviews, focus groups and anonymous surveys.  In most cases, there is not a need to turn everything upside down immediately – buyers should not expect for all the new employees to join their new health insurance plan immediately, buyers should also consider letting the new employees keep their old PTO until the end of the year, if a new employees has already reserved PTO, a buyer can still honor that time and garner a little morale. 

 Ultimately, communication will be key - giving employees an opportunity to feel seen and heard will give them the sense of feeling valued by their new employers.  Additionally, this will bring a level of comfort to the seller that those individuals who helped them achieve success will continue to be taken care of and that the culture of a company that takes years to create will remain intact and continue to permeate throughout the new company.

Author:
JP Santos
Senior Associate
Benchmark International

T:   +1 (512) 861 3309
E: Santos@benchmarkcorporate.com

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When Is The Right Time To Retire And Sell My Business?

Over 88% of business owners think their business will stay in the family. In fact, only about 30% of family-owned businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond. As baby boomers are heading for retirement, who is going to take over the businesses the boomers are looking to sell? 

Today’s business owners are faced with multiple factors when deciding the right time to sell. The perfect time can be tricky to predict as several economic considerations need to be weighed. The majority of business owners begin this thought process when nearing retirement age, but is this too late? The most important considerations are current economic statistics, market conditions, and industry trends. These are good predictors of a sellers’ market and shows the types of buyers and private equity companies ready to invest. Buyers are looking for businesses in the growth and maturity stages of their business life cycles. During these stages, operational bottlenecks are becoming managed and demand, profits  and lasting customer relationships have been built. Business owners sometimes have the tendency to postpone selling until operations and profits begin to decline. This is a costly mistake for any business owner wanting to maximize their company’s value.

 

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Sellers should strive to put aside personal feelings anchoring their decision-making process when considering their exit strategy. When considering selling, business owners should focus their attention on asking is my business in a financial incline, is my staff in place able to succeed without me, do I have a diversified client structure, and are my capital expenditures under control?Business owners need to consider these objectives now and determine if a sale is the right decision. Economic environments quickly change and in order to achieve a premium sales price, a favorable market is the key. Currently, multiples are at a historic high with limited quality businesses available for sale. Baby boomers are holding on to their businesses and aren’t willing to sell until they have to. 

This can be a hard-personal decision to make for owners who have built their companies from infancy. Owners are conflicted with their decision, asking did I do the right thing, did I maximize my company’s value, will my employees be taken care of, and what is next in my life.Before considering the sale of your business, define both the internal and external factors and remove any hidden traps that cloud your decision-making process and can result in missed opportunities. By having a written exit plan, an experienced team of advisors, and patience, business owners will realize the full value of their life’s work.

Here at Benchmark International, we understand the emotional and physical stress that accompanies the decision to sell. Our experienced advisors assist by providing an outside perspective to business owners and by identifying suitable conditions in the M&A sector. Our responsibility is to ensure our clients are presented with all the facts and strategies to move forward. Benchmark International values close relationships and ensures that our clients are fully prepared to make the right decision when the day comes.

Author:
Kendall Stafford
Managing Partner
Benchmark International

E: Stafford@benchmarkcorporate.com

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Best Practices When Preparing Your Business for Sale

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

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Financial Preparations

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

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

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

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

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

Operational Preparations

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

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

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

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

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

Author:
Theodore Pince
Associate
Benchmark International

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

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How Can I sell the Business I Love ?

Bringing a business to success is an emotional journey from start to finish. Years are spent making sacrifices and taking tough decisions. So, as you get closer to retirement age, choosing to sell your business can be a bittersweet step to take. You raised your business like a child, and you have grown attached to it. How do you begin to make the decision to sell it?

First and foremost, you need to know your reasons for selling. Perhaps, you started your own business, so you could take control of your life and call the shots. Maybe, it was to provide a better life for you or your family. If you are reaching retirement age, then you have probably made a full circle and came back to those initial reasons. Those same motivators can be the drivers behind your ultimate decision to develop a strategy so that you can exit your company.

You love your business, but you love your family too. Perhaps you feel it’s come time to refocus your time and energy on your personal life. That’s okay, and you have several options at your disposal. Balancing work life and home life can be a challenge. Don’t let your obligations to your business keep you from fulfilling your goals at home.

If the decision to sell is on the table, there are a few paths you can take. A partial sale of your business is one option. This option is intriguing if you aren’t sure if you are ready to leave your business entirely. Bringing in a strategic buyer for your business that can begin working alongside you and help your business grow to its full potential will give you more time for your personal goals, while still allowing you to stay involved in your business. You can take on a less rigorous role without having to step down completely.

Strategic buyers are looking for a synergistic partnership that will allow them to either expand their footprint within a particular market, or one that will give them the chance to break into a new industry. Your business will add value to a strategic buyer’s plans , so they will want to see success in your company. This means your incentives will be aligned and if your company isn’t successful, neither is theirs.

Another option is a sale with an eventual complete exit. A complete sale does not have to happen immediately. You can slowly transition out of your business over time. This is a good option if you want to retire and leave your business completely, but care about your employees and the legacy you’ve left behind after you are gone.   

A buyer who buys your business out right is called a financial buyer. Your business is an investment, and this buyer will need to have a management team in place, most likely your management team. If you want to make sure your business is going to be okay without you, it’s a good idea to transition with the business, so your employees can get acclimated to the changes as well.

Also, if your employees see your commitment and support to transitioning through the changes with them, it will help alleviate doubts they might be having about the sale themselves. When you decide to leave the business you love, you want to make sure you are leaving it in the right hands, and you want to make sure the employees who helped you build it are in good hands as well.

One thing you definitely should not do is tackle a sale on your own. If you are vested in focusing on selling your business and neglect your daily responsibilities within the business itself, you can potentially harm your business because your focus has shifted. Successfully completing a sale takes a great deal of time and understanding of the mergers and acquisitions transaction process. Patience is a virtue, and selling your business will take a little time, but with the right team in place, you can get maximum value for your company.

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11 Reasons to Have the Exit Conversation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

9) Dry powder is at a record high – Reserves in dry powder have peaked, and this means private equity firms have more cash to spend on transactions. Now is the time to take advantage of this sum of cash waiting to be spent. The 2017 tax law created ample opportunity for investors to explore more options. Let yours be the one they choose while the market is still hot. If you can show how your business stands apart from the crowd, you can also negotiate competitive multiples for the purchase of your business.

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

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

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

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

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When Do I Tell My Employees I'm Selling?

The thought of selling your business has been on your mind for quite some time, and now you have made the decision to sell. The business is ready to go and you have been working with your advisor to bring in a suitable buyer. The offer comes in and you have signed a letter of intent. The process is in motion, and this is what you have been waiting for, but what about your employees? Your exit plan has been on your mind, but your employees probably haven’t given much thought to what will happen if and when you exit the business. You have a couple options when it comes to sharing the news of your business sale to your employees.

Share Nothing:

Some business owners opt to not share the decision to sell with their employees at all. This option can be viewed as inconsiderate, but it does alleviate the risk of a mass exodus from the company. There are pros and cons to any decision, but not telling your employees right away and keeping information for yourself allows you to keep them from undue stress.

It’s important to protect the integrity of the deal and the company. This means you need to keep details under wraps. If you spill the beans to your employees, there is no guarantee that the information will stay within your company, and it could be concerning for your client base if they catch a whiff of the pending sale.

This doesn’t mean you can’t put things in place to protect your employees through a transition, of course. You just need to pay attention to their needs and ask your advisor what your options are in a sale. If you choose this route, you need to be prepared to extinguish any rumors and answer employee questions the best you can if they notice any changes taking place.

Keep Them in the Loop:

Some owners think the best policy is to be transparent with employees from the outset. The decision to sell has been made, and you are exploring options. So, you want to inform your employees what’s going on. You can be up front with employees and let them know of your plans to sell and your desire to find the right buyer for the company who will instill the same values you hold as a business leader.

This will need to be handled delicately, so your employees will remain comfortable throughout the process. You will need to drive home the initiative that you are doing what is best for the company as a whole and selling the business doesn’t mean the end of the business but rather the growth of the business. It is important to keep the conversation positive, so your employees will get on board with your plans.

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I’m Thinking of Selling My Company, How do I Value My Business

So, you are entertaining the thought of possibly selling your business. How do you know what it’s worth? There are a lot of factors that go into deciding an asking price for your company. The market, the industry, and the level of risk can all affect the final value. The following guide will walk you through a quick rundown of the valuation process for middle-market businesses and help you gain a basic understanding of what your company might be worth.

Step One: Have Your Finances in Check

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Things You Need to Know Before You Sell Your Business

Know Why You Want to Sell

What do you plan to do after you sell your business? It’s important to know your purpose for selling, so you can appropriately plan what you want to do after the sale. Are you planning on a total exit, or do you want to stick with the business for a while? There are a few options at your disposal when deciding your reasons for exiting your company. If you are wanting to take a step back, but still want to have some involvement, you can keep a small percentage of the company and transition into a new role with lighter responsibilities after the sale.

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Are you thinking of selling your business? How will you protect your employees?

Your business is your baby, and the people who work for you are your family. A concern of many business owners thinking to sell is how they will care for their employees throughout the sales process.

Download our guide “If I Sell My Business, How Can I Protect my Employees?,” today!

Download Guide

In this guide, you will learn how to best communicate with your employees effectively, how to negotiate on their behalf, how to put their concerns at the forefront of your decisions, and how working alongside them can help alleviate their concerns. 

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How Much Do I Need to Sell My Business For, So I Can Retire?

So, you are a business owner who is thinking of moving toward retirement. How do you do that? What are your options? How much money do you need to sell your business for, so you can retire? These are all questions you need to fully explore when you’re ready to make this transition.

What Are My Options?

You have a couple options if you are looking to retire. First, you need to decide what your ultimate goal is. Do you want to completely exit the business? Or do you just want to take a step back and pin the majority of the responsibility on someone else? It’s up to you how you want your money to work for you and how much free time you want to have.

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Don't Kick the Can Down the Road

There are many things to consider when you are thinking of a potential exit, whether it be your own personal/business circumstances, the overall M&A market or potential tax implications.

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