Benchmark International Logo Blog Mergers and Acquisitions

Archives

Overview Of Steps In The M&A Process

The processes behind mergers and acquisitions can be quite complicated. Each deal is unique and has its own level of intricacies. However, all M&A transactions tend to follow a basic framework of steps. Most M&A advisory firms follow this basic framework, but bring their own methodologies to the table. This outline will give you a rudimentary view of the process.  

Target List Creation

In order to engage in the selling or buying of a business, you must have potential buyers or sellers. Suitable M&A targets can include competitors, vendors, or customers. This is also a good time to consider how much geographical factors should be taken into account.

Contact Initiated

Once the target list is established, contact is made and discussions begin to gauge the interest level of the buyer or seller.

Sending of a Teaser

A teaser is a document that sellers send to buyers. It supplies just enough information to entice the buyer into wanting to know more. It showcases topline info such as the company’s product or services, its unique selling points, industry overview, ownership structure, potential areas of growth, and high-level financials.

Confidentiality Agreement Signing

This ensures that all sides in the deal agree to keep all discussions and materials confidential.

 

Ready to explore your exit and growth options?

 

Sending of the Confidential Information Memorandum (CIM)

The CIM serves is drafted by the sell-side of a transaction and serves as a type of handbook. It provides all the information a buyer needs to ascertain whether they want to make an offer, such as company management, operations details, financial data, future projections, customer diversification, market opportunities, competition, and other relevant specifics.

Submissions of Indication of Interest (IOI)

Upon their review of the CIM, the buyer then expresses interest in moving forward by submitting a non-binding written offer. An IOI typically provides a valuation range for the sale price, transaction structure, timeframe, and other important details. It limits the buyer’s time and financial resources devoted to the deal if the proposal falls short of expectations and other bids. For the seller, an IOI helps them to measure the market appetite for the company, compare different buyers’ views on value, and perform preliminary due diligence on the buyer’s ability to complete the transaction.

Management Meetings

After the initial communications that establish interest on both sides, it is time for the buyer and seller to meet and take the conversation further. Both sides take this time to learn more about each other to get a better idea of compatibility and whether it is a good fit.

The Letter of Intent (LOI)

The buyer submits a detailed document with a price and deal structure that details items such as closing dates and conditions, an exclusivity period, any break-up fees, management compensation, escrow, and so on. These are usually non-binding, but they can be denoted as binding.

Formal Due Diligence Process

This important phase is when all documentation and records are compiled by the seller and provided to the buyer. The findings help the buyer assess their risk and improve the decision-making process. Due diligence examines an extensive level of information on the company, including all financials, intellectual property, customer base, management, talent, synergy, outstanding litigation, technology, infrastructure, stockholder issues, production, inventory, supply chains, real estate, marketing plans, and anything else that is relevant to the business.

The Purchase Agreement

A Purchase Agreement supersedes any previous IOI and LOI. This binding document lays out the final terms of the deal including the purchase price, a detailed list of definitions used in the agreement, timeframes for the delivery of final statements, executive provisions, representations, warranties, schedules, indemnifications, closing conditions, and break-up fees.

Pre-Closing Period

Sometimes there is a pre-closing period during which the seller and buyer prepare all deliverables and fulfill closing conditions such as government approvals and third-party consents. The duration of this period can vary depending on the closing conditions.

Closing

Once all of the closing conditions are met, the transaction is ready to close. Funds are exchanged and the buyer assumes possession of the business.

Post-Closing Period

After the deal closes, there are usually post-closing financial adjustments and integration topics to be addressed between the seller and buyer.

Ready to Make a Deal?

Our M&A experts at Benchmark International would love to hear from you regarding your company and its potential. Our world-renowned team offers the unparalleled transaction experience, remarkable resources, and global connections that you need in your corner to in order to get the most value possible out of your M&A deal. Learn more about our unique Benchmark Fingerprint Process here.

READ MORE >>

2020 Mid-Year U.S. Economic Outlook

The COVID-19 global pandemic is having a significant impact on economies across the world and business owners are understandably concerned. In these times of uncertainty, many are asking what can be expected in both the short and long term for the United States economy.

Looking Back at Q1 and Q2

After several years of economic expansion, the U.S. gross domestic product (GDP) dropped 5% in the first quarter of 2020, and plummeted 52.8% in the second quarter. The National Bureau of Economic Research (NBER) declared that the U.S. economy officially entered recession in February. 

  • Consumer spending was down 13.6% in April, slightly rebounding in May, up 8.2%.
  • In May, U.S. employers added 2.5 million workers back to payrolls and housing rebounded moderately.
  • The Federal Reserve cut interest rates and rolled out a $2.3 trillion effort to help local governments and small- to mid-sized businesses, and the U.S. government approved nearly $3 trillion in aid.
  • 8 million jobs were added in June, while more than 19 million Americans were still receiving unemployment insurance benefits.
  • June retail sales jumped 7.5%.

 

Ready to explore your exit and growth options?

 

Forecasting Q3 and Q4

Goldman Sachs forecasts U.S. GDP growth of 25% in the third quarter, down from a previous forecast of 33%. The NBER Conference Board expects a 20% rebound in quarter three, with growth slowing to 1% in quarter four.

The manufacturing and construction sectors continue to recover, with predictions of 8% growth in the fourth quarter. Additionally, existing home sales have rebounded at a record pace.

Consumer confidence is going to depend on how rapidly the virus is brought under control. In July, coronavirus cases spiked in many areas of the country, causing some state and local governments to step back on reopening plans. The recent resurgence in cases has slowed expected consumer spending, as many Americans are unable to visit certain places due to state restrictions. Markets will likely remain erratic until there are solid indicators for increased confidence. The economy will recover, it is just a matter of when, keeping in mind that recoveries tend to be longer and stronger than downturns, and returns are usually highest after the market bottoms out. As of late July, September is a hopeful target for a bounce-back in spending.

Even once restrictions are lifted and businesses are able to operate as normal, the recovery will hinge on how willing Americans may be to participate. Consumer demand is expected to remain sluggish through the latter half of the year, but there are positive long-term investment opportunities that arise out of such an environment, especially for companies that have shown that they can adapt under dire circumstances.

New developments in COVID-19 clinical trials indicate that a vaccine could be available by 2021. A vaccine or treatment will be critical to boosting consumer confidence and economic growth.

Finding Opportunities Within a Crisis

While the virus has had devastating impacts across several sectors—especially travel and hospitality—it has also created opportunities for certain industries. Types of businesses that have seen strong growth during the pandemic include telemedicine, online retail, food and grocery delivery services, home improvement, educational services, gaming, cleaning products, RVs, and even puzzle makers.

With people working and schooling from home, people’s lives are now more digital than ever. Demand for cloud-based services has skyrocketed. Streaming services and mobile payment services are increasingly popular, and reliable broadband is a must-have. During mandatory lockdowns, consumers became more likely to try things for the first time, such as grocery or alcohol delivery, and may opt to continue to use them following the COVID-19 pandemic. These types of outcomes could translate into even healthier e-commerce growth potential in the future, not just in the U.S, but also globally.

There will also be possibilities for partnerships through mergers and acquisitions. Prior to the crisis, private equity was sitting on an estimated upwards of $1 trillion in dry powder and will likely play a key part in the revival of the economy. M&A opportunities are expected to be in the most resilient sectors post-pandemic, and bidders are predicted to become aggressive in seeking out company valuation bargains in the hardest hit industries such as the transportation, hospitality, and energy sectors. Additionally, in the more stable sectors, deals could be driven by the need to vertically integrate and address supply chain issues to get back on track. There is also the possibility for stock deals to become more appealing as equity prices fall.  

Schedule a Virtual Valuation

Contact the M&A advisors at Benchmark International to discuss the possibilities for the future of your business. We are here for you, even throughout the pandemic, getting deals done and making great things happen in the most trying of times. You can even schedule a Virtual Valuation in order to practice social distancing while gaining an understanding of the current value of your company.

READ MORE >>

10 Important Post-merger Integration Tips

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.

 

Ready to explore your exit and growth options?

 

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

READ MORE >>

The 2020 U.S. Election And M&A

Past presidential elections in the United States have coincided with macroeconomic circumstances that affect markets. For example, in 2000, the dot-com bubble burst. In 2008, America was in the midst of the Great Recession. And now in 2020, we are in the middle of a global pandemic, dealing with the impacts of the COVID-19 virus, coupled with sweeping protests regarding racial injustice and the repercussions that forced closures have on businesses. In the wake of all of this, four months remain until the November election. Unfortunately, we cannot predict the future, but we can take a look at how the M&A market has been impacted in the past.

M&A activity is cyclical in nature, subject to underlying circumstances that include changing technology, electoral politics, and regulatory changes. As the current M&A cycle winds down, it is worth noting that the dealmaking wave that ceased during the financial crisis actually got started during a slowdown in 2003. Leading up to the 2008 election, M&A activity in the U.S. was strong and it did not bottom out until later when the worst of the recession had passed. Two major relief packages, the Emergency Economic Stabilization Act of 2008 enacted by the outgoing administration, and the American Recovery and Reinvestment Act of 2009, enacted during the first year of the new administration, boosted recovery in capital markets and helped companies adapt to adverse macro conditions in the near term, and eventually paved the way for a new M&A cycle because the cost of capital was reduced to historic lows, injecting liquidity into equity and bond markets.

The level of dealmaking activity in the multiquarter period leading up to the 2012 election compares favorably to the financial crisis period that coincided with the 2008 election at $802.6 billion in 6,087 deals, topping activity for the same period the year before. In the first three quarters of 2012, M&A activity saw a combined $837.5 billion in 6,864 completed deals. The JOBS Act was enacted in 2012, designed to encourage small businesses to become public companies. As a result, the SEC made the filing process easier to manage.

 

Ready to explore your exit and growth options?

 

M&A activity peaked in Q4 ahead of a decline in 2013 Q2 that bottomed out at $241.3 billion in 2,049 transactions. In mid-2013, M&A activity accelerated and the cycle expanded, partially stimulated by strategic buyers contending with financial sponsors armed with record levels of dry powder. Private equity has kept that cycle going from 2013 to 2019. Volume met or exceeded 900 completed transactions and at least $70 billion in value over the same timespan.

Certain conditions that were a result of the financial crisis spurred expansion of the M&A cycle and have proven favorable for private equity and venture capital dealmaking, such as enterprise restructuring around developing regions, expansion of business portfolios, and optimization for tax benefits and accessing cash outside the U.S.  

During 2014, completed transactions grew 26% year-over-year, while deal value increased by an additional $500 billion. This cycle of completed transactions peaked in 2015 at 12,523 deals of $1.9 trillion in value. Annual volume remained above 11,000 transactions with deal value at around $2 trillion for each of the past five years.

Leading up to the 2016 election, M&A activity was pushed to its highest levels per quarter in a decade. In the first three quarters of 2016, 8,825 transactions worth a combined $1.6 trillion closed. Activity dropped in Q4, but rebounded in 2017. Since 2018 began, M&A has steadily declined and Q4 2019 posted the lowest total since Q2 2013. 2019 saw levels return to those last seen in 2013. On June 8, 2020, the National Bureau of Economic Research announced that the U.S. entered into a recession in February of 2020.

While the global pandemic has undoubtedly been costly and detrimental to many businesses, it has also opened up opportunities for growth for some companies as consumer behaviors adapt to a changed world. Global supply chains were massively disrupted, hampering global trade, all of which has a negative impact on dealmaking. How it will play out in the later half of 2020 and into 2021 will depend partly on if there is a second wave of the virus and the availability of a vaccine. Technology remains a continuously evolving area of opportunity and the pandemic has changed the ways that we work and collaborate. Environment, social and corporate governance practices will continue to designate the convergence of technology and regulation. How the election will impact M&A markets remains unknown, but history has shown that emerging out of a recession tends to spawn accelerated M&A activity well into the future. Every M&A cycle develops in response to different conditions, yet all have emerged during periods of economic recovery combined with improvements in capital markets after consecutive quarters of underperformance.

READ MORE >>

3 Ways To Grow Your Company

  1. Through a Merger

A merger unites two independent, similarly sized companies as one new entity, typically with a new name. This strategy adds value to both companies by growing into new market segments, gaining market share, or expanding geographic reach. A merger enables the new venture to benefit from the best that each company brings to the table as far as expertise, talent, technology, products, services, assets, and market penetration. In total, it offers a powerful competitive edge. A merger can also be less time consuming than other strategies, such as relying on organic growth.

  1. Through an Acquisition

In an acquisition, a company purchases a 51 to 100 percent stake in another company, taking control of it and all of its assets. Acquiring a business means acquiring its already established customer base, talent, geographic diversification, portfolio of services, and other immediate growth opportunities that would take years to create under organic growth.

Both mergers and acquisitions offer several advantages for a company looking to generate growth and value.

  • Expansion: M&A can easily extend the reach of a business in terms of geography, products and services, and market coverage. This translates into more customers gained without having to hire more salespeople or increase marketing expenditures.
  • Consolidation: M&A can unite two competitors to bolster market domination. It can also increase efficiencies by cutting surplus capacity or by sharing resources. Plus, M&A can increase production efficiency and bargaining power with suppliers, coercing them into lowering their prices. It can also allow a business with weak financials to combine with a stronger one and pay off debt.
  • More Capabilities: M&A can boost a company’s capabilities by quickly adding new talent and new technologies rather than taking the time and energy to develop each from scratch.
  • Lower Costs: By merging with or acquiring another business, you can lower costs and increase efficiency and output.
  • Speed: M&A empowers a business to grow more quickly, altering the landscape of the sector more rapidly than competition can adapt and respond.
  • Tax Perks: Profits or tax losses may be transferable within a combined business, benefiting from varied tax laws within certain sectors or regions.
  • Unbundling: Sometimes a company’s underlying assets are worth more than the price of the business as a whole. In this case, a company can acquire another and quickly sell off different business units to other buyers at a substantially higher price.

 

Ready to explore your exit and growth options?

 

  1. Through a Strategic Alliance

Mergers and acquisitions adjoin companies through total change in ownership. But there are ways that businesses can share resources and activities for a common goal without sharing ownership, known as strategic alliances. Strategic alliances enable a business to quickly grow its strategic advantage, but with less commitment. There are several ways a strategic alliance can be accomplished.

  • Equity Alliance: The creation of a new entity that’s owned separately by the two partners involved, such as a joint venture. Both companies remain independent but form a new company jointly owned by the parent companies.
  • Consortium Alliance: This is the same as a joint venture but can be formed with several partners.
  • Non-equity Alliances: These do not involve the commitment implied by ownership and are often based on contracts, such as franchising or licensing. Under this contractual alliance, one company gives the other the right to sell its products or services or to use intellectual property in return for a fee.
  • Scale Alliance: When businesses combine to achieve necessary economies of scale in the production of products or services or by lowering purchasing costs of materials or services.
  • Access Alliance: This occurs when a company needs to access the capabilities of another company needed in order to produce or sell its own products and services. An example of this is when an international company needs access to a local company to be able to product or sell the product.
  • Complementary Alliance: When companies of similar value combine their unique but complementary resources so both have any gaps filled or weaknesses strengthened.
  • Collusive Alliances: This involves companies colluding in secret to bolster their market strength, reduce competition, and demand higher prices from customers or lower prices from suppliers. Regulators usually discourage such behavior.

Mergers, acquisitions, and alliances can provide many benefits for a business that is seeking growth far above and beyond what is possible through organic growth. Each can enable:

  • Faster access to new products or markets
  • Instant market share
  • Economies of scale
  • Better distribution channels
  • Increased control of supplies
  • Lessened competition
  • Adding of intangible assets
  • Removal of entry barriers to new markets
  • Deregulation in an industry or market

Let’s Talk

If you are considering a merger or acquisition strategy to grow your business, we can make it happen. Our world-class team of experts at Benchmark International is a true game changer for accelerating your business growth in the smartest ways possible. Contact us today and look forward to a brighter tomorrow.

READ MORE >>

How To Value A Business

When it comes to valuating a business, a major distinction is whether the company is privately or publicly held. For a publicly traded company, calculating the market value is somewhat simple: just multiply the stock price by its outstanding shares. For a private company, determining its worth is a much more complicated process because the stock is not listed and there is zero regulated public financial reporting. For these reasons, private company valuations must be based on a series of estimations, which can be well founded when done properly. There are several different approaches to calculating the market value of a private business. You can choose to one singular method, but using each method of assessment together can form a more complete picture.    

Comparable Company Analysis (CCA)

CCA is a common way to assess a private company’s value. Under this process, publicly traded companies that are most similar to the private company are identified. The similarities must reflect the companies’ sector, size, competitors, and growth rate.

Upon establishing an industry grouping of similar companies, their valuations are averaged to paint a picture of where the private firm fits among its peers. These averages are calculated on aspects such as cash flow, operating margins, and assets. CCA may also be referred to as trading multiples, peer group analysis, equity comps, or public market multiples.

Precedent Deals

If the business being valued operates within a sector that has witnessed several recent mergers, acquisitions, or IPOs, the financial information and value determinations from those transactions can be used to help calculate a valuation based on consolidated and averaged data. While useful, precedent transactions become dated as more time passes since they occurred.

 

Ready to explore your exit and growth options?

 

Enterprise Value (EV) Multiple

Also known as private equity valuation metrics, the enterprise value multiple tends to offer a more accurate valuation because it includes debt in the assessment. The EV multiple is calculated by taking the enterprise value (the sum of its market cap, value of debt, minority interest, preferred shares deducted from cash and cash equivalents) and dividing it by the company's earnings before interest taxes, depreciation, and amortization (EBIDTA).

Discounted Cash Flow (DCF)

The estimated discounted cash flow approach is a fairly detailed method of valuation. It compares the discounted cash flow of similar companies to the company being valued. The revenue growth of the company is estimated by averaging the revenue growth rates of similar companies. This process can be challenging depending on the business’s accounting methods. Personal expenses are sometime included in the financial statements of private companies, which can affect the estimation.

Once the revenue is estimated, any anticipated changes in operating costs, taxes and working capital are estimated, allowing for the calculation of free cash flow, or the operating cash remaining once capital expenditures are deducted. Investors often use free cash flow to determine how much money will be available to give back to shareholders in dividends.

Next, the peer grouping of companies are assessed to calculate their average beta (the market risk of a company without the impact of debt), taxes, and debt-to-equity ratios. In the end, the weighted average cost of capital (WACC) must be determined. This factors in the cost of equity using the Capital Asset Pricing Model, the cost of debt using the company’s credit history, capital structure, debt and equity weightings, and the cost of capital from the peer grouping of companies. Calculating capital structure can be challenging, but industry averages can help, keeping in mind that the costs of equity and debt for a private company will likely be higher than that of its publicly traded counterparts. The WACC furnishes the discount rate for the private company. By discounting its estimated cash flows, a fair value can be assigned.

Cost Approach

This method of analysis is less common within the corporate finance world. It assesses the actual costs of rebuilding the business, ignoring any value creation or cash flow generation. It is merely cost equals value.

Ability to Pay

Under this valuation approach, the maximum price a buyer can pay for a business while still reaching target is assessed. If the business will be ceasing operations, a liquidation value is estimated based on selling off the assets. This value is often highly discounted because it assumes the assets will be sold as quickly as possible.

Other Important Factors

While there are several financial methods of valuating a business, there are other somewhat intangible factors that should be considered. For example, the culture of the company is important because it motivates its underlying ethics and competitive strategy, creating an environment for less risk. Also, the company’s management is key, because their track records will say a great deal about the value they bring to the table and the level of confidence that they instill. Ultimately, they will have a deep understanding of the industry and have the skillset to foster and maintain a positive culture. Additionally, aspects such as innovative intellectual property, established branding that is well recognized in the market, retention of key talent, and strong customer and supplier relationships can drive up the value of a business.

Don’t Go It Alone

Due to a lack of transparency, the valuation of a private company is never an exact science, but there are advisory experts that have methodologies that do get it as close as possible. Our world-renowned M&A advisors are standing by, waiting to engage you in the process of taking your future to the next level. We are experts in helping to create added value for your business and getting the most value for it in a sale. Contact us to get this exciting process started.  

READ MORE >>

Using Growth Capital To Grow Your Business

Every business owner wants to grow their company, but having access to capital to make it happen can make all the difference in the world. Growth capital is money that you borrow to help grow your business’s operations and, ideally, its profitability. There are many different forms of growth capital. It may be structured as a short- or long-term loan or as a line of credit. Long-term financing is the most common because it is easier to repay.

There are several reasons that growth capital can be secured by a business.

  • To purchase commercial real estate
  • To buy equipment to increase production
  • To increase workforce
  • To expand into new markets
  • To increase advertising and marketing efforts
  • To purchase another company

Growth capital is different from working capital because it is debt financing to create growth, while working capital is used for financing the daily operations of the business and keep it running. It is also different from equity capital, which requires relinquishing partial ownership and entering into a strategic partnership in exchange for investor funding. Growth capital does not require giving up any ownership.

 

Ready to explore your exit and growth options?

 

Types of Growth Capital Loans

There are several financing options for small to mid-size businesses seeking paths to growth.

  • Conventional growth capital from bank lenders. This method typically offers the lowest rates and fees, and longest terms. The average conventional business lender approves between 20 to 50 percent of all growth capital loans.
  • SBA financing with an enhancement guarantee by the Small Business Administration to cover your losses if you fail to repay. This financing is used for startups, acquisitions, expansion, construction, revolving funds, and working capital.
  • Asset-based growth capital that shows lenders collateral and substantial cash flow for approval. If you do not have adequate cash flow to get approved, you can use assets such as real estate, equipment, or inventory as collateral. These lending rates are often higher than that of banks, and the terms are shorter.
  • Alternative growth capital from private lenders, non-bank lenders, marketplace lenders and mid-prime alternative lenders have shorter terms but can be amortized over up to five years.
  • Cash advance capital is a short-term advance that involves selling a part of your business’s future receivables for a lump sum. This form of financing is usually more expensive, so the ability to increase revenue needs to justify the cost.

Applying for Growth Capital

When you apply for growth capital, lenders will assess the profitability of your company. They will want to ensure that your business model is proven, cash flow is adequate, and operations are efficient. After all, they want to feel confident that the loan can be repaid.

As defined by the National Venture Capital Association, growth equity investments feature the following attributes.

  • The business’s revenues are growing rapidly.
  • The company is cash flow positive, profitable, or approaching profitability.
  • The business is founder-owned and has no prior institutional investment.
  • The investor is agnostic about control and purchases minority ownership positions more often than not.
  • The industry investment mix is comparable to that of venture capital investors.
  • The capital is used for company needs or shareholder liquidity and additional financing rounds aren’t expected until exit.
  • The investments use zero or light leverage at purchase.
  • The returns are mainly a function of growth, not leverage.

How Can We Help?

At Benchmark International, we have an award-winning team of M&A advisors ready to help you take your business to the next level, whether it’s through a growth strategy, an exit plan, a merger, or an acquisition.   

READ MORE >>

What Is An ESOP?

An ESOP is an Employee Stock Ownership Plan under which staff members acquire interest in the company through a particular benefit plan. This type of plan is designed to incentivize employees to act in the best interest of business and stay focused on company performance since they themselves are shareholders and will want the stock to do well. A study by Rutgers found that companies grow 2.3% to 2.4% faster after setting up an ESOP. 

ESOPs are established as trust funds and can be funded when companies:

  • Put newly issued shares into them
  • Put in cash to purchase existing company shares
  • Borrow money through the entity to buy shares

If the plan borrows money, the business contributes to the plan to facilitate repayment of the loan. Contributions are tax-deductible and employees pay no tax on them until they leave or retire. If an ESOP owns 30% or more of company stock and that company is a C corporation, owners of a private company selling to an ESOP can defer taxation on gains by reinvesting in securities of other businesses. S corporations can also have ESOPs and the earnings attributable to the ESOP's ownership are not taxable.

 

Ready to explore your exit and growth options?

 

Companies of all sizes use ESOPs, from small family-owned businesses to large publicly traded corporations. Company leadership usually offers employees stock ownership with no upfront costs. It is common for distributions from the plan to be linked to vesting, which is the proportion of shares earned per each year of service. The shares may be held in a trust for safety and growth until the employee resigns or retires—they cannot take the shares with them. If an employee is fired, they usually only qualify for the amount they have vested in the plan. Once fully vested, the business buys back the vested shares from the departing employee and the money goes to that employee in the form of either one lump sum or periodic payments. After the business buys back the shares and pays the employee, the shares are either redistributed or voided.

ESOPs offer several benefits for the ownership, the company, and its employees. Owners gain liquidity and asset diversification, they can defer capital gains taxes on proceeds, and they maintain upside potential and leadership in the company. Companies get tax deductions on sale amounts, can become income tax-free entities, and have a tool to retain and attract talent. Employees secure retirement benefits and enjoy having a real stake in the company they work for.

It should be noted that employee ownership does not mean that employees are more involved in operations or running the business. They are not entitled to receive financial or strategic information. They are given a summary plan description and annual statements for their account. In some cases, employees may be granted certain voting rights.

ESOPs and Exit Planning

ESOPs are often used in succession planning as a strategy for liquidity and transition. Around two-thirds of ESOPs provide a market for the shares of a departing owner of a profitable business. Others are used as a supplemental employee benefit plan or as a way to borrow money in a tax-favored manner. Because ESOP transactions are flexible, they enable ownership to either withdraw slowly over time or all at once. Owners may sell anywhere from one to 100% of their stock to the ESOP, allowing them to stay active in the company even after selling all or most of it.

Additionally, ESOP transactions provide more confidentiality than third-party sales. Because confidential information does not need to be shared with prospective buyers, it eliminates risk of detriment to the business. An ESOP transaction is also known to offer a greater certainty of closing versus sale to a third party, and terms of the transaction are arranged to be fair to the ESOP and its members. It is also considered to be more conducive to maintaining healthy company culture because it aligns the interests of ownership, management, and employees.

Other Types of Employee Ownership

In addition to ESOPs, companies can offer employees the following options:

  • Direct-purchase programs that allow employees to buy shares of the company with their personal after-tax money.
  • Stock options that offer employees the chance to purchase shares at a fixed price for a set period of time.
  • Restricted stock, which gives employees the rights to acquire shares as a gift or purchase after reaching certain benchmarks.
  • Phantom stock, which provides employees with cash bonuses equal to the value of certain shares based on performance.  
  • Stock appreciation rights that allow employees to raise the value of an assigned number of shares, which are usually paid in cash.

Let’s Talk About Your Future

If you’re ready to make a move with your company, we’re ready to make the most of the process for you. Contact one of our esteemed M&A advisors at Benchmark International and we can begin writing the next chapter of your success story.

READ MORE >>

What Is A Buy and Build Strategy?

A buy and build strategy is commonly used by private equity firms seeking to expand operations, generate value, and increase returns. It is accomplished through the acquisition of a platform company with already established internal capabilities that can be further built upon. This can include the acquisition of several smaller businesses, combining their operations to create more value. Buy and build transactions, which can be aggressive, tend to occur more often in slower economies because private equity firms become even more interested in improving returns at a time when organic growth and operational efficiencies are not enough. They are also more common in highly fragmented sectors.

Buy and build can be a great formula for expansion and added value. It allows businesses to acquire skills and expertise that would normally require a great deal of time to build on their own. It can help a company expand into other markets in a much more efficient manner. Usually, these private equity firms have a relatively short holding period of around three to five years and investors expect a fair amount of interest after an agreed time period. Buy and build deals result in an average internal rate of return of 31.6% from entry to exit, versus 23.1% for standalone deals. While private equity is the most common employer of buy and build strategies, this tactic is also used by strategic buyers, stock listed companies, and family-owned companies.

 

Ready to explore your exit and growth options?

 

Because it brings about a great deal of change, a buy and build strategy must be executed properly in order to succeed. Otherwise, the resulting effects can actually be detrimental to value. In an ideal situation, the private equity firm will have significant experience in the particular sector of the company that they are acquiring. Having a strong CEO and management team with a solid background in the field of business is also important because the transition and integration process can be complicated and needs to be handled adeptly. The leadership should also have a certain skillset that includes an understanding of areas such as risk management, operational metrics, and change management. This is especially true when the acquired companies are competitors and there needs be vertical integration of supply chains. Additionally, a buy and build strategy can take several years because it involves the acquisition and integration of multiple companies.

To learn more about why buy and build strategies work, check out our previous post here.

Time to Make a Move?

Whether you are looking to sell your business, create strategies for growth, or craft an exit plan, our experts at Benchmark International will take the time to carefully devise strategies designed for your specific needs. Your goals are our goals and we will put all of our resources and global connections to work for you, getting you the most value possible for your business.

READ MORE >>

How Much Time Will The M&A Process Require Of Me?

As a business owner, you may be curious regarding how much of your time you should expect to invest in the process of a merger or acquisition from start to finish. First and foremost, it is important to recognize that any M&A deal will take time. This can be anywhere from several months to years, depending on various circumstances such as the state of the current market and the type of business. The good news is that if you hire an experienced M&A advisory team to handle the transaction, it will not require much of your time at all in the early stages.

The Preliminary Phase

A quality M&A team will handle the vast majority of the necessary work required to facilitate a transaction with the understanding that you have a business to run and you need to stay focused on doing just that. This early phase of work includes:

  • Compiling due diligence documentation
  • Studying the market
  • Assessing the data
  • Creating a solid marketing strategy
  • Vetting potential buyers

Of course, you should constantly be kept informed of all developments in the process, but you will not need worry about doing all the legwork and dealing with time-consuming details. An M&A team will guide you through every step, making sure that all communications are clear and concise, and that you can stay focused on your day-to-day life with some peace of mind.

 

Ready to explore your exit and growth options?

 

There are many reasons why enlisting an M&A advisory firm as your partner offers you a major advantage in a deal. You could try handling a sale yourself, say with the help of your lawyer or CPA, but it is a complicated process that makes it very difficult for a business owner to juggle running their business while dealing with all the minutia involved in an M&A transaction—especially when you have no prior experience in selling a company. Think about how much you really know about corporate and antitrust laws, securities regulations, and where to even find a buyer. Not to mention that experienced buyers will recognize that you are in unchartered waters and will not hesitate to take advantage of your lack of practice. Keep in mind that it is firmly established that the majority of mergers and acquisitions (70 to 90 percent, according to the Harvard Business Review) fail. This makes it even more crucial that you have an experienced team working on getting you results. Experienced M&A advisors know how to get deals done because they do it every day.

But there is more to it than that. Selling your company is an emotional journey. Your personal feelings can easily cloud your judgment regarding a sale. It is incredibly helpful to have a team in your corner that is looking out for your best interests while being able to assess buyers on their true merit. A good M&A advisor will have empathy for you during this difficult process and know how to help you through it while getting a high company valuation and the results that you deserve.

 

The Later Stages

Once you agree to an offer, it will require a little more participation on your part, but in a way that you should welcome, because this great milestone is finally nearing completion. You will be introduced to prospective acquirers and presented with their letters of intent. Contract negotiations and financing strategies will be underway. Your M&A deal team will work with you to evaluate the top bidders and narrow down the options, and get you across that coveted finish line to an exit strategy that is designed specifically to fulfill your unique aspirations for the future. Once you have decided on a buyer, you will need to work together to formulate integration strategies for the ultimate success of the business.

Thinking About Selling?

Even if you have not made up your mind to sell, it can still be fruitful to have a conversation about the possibilities for your future. The M&A experts at Benchmark International would love to discuss your options and help you gain insights into what and when is right for you, your company, and your family. If you choose to sell, our proprietary methodologies and global connections will help you find the right buyer and get the maximum value for the business you have worked so hard to build.

 

READ MORE >>

7 Key Considerations When Selling Your Business

You have poured your life into building your business. Selling it is not only a very emotional process, but it can also be a monumental task that involves many intricacies. Careful planning and preparation before a merger or acquisition can translate into your efforts being rewarded with a high value deal. While there is quite a bit that can go into preparation, the following seven considerations are key to arriving at a successful deal in the end.

1. Protect What’s Yours

Intellectual property can be a company’s most significant asset. It differentiates you from your competition, is an important marketing tool, and can provide revenue through licensing agreements. It is also a major driver of value in a merger or acquisition. Any intellectual property that belongs to your business (proprietary technologies, copyrights, patents, design rights, and trademarks) must be legally protected. Enlist your legal counsel to ensure that all the proper paperwork is filed and current. If you are considering a cross-border transaction, you will want to make sure the property is protected on an international level as well as a local level, as different countries have different laws and requirements.

2. Get Your Finances in Order

It’s never a good look when a prospective acquirer asks for financial documentation and you are scrambling to put it together. This can also delay the process. Before taking your company to market, you will want to compile all of the proper financial and contractual records and have them organized and ready to turn over. Having your finances in order also means that you should seek to resolve any outstanding issues where possible before trying to sell. For example, if you know you have a situation you can probably resolve, getting it straightened out ahead of time can eliminate unnecessary complications during the due diligence process. The due diligence process is also going to require an audit of your assets. A buyer is going to want a complete picture of what they are acquiring. Intellectual property is an important element of due diligence but the process also includes areas such as equipment, real estate, and inventory.

3. Maintain Business as Usual

Going through the lengthy process of selling a business can certainly provide its share of distractions. No matter how easily it can be to become sidetracked or consumed in the details of the sale, now it is more important than ever that you stay focused on the daily operations of the business and ensuring that it is running at its best possible level. This includes keeping your management team focused. Deals can take time and they can also fall through. Every aspect of an M&A transaction hinges on the health of your company at every stage of the game and you need to make sure the business does not lose any value.

4. Think Like a Buyer

As a seller, you obviously don’t want to leave money on the table. That is why it can be helpful that you look at your business from the perspective of a buyer. This will help you avoid being fixated on a sale price the whole time. Think about why they would want to buy your business and what opportunities it affords them in the future. If you can improve your business and develop it as a strategic asset before you try to sell, you can increase its value and get more money.

5. Predetermine Your Role

Sometimes after the sale of the business the original owner executes a full exit strategy and severs all involvement with the business. You need to decide up front what is right for you. To what extent do you plan to relinquish control of the company? Do you wish to remain an employee or a member of the board? How much authority do you plan to retain? You should think these options through before going to market so that you can find a buyer that supports your intentions for the business.

6. Have a Post-Sale Plan

Consider what life will look like following the sale of your company. Think about what your financial picture will look like. How will you invest the proceeds to maintain your financial health? How much cash will you take at closing? How long should the earn-out period be? What about stock options? And don’t forget about tax liability. How much will be paid immediately and how much will be deferred? These are all important questions to ask yourself when anticipating the sale of your business.

7. Retain an M&A Expert

Selling a business is a complicated process and a seller should never go it alone. You may be an expert at your business, but chances are you aren’t an expert at selling businesses. Enlisting the partnership of a M&A experts can not only help you get a deal done smoothly but can help you get the maximum value for your company. M&A advisors know what to expect, they know how to avoid common pitfalls, and they have access to resources and experience that can be game changers for your deal. They can also help you work through some of the difficult decisions mentioned above. Of course, they come at a price, but a price that is worth it when you consider how much their involvement can increase the value of your sale and the chances of the deal being closed.

Ready to Sell?

When you are ready, so are we. Reach out to our M&A advisory experts at your convenience to talk about your options and how we can help you sell for the utmost value.

READ MORE >>

Avoiding M&A Integration Failures

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.

 

Ready to explore your exit and growth options?


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.

READ MORE >>

A Beginner's Guide To Finding An M&A Advisory Firm

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.

 

Ready to explore your exit and growth options?

 

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.

READ MORE >>

Key Tips For Building A Great Management Team

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.

 

Ready to explore your exit and growth options?



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.

READ MORE >>

How To Explain To Your Family That You Are Selling Your Business

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.

 

Ready to explore your exit and growth options?

 

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.  

READ MORE >>

7 Steps To Finding The Perfect Business To Acquire

Purchasing an existing business is a far less risky alternative to starting a new business from the ground up. In fact, more than half of start-up companies fail within the first several years. Some research even reports that a whopping 90 of new businesses fail within four to five years.

By buying an existing business, you are acquiring all of the positive aspects that it already possesses, such as the customer base, infrastructure, supplier relationships, and brand recognition. You will also be taking on its shortcomings as well, and that is another element you will need to factor into your search. So, when looking for the ideal business for you to acquire, where do you start?

7. Consider Your Value

When embarking on your search, think about how you can bring value to the table. Consider how your particular experience, skills and areas of expertise can improve the company and strengthen its weaknesses. It is a logical step in finding the type business that makes sense for you. It also aids in making your case to the owner as to why you are the right person to carry on their legacy.  

6. Focus Your Passion

If you are going to go all in on a business, it is more likely to succeed if it something that you feel passionate about. If you have zero interest in producing or selling trombones, then a trombone company is probably not the best choice for you. Seek out a business that you naturally feel gravitated toward helping flourish. Because you are going to need to dedicate a great deal of time to this new venture, it will help that you feel inspired by your mission.

You may even come across a business that interests you that is not on the market. Don’t be afraid to ask the owner if they are willing to sell. Even if they say no, they could change their mind down the road so make sure to give them your contact information.  

5. Leverage Your Network

Reach out to your colleagues, friends, and family members to see if they are aware of any companies on the market. This can be a simple path to finding a good lead, especially if you already have a connection to the ownership, making for an easy introduction. Also keep in mind that this route can also lead to prospects that may not be serious or may not be the best fit. Just because you know someone who knows someone who wants to sell, it does not mean it is the right opportunity for you.    

4. Search Online

There are several online marketplaces that list small businesses that are for sale. This is a relatively effortless way to access key information such as location, asking price, revenue, inventory, and have access to global listings. Just be aware that these sites may list high company valuations. Also, these types of sites can be flooded with listings, which can be a major waste of your valuable time. You may also come across sellers that are not actually serious about selling. 

3. Consider Lifestyle Impacts

When purchasing a business, you are taking on a massive responsibility and it is important that you make sure your lifestyle can accommodate all that it will entail. Think about how taking over a company will affect your time, your family, and any other obligations you may already have. How much of your time are you willing to invest? Will you need to relocate? Are you going to be losing sleep over any debt? Avoid over-extending yourself for your sake, the sake of your family, and the sake of the company.

2. Know Your Budget

Before even attempting to buy a business, it is important to establish what you can afford to invest in the endeavor. Be sure to ask yourself the right questions, such as how much you have on hand, if you will need financing, and how much debt you are able to take on. Also, if you have a reasonable idea of what you are willing or able to spend on an acquisition, you can avoid wasting time looking at companies that are outside of your ballpark.

1. Work With M&A Experts

By working with a mergers and acquisitions advisory firm, you will have access to exclusive information about businesses that are for sale that you will not be able to find on the street or the Internet. These experts will also have superior resources and proficiencies in matching quality businesses with the right buyers. Going this route also means you can be sure that you are dealing with serious sellers only—not someone who is just toying with the idea of selling. These many benefits are proven to translate to a more efficient and fruitful experience overall.   

Looking to Buy?

While we specialize in sell-side M&A, our talented team at Benchmark International can also help to effectively match buyers with the right businesses. Visit www.BenchmarkIntl.com/buyers/ to create your buyer profile and learn more about the merits of working with us.

 

READ MORE >>

How Long Does It Take To Sell A Business

Selling a company can take several months to even years, depending on factors such as the state of the business, the industry, the market, and the economy. At Benchmark International, we have created an efficient process that we use as a framework to guide any merger or acquisition from start to finish. While not every deal will follow this timeline exactly, it is what we strive to adhere to and what you can expect from the process, keeping in mind that when several parties are involved, timing depends on when they each do their part.   

The 120 Days Prior to Going Live: Strategy Development & File Preparation

First, in order to determine the “go live” date (when we take the business to market) we carefully assess your needs and priorities as the business owner, the completion of audits and taxes, the harmonizing of the business’s external image, and the M&A market calendar. 

In the 120 days prior to “going live” with your company, we will go through a preliminary preparation period. This period begins when you and your Benchmark Deal Team sign the engagement and we deliver a data request list to you in order to obtain the relevant information we will need to facilitate a deal. The initial delivery of these documents to us usually takes about two weeks. Then, two weeks after that, we conduct a Q&A session with you regarding the financial data to resolve any outstanding topics. This is when we dig in and do an even more thorough assessment.

A few weeks later, we have our first meeting with you for the presentation of any issues that we found, we request any additional data, and we conduct a preliminary discussion of a marketing strategy. In another 20 days, we have a second meeting to verify the completion of the harmonization of the company’s public image, finalize strategy, and recap any additional data still needed.

Then, in about three weeks, our deal team delivers drafts of the company Teaser and Confidential Information Memorandum (CIM). In the week subsequent to that, we will meet to finalize materials, we prepare market intelligence, and then we are ready to go live.

 

Ready to explore your exit and growth options?

 

Two Months After Going Live: Solicitation of Candidates & Expression of Interest

Now that we are ready to go live, we move into the next phase of the process. We start by approaching prospective buyers. We begin obtaining non-disclosure agreements and screening candidates. Within about three weeks, our deal team delivers an interim candidate report to you, classifying candidates into three categories. We then meet to determine authorized recipients of the CIM out of the candidates delivered. Following this meeting, we deliver CIMs to a second round of prospects. You can expect us to be one month into this process when we deliver a finalized candidate report to you, which again classifies the candidates into three categories. Soon after, our team will meet with you to determine the authorized recipients of the CIM out of these candidates. Following this meeting, we deliver CIMs to a second round of invitees. By day 60, expression of interest is due from these candidates.

Two to Four Months After Going Live: Evaluation of Candidates & Offers

Now that we are two months into the process of having gone live, your Benchmark team presents the expressions of interest on behalf of prospective buyers to you. Next, you instruct us as to which candidates should be invited to bid. We then confirm each invitee’s continued interest and they are provided access to a preliminary data room.

At about three months in, letters of intent are due to us from the bidders. We revert to them with any questions raised by the letters of intent. Next, our team presents the letters of intent to you and follows up on any questions you have for the bidders. At this stage, around Day 107, we work closely with you to reevaluate the top bidders, and negotiations begin with one to three bidders. By Day 120, the letter of intent is executed and the counterparty is granted access to the complete data room.

Ready to Sell?

We’re ready to help. Contact our M&A advisory experts at Benchmark International to formulate effective strategies to grow your business or plan your exit strategy and sell your company for the highest valuation possible. 

READ MORE >>

How To Get More Results Out Of Selling Your Business

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.

READ MORE >>

Growing Your Business Is Not As Difficult As You Think

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.

 

Ready to explore your exit and growth options?

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.

READ MORE >>

How To Retain Top Talent During An Acquisition

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.   

READ MORE >>

Businesses Are Just Like Classic Cars

Anyone who owns or has owned a classic car will attest that it’s a very special relationship and one not dissimilar to owning a business.

Classic cars and businesses are assets that relatively few have the privilege of owning, they take time to build or acquire, have personality, and generally represent a sizeable investment and very personal commitment for anyone.

At the outset of these relationships, our perceptions of what the experience will be like is dominated by excitement, passion and it is often a journey we have spent many years planning and saving for. The risks have been calculated and monetised yet despite knowing that as physical or metaphorical assets they do break, and cost money, we have an ingrained belief we’ll get through it and that value that will accumulate with time.

It is inevitable, unless one is fortunate enough to be able to pay a premium price for a pristine model, that the early stages of these ownership journeys are characterised by a series of unfortunate discoveries - usually requiring us to roll up our sleeves and invest both time and money to rectify. It’s something we readily do as this beast is now a part of us and with ownership comes responsibility.

Like classic cars, business ownership takes us on a rollercoaster ride of emotions that range from pride and joy to anger and despair. One faces a multitude of risks from accident to theft and even the collapse of a market for it. The sacrifices can be significant, yet from the outside others often perceive us as merely lucky and in viewing the finished product, do not have insight or appreciation for the all-consuming toil, sunk and personal cost that it has taken to get to this point.
 
 
Ready to explore your exit and growth options?
 
Driving the old stag was not possible without being approached by somebody wanting to acquire the car and whilst they’d all expressed an interest to buy, it was once the door to such a discussion was opened that they divert the negotiation from their motive and start to approach the transaction from a purely clinical perspective. It is at this point buyers begin quoting market-related metrics seeking to mitigate the risk of what will be their investment. Simply put, such an approach is common in business too as a seller the future value potential and emotional attachment can often outweigh the immediate cash consideration but yet we also fail to see the other side and balance the risk to a buyer. It is for this reason that the intangible benefits of a deal are often larger considerations than the price attributed.

Selling a classic car is a difficult decision. It marks the end of a very personal relationship and what has been an emotional journey - for some, it can be a process as difficult as picking a spouse for one of our kids might be. Price becomes important as it measures the worth we attribute to it, and the reward for the investment or sacrifices made. Equally, however in finding the right person who we can trust to nurture, protect, improve and care for our treasure, we’re achieving a value beyond compensation.

Central to the decision to sell a classic car is always the consideration of “what next”. If the transaction facilitates the acquisition of a more prized possession or the freedom to pursue a long-sought ambition, the decision becomes more palatable. The similarity in selling a business is that it is vital to plan for what comes next. For example, in the case of retirement, it’s key to have something to retire to, as opposed to from.

It is a commonly expressed view that anything is for sale at a price, but committing to the prospect of a sale is a fundamentally different process to being available to be bought. Knowing your asset, the buyer’s next best alternative, and the adventure you’d pursue next are all key to a successful outcome. Whilst experience, financial, analytical, and other corporate finance skills are minimum requirements for an advisor, someone who’s been there, done it, and who intimately understands the internal conflicts only a business owner experiences can certainly add value in navigating this journey.
 

Author
Andre Bresler
Managing Partner
Benchmark International

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

 

 

READ MORE >>

What The Heck is M&A?

Mergers and acquisitions (M&A) involve the consolidation of ownership of companies through financial transactions. They serve as vital components of business strategies, allowing companies to innovate, evolve, and sometimes even survive. You may hear the terms "mergers" and "acquisitions" used interchangeably, but they are two fundamentally different types of transactions. Both processes are comprised of several phases, and both can take several months to years to complete. Some of the world’s largest and most successful companies grew to become what they are today through M&A activity.   

The motivations behind M&A deals can be:

  • Creation of synergy for lower cost of capital
  • Improved performance and accelerated growth
  • Achievement of economies of scale
  • Increased market share
  • Diversification of products
  • Expansion of geographic markets
  • Strategic realignment and technological advancement
  • Diversification of risk
  • The opportunity of an undervalued target
  • Tax advantages

Mergers

A merger occurs when two companies join forces to do business as a single new entity, combining ownership and operations. In these situations, the stock of both companies is surrendered and new company stock is issued in its place. Stockholders of both companies must approve the transaction and consolidation of the businesses creates a new entity. Mergers can be structured in various ways:

  • Horizontal Merger - The union of two companies in direct competition that share similar products or services and markets.
  • Vertical Merger - Occurs between either a customer and a company, or a supplier and company, with complementary offerings.
  • Congeneric or Concentric Merger - When two companies that serve the same consumer in different ways join forces as one company.
  • Market-Extension Merger - Joining of two companies that sell the same products but do so in different markets.
  • Product-Extension Merger - Takes place between two companies that sell different but related products in the same market.
  • Conglomerate Merger - The merger of two non-competing companies that have no shared or common business areas.

 

Ready to explore your exit and growth options?

 

Acquisitions

An acquisition occurs when one business purchases and takes over another one using cash, stock, or both, and establishes itself as the new owner. Once the buyer absorbs the business, the purchased company ceases to exist and their stock ceases to be traded. A simple acquisition often means that the acquirer obtains the majority stake in the purchased business and does not change its name or alter its legal structure. And sometimes a target company does not wish to be purchased. This is known as a hostile acquisition or takeover. In this situation, the acquiring company approaches the shareholders of the target company, bypassing the board of directors or executives. The target company may be acquired without the consent of upper management as long as the shareholders approve the transaction.

Management Acquisitions 

Also referred to as a management-led buyout (MBO), the executives of an organization partner with a financier to buy a controlling stake in another business, making it private. These types of deals are often financed with debt, and must be approved by shareholders.

Tender Offers

A tender offer is when one business goes straight to the other company's shareholders and offers to purchase the outstanding stock of the business at a specific price. It is common for tender offers to result in mergers.

Acquisition of Assets 

This occurs when one company acquires the assets of another company upon approval from its shareholders. This is common during bankruptcy proceedings, allowing for other businesses to bid on assets of the bankrupt firm, which is then liquidated upon the final transfer of assets.

Reverse Merger

There is also another acquisition type known as a reverse merger. This enables a private company with strong prospects to buy a publicly listed shell company with limited assets and without legitimate operations. Together they become a new public company with tradable shares.

Contact Us

M&A deals are some of the oldest and most reliable growth strategies in business. But they do require quite a bit of groundwork and complex valuation processes. In fact, it is not uncommon for M&A transactions to fail. If you are considering a merger or acquisition for your company, please reach out to our M&A advisory team at Benchmark International to get award-winning guidance and plan the next steps for your future and the growth of your company. We are experts at getting the most value for a business in a sale and we can help you decide if a merger or acquisition is right for you.

READ MORE >>

5 Ways To Determine It's Time To Explore Your Company's Exit Options

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.

 

Ready to explore your exit and growth options?
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.

READ MORE >>

2020 Outlook For The Global Agriculture Sector

Geopolitical Factors

Mergers and acquisitions activity in the agriculture sector was bustling with billion-dollar deals in the years of 2017 and 2018. An M&A slowdown occurred in 2019 and spilled into 2020, largely due to uncertainty caused by global politics.

The trade war between the world’s two largest economies, the United States and China, has lowered confidence and caused global repercussions. This dispute is slowly moving in a more positive direction, as the two nations reached a “phase one” deal in January of this year. Under this deal, China pledged to boost U.S. imports of agricultural products and manufactured goods by $200 billion over the next two years, and the U.S. agreed to cut in half some of the tariffs it had imposed on China. A "phase two" deal has been mentioned but timing and expectations remain unclear. Industry experts do anticipate large U.S. farms to experience 9.3 percent growth and income over 2019. 

Brexit is another factor that is impacting the agriculture sector under implications of a trade deal between the European Union and the United Kingdom. Prime Minister Boris Johnson has declared a goal to finalize a deal by the end of 2020. E.U. negotiators suggest that it is not enough time to secure the kind of complete deal needed.

Ag-Tech Opportunities

Even with the uncertainties that remain in 2020, there are significant opportunities for disruption and transformation within the agriculture sector. These opportunities are being driven by a shift towards a more high-tech industry that is expected to bolster agricultural capital investment.

  • Farmers are increasingly using apps to regularly monitor crops.
  • More localized weather data is helping farmers to better prepare for planting and harvesting times.
  • Social media is allowing farmers to better communicate directly with their customers, as studies show that 40 percent of all farmers are on Facebook.
  • A special material called graphene is being used to gather data regarding field and soil conditions to help plants survive better.

Ready to explore your exit and growth options?

 

Automated agricultural equipment is also playing a major role in the global market amid a shortage of young, new farmers. New agricultural robots are being developed across all aspects of agriculture, such as imaging, navigation, planting, weeding, and harvesting. Drones are being used for deliveries, spraying, and crop and livestock imaging. Robotic harvesting equipment is being implemented for labor-intensive harvesting tasks. Large farms are collaborating with the companies developing these technologies to lower costs and maintain a competitive advantage. And as global demand for agricultural products grows (projected at 15 percent over the next decade), robotic automation is a key facilitator in meeting the demand. The U.S., Canada, and Mexico are all adopting various agricultural robots, giving North America the highest share of the robotic farming market.

Hemp Farming

More farmers are now growing and selling forms of hemp and hemp-derived CBD as part of their overall crop. Last year, hemp businesses that had vertically integrated their supply chains performed better than those that had not vertically integrated. In 2020, it is expected that small farmers, processors and entrepreneurs will exit the industry or seek out opportunities for consolidation and integration.

Growing Conditions

2019 saw adverse growing and harvesting conditions that resulted in a smaller supply of crops such as grains and oilseeds. There is hope that these conditions will improve in 2020.

In the U.S. alone:

  • Crop yields are expected to grow.
  • The majority of the 20 million acres that were unplanted last year will likely be planted this year, primarily corn and soybeans.
  • The USDA puts the 2020 soybean crop at 84 million acres, making it the fourth-largest soybean crop on record.
  • The production of red meat and poultry is projected to rise by more than two percent.
  • Milk production will reach a record-high 222 billion pounds and pricing is expected to continue to improve.
  • Overall livestock, poultry, and dairy exports are forecasted to reach $31.9 billion, $500 million higher than previously projected.

As long as the weather cooperates and growing conditions face fewer extremes, the world should also see similar improvements in agricultural output.

Ready to Make a Move?

We look forward to hearing from you and discussing how our M&A advisors can expertly help you grow your business, maximize its sale value, or craft your exit strategy.

READ MORE >>

7 Quick Tips About Growing Your Business

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.

 

Ready to explore your exit and growth options?

 


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.

READ MORE >>

Force Majeure is Coming and if You’re Selling Your Business That is Bad

Force ma·jeure /ˌfôrs mäˈZHər/ (1) "superior force", (2) unforeseeable circumstances that prevent someone from fulfilling a contract.

Airlines are suspending flights and changing rules for refunding tickets. Cruise ships companies are in tailspins. Cargo ports are operating with reduced staff and reduced hours. Entire cities are being quarantined. The Coronavirus may or may not become a major global health issue. But the probability that the disease will have an impact on global business is far higher, if not approaching a certainty. This is safe to say not because there is a high probability that the virus will impact your company’s travel or suppliers or daily operations but rather because of the dreaded force majeure provision lurking in so many of your company’s contracts. These clauses are known as the “canary in the coal mine” when it comes to large-scale black-swan type macroeconomic downturns as parties typically rush to invoke them well in advance of any actual calamity striking. One of the unfortunate lessons from 9-11 was that lawyers are not shy about advising their clients to invoke the clause to escape performance obligations on unfavorable contracts. Of course, any contract that is unfavorable to them (whoever “them” is) is probably favorable to your business.

As a reminder, here is an example of a simple force majeure clause:

For this Agreement, an “Event of Force Majeure” means any circumstance not within the reasonable control of the Party affected, but only if and to the extent that (i) such circumstance, despite the exercise of reasonable diligence and the observance of Good Industry Practice, cannot be, or be caused to be, prevented, avoided or removed by such Party, and (ii) such circumstance materially and adversely affects the ability of the Party to perform its obligations under this Agreement, and such Party has taken all reasonable precautions, due care, and reasonable alternative measures to avoid the effect of such event on the Party’s ability to perform its obligations under this Agreement and to mitigate the consequences thereof.

The definitions commonly provide examples of the types of circumstances that qualify earthquakes, war, acts of God, change in laws, civil disorder, and even labor strikes. One aspect of the clause that allows it to be used well in advance of any actual natural event such as the arrival of an epidemic is that the definition commonly includes political acts as well as natural acts. As a result, the declaration of an area as one warranting extreme caution might qualify a government order to reduce the number of flights to an area or the number of visas it grants to people going or coming from an affected area (or quarantining travelers) might qualify.

Furthermore, it seems everyone has a global supply chain. So, any of these events happening “over there” might seem remote from your business. However, for anyone with a contract that wants to avoid the Butterfly Effect can be a siren song.

* * *

At this point, you are probably asking, “But surely people don’t write this term into their contract in a way that allows them to be abused, right?” Well, this clause is kind of an atom bomb. As one does when dealing with atom bombs, contracts are designed to prevent their use and mitigate their effects. The overarching check on the amazing power of the force majeure provision is that it only relieves the party’s performance while the circumstances remain in effect. It’s temporary. Parties won’t abuse it because it just gives them a short-term benefit and then they have to face the music.

So, in the ordinary course of your business, you have to deal with the fact that force majeure clauses may face lean times even when your local environment is perfectly normal. Parts may not be provided on time. Your call center might go dark. Your IT support may not be available. And anyone of your suppliers or customers may have the same problem. As an example, a company that collects fees for collecting, cleaning, and reissuing linens to other local businesses and uses an in-house local manufacturing facility in area with no odd circumstances occurring. Let’s say Miami at present (if there is such a company) may suddenly be hit with the clause because they service cruise ships and hotels or because their raw materials come from Egypt or parts of their detergent is manufactured in Germany from elements mined in the Philippines.

Businesses can survive a three-month or six-month calamity such as this in the ordinary course of their lifespan, so people don’t usually think twice about the wording of a force majeure clause. But your business is going up for sale. And when you go up for sale, everyone looks at your last 12 months' financial performance. The ­last thing you want is a hole that has to be explained. Even if your broker can come up with addbacks to create pro forma financials to show what “would have” happened absent the event of force majeure and how rosy that alternative reality would have been, it is better to not have to do this. More importantly, it points out weaknesses in your business. Buyer favorites include you are beholden to a single source of supply, you have too much customer concentration, your business lacks redundancies, your perfect line of decades of growth and healthy margins now appears more vulnerable than it did before. Whether they believe it or not buyers latch on to these things to justify their valuations and their lenders latch on to them to constrain the debt available to get the deal done (and thus impact purchase price).

We still find buyers asking to see clients’ financials from 2007-2010. Looking back more than five years is (or should I say “was”) unprecedented in M&A, much less looking back over a decade. But it is common at this point and we see little signs that that is ending. But that was the last force majeure type event most of our clients suffered and buyers want to see how the businesses weathered it…And they aren’t asking in hopes of finding some reason to raise the value of their offers.

All the better to have the next event of force majeure occur after your sale rather than before.

Author
Clinton Johnston
Managing Partner
Benchmark International

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

READ MORE >>

Key Steps For Successful Post-Merger Reorganization

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.

 

Ready to explore your exit and growth options?

 

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.

READ MORE >>

2020 Global Outlook For The Marketing Sector

In a world of billions of connected smart devices, digital technology has essentially revolutionized the global marketing industry. From social media to content marketing, the market is massive and poised for continued growth.

The traditional ad agency model now includes a major focus on digital marketing, and digital marketing agencies continue to become more prevalent and provide a wider range of strategic services and specialized areas. And more and more companies outside of the advertising and marketing industry are also developing their own in-house digital marketing arms. 

In 2019, the global digital marketing market size was $300-310 billion. It is expected to grow to $360-380 billion in 2020.

On a global scale, the market size per region is:

  • $110-130 billion for North America
  • $120-130 billion for Asia Pacific
  • $48-52 billion for Europe
  • $6-10 billion for the Middle East/Asia

Online videos and mobile ad spending account for a large portion of the digital advertising space and continue to drive digital marketing spending, especially in Europe and North America. Digital out-of-home media is becoming more personalized and contextually relevant through targeted ad delivery, and location-aware and bandwidth-aware tech tools. And with the increasing emergence of 5G technology in 2020, phone streaming will reach incredible speeds and higher quality, opening up new possibilities for marketers. 

Content Marketing

2020 will be a big year for content marketing in several different forms. User-generated content will be in demand as the majority of consumers report that they find the opinion of users to be more influential than content promoted by the actual brand. This content includes anything from social media posts and blogs to web pages and testimonials.

Another huge component of content marketing is video content creation. More consumers are expecting to see video content from their favorite brands. Video also keeps audiences engaged for more time versus other types of content. Live streaming is also a growing trend, as consumers are reporting that they would prefer to watch live video than read a blog post.

 

Ready to explore your exit and growth options?

 

Social Media

Marketers are forecasted to spend $112 billion on social media advertising in 2020. 

Globally, North America continues to dominate ad spending in this digital marketing sector, with the retail industry as the leading ad spender in the United States. While search remains a preference of retail marketers, video, social media, and other display formats are growing in demand to increase brand visibility. Digital ad spending in the Asia Pacific region has surpassed that of Europe, with growth driven by China due to increasing investments on technology and digital platforms. The automobile, consumer goods, and telecom sectors are the leading marketing spenders in the country.

Print

Digital marketing has had a large impact on the commercial print side of the industry. This is causing service providers to offer more innovative value-added services such as data management and e-publishing. The demand for print services is largely driven by the retail, financial, publishing, and food and beverage sectors, especially for on-demand print materials, packaging, and other promotional materials. Additionally, increased digitalization and eco-friendly practices (such as using soy ink vs. petroleum-based ink) have lessened the printing industry's impact on the environment. Increased digitization will continue to result in more e-versions of print, such as annual reports and catalogs, and use of more online targeting channels such as email.

Direct Mail

The size of the global direct mail market is expected to reach $94–98 billion in 2020. The use of direct mail remains high in developed regions such as North America and Europe due to comprehensive customer database maintenance. At the same time, the increased use of e-mail and mobile marketing is lessening the demand for printed direct mail materials. In smaller markets that have lower Internet penetration, such as parts of Latin America and the Middle East, the direct mail sector remains strong with demand being driven by retail, travel, and real estate. To remain competitive, direct mail providers are offering e-mail marketing and other digital marketing services at lower prices.

Loyalty Programs

The global market for loyalty programs continues to grow due to increasing e-commerce, smartphone use, and online shopping customer behavior. The retail, financial, consumer, and food and beverage industries drive the demand for loyalty services, digital rewards programs, analytics, and business intel used for customization.

Mergers & Acquisitions

M&A activity regarding digital marketing and advertising agencies has high potential due to growth and high fragmentation within the industry. Traditional ad agencies and private equity firms target companies that offer solid growth opportunities. As digital advertising revenues increase, so does the global demand for more online content in an ever-connected world. Digital capabilities and relationships are a priority for traditional agencies and their holding companies as they have a need to grow their digital revenue and expand their portfolios.

Thinking About Selling?

At Benchmark International, our award-winning team of M&A experts would love to hear from you and discuss how we can help you grow your business or sell your company for maximum value. Feel free to contact us at your convenience.

READ MORE >>

The Value Of An M&A Advisory Firm

When selling a lower to middle-market company, enlisting the guidance of an experienced mergers and acquisitions advisory firm can make a world of difference in the transaction’s outcome for several important reasons.

  • Having an M&A advisory firm act as an intermediary in a transaction increases the chances that a deal will be closed successfully. In fact, some buyers are willing to pay more for a business when an M&A firm is involved because they know there is a higher chance of closing.

According to a large study by the University of Alabama, private sellers receive between 6% and 25% higher acquisition premiums when they retain M&A advisors.

  • When you work with an M&A firm, it demonstrates to buyers that you are truly committed to the sale process and that your valuation expectations have been properly vetted. 
  • Having an M&A team in your corner will save you a great deal of time and effort regarding complicated tasks such as due diligence, company valuation, and data management. Even simple transactions require a burdensome amount of due diligence regarding real estate, software, employment, benefits, accounting and legal issues. There are also many standard pre-closing tasks that must be completed in a timely manner and can affect the success of a transaction.
  • M&A experts already know all the possible deal breakers and how to avoid them, giving you a major advantage in the market and protecting you from pitfalls.

Ready to explore your exit and growth options?

 

  • You will attract a greater number of serious buyers because you have access to the M&A firm’s global connections. And when you have drawn the interest of several buyers, you are more likely to get more for your company. If you sell your business on your own, experienced buyers know they can get away with offering you a lower price.
  • A truly effective M&A firm will use proprietary technologies and databases to review the market for matches regarding the size, industry and geography of your company.
  • Experienced M&A advisors know how to protect your confidentiality through the entire process. Confidentiality is critical because if information is leaked, it can not only derail a sale but also have a negative effect on crafting another potential deal.
  • A quality M&A team will have the capability to build a strong marketing strategy and create materials to attract suitable and quality acquirers for your company.
  • Another important task that an M&A firm will handle is third-party research. Buyers will immediately seek out negative information on a company that is on the market. A good M&A team will create a strategy to mitigate any potential negative impacts.
  • The right M&A advisory firm will take the time to fully understand your objectives and aspirations and will be committed to making sure that the process is tailored to your needs and that you find the right fit. They will also work to keep eager buyers at arm’s length when you need more time to make decisions, understanding that selling your company is an emotional task and you deserve support and empathy along the way.

Work With the Best

Reach out to our world-renowned M&A experts at Benchmark International to discuss how we can help your business achieve its ultimate sale potential. You can trust that our objectives are aligned with yours, and that we will provide you with the most amount of information possible while protecting you from making rushed decisions. Simply put, your best interests are our best interests.

READ MORE >>

Why You Should Spend More Time Thinking About Selling Your Company

Selling your company might be the farthest thing from your mind right now. But there are several reasons that thinking about selling now can make all the difference later, especially for lower and middle-market business owners. Proper exit planning can take years, so getting started increases your chances of selling for maximum value. It also puts you on the right track to fulfilling your aspirations and realizing your vision for the future.

1. Start Making Your Business More Valuable

Whether you want to sell this year or five years from now, you will need to take every step necessary to drive up your company valuation prior to a sale. An endeavor this important is not going to be accomplished overnight. Consider what you can do to improve the business and make it more attractive to buyers. Implement a well-defined strategy to create growth and improve profitability. Hone your marketing plan. Think about how you can make the company more efficient. An experienced M&A advisor can help you craft the right tactics to accomplish all of these goals and get your exit plan moving in the right direction.     

2. Know Your Number

Part of a smart exit plan includes knowing what your business is actually worth and at what price you will be comfortable selling it. This means you will need to know how your company stacks up in the current market in your industry and what the market conditions are expected to be in the next several years based on expert M&A knowledge and analysis.

3. Know Your Buyer

Not all buyers are the same. They can be financial, strategic, or even internal. If you take the time to figure out the right kind of investor for your company, you can spend your time and energy taking the steps to maximize the business’s value based on that type of buyer. For a financial buyer, you will need to focus on cash flow, revenues, and management. For a strategic buyer, you will want to concentrate on profits, innovation, market share, and brand strength. Finally, an internal buyer will look for things such as strong financials and balance sheets, a positive culture, and product diversity. An experienced M&A advisory firm can help you identify the right buyer for you, and give you exclusive access to prospective buyers that you will not find on your own.

 

Ready to explore your exit and growth options?

 

4. Get Your Records in Order

When the time comes to put your company on the market, you are going to need to have all of the proper documentation organized and accounted for. This includes all of the financial documentation, tax records, profit and loss statements, legal contracts and client records from the past few years. Buyers tend to place more value on businesses that can provide comprehensive records that paint the most accurate picture of the company’s health and future potential. You will want to be honest in this process. Do not try to fudge the numbers or hide issues. The buyer’s due diligence team is going to uncover anything that you attempt to cover up, which can lower the purchase price. Disclose the truth from the beginning and you’ll be in a better position to overcome any challenges, plus, the buyer will be more confident in acquiring your business.  

5. Keep Your Eye on the Business

Running a company is already a massive responsibility, and the process of selling a company is a significant undertaking all of its own. You need to remain focused on your daily operations without being so distracted by a sale that it has a negative impact on the business. Enlisting the help of M&A deal professionals to handle the sale can take the pressure off of you and keep your business on course. Remember, the process can take several years, and that is quite a bit of time for you to be unnecessarily preoccupied, putting the health of your company at stake. 

6. Have a Plan

You have worked so hard to build your business and you have earned the right to dream about your future. To get there, you have to ask yourself the right questions. Are you ready to retire? What is your target retirement age? Do you want to purchase or get involved with another business? What level of lifestyle will you need to maintain? Will someone in your family be taking the reins? Do you want to retain a small level of involvement? If you know what you expect from your future, you will be less likely to get cold feet at selling time. It’s also important that you appear confident about a sale so that buyers do not feel that you cannot be taken seriously. Knowing your vision for the future is a critical step in making your dreams a reality. As Warren Buffet once said, “Someone is sitting in the shade today because someone planted a tree a long time ago.”

Let’s Discuss Your Options

If you are thinking about selling your company, now is the time to start considering your options regarding timing, exit planning, and market value. Contact our M&A geniuses and let Benchmark International help you map out a future that is in the best interest of you, your family, and your company.

READ MORE >>

Tips For Transitioning A Company's Leadership

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.

 

Ready to explore your exit and growth options?



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.

READ MORE >>

2020 Outlook For The Global Energy Sector

The global energy mix is comprised of the oil, liquefied natural gas (LNG), coal, renewable energy, and electricity sectors. The landscape of this industry has seen a great deal of change over the years, and is primed for even more change in the future. Five years ago, fossil fuels accounted for 82 percent of global primary energy. This number is targeted to decline, with large growth in the natural gas and renewable energy sectors, especially wind and solar. However, a rising global population and economic growth make it challenging for renewables to keep up with demand, meaning that fossil fuels will remain a primary source as energy demand will rise one percent each year over the next 20 years.

Oil & Gas

Oil output is projected to remain on the rise in the next 10 years, with 85 percent of the production increase coming from the United States. At the same time, oil demand is expected to slow after 2025 due to better fuel efficiency and more electric vehicles, according to a report by the International Energy Agency (IEA).

In 2020, shale production in the U.S. is expected to continue to grow even as growth is slowing due to reduced capital expenditures from drillers. Additionally, exports of U.S oil and LNG are forecasted to grow as infrastructure capacity increases.

As the number of U.S. oil and gas companies in distress grows amid limited funding options, there is an opportunity for smaller firms to be acquired by bigger firms, or for them to merge in order to scale operations and reduce costs. M&A strategies may be more appealing to these companies than the option of restructuring through bankruptcy.

Oil and gas prices should remain range-bound this year as production increases from non-OPEC nations such as the U.S., Brazil, and Norway.

Internationally, oil markets will be affected by the ongoing trade negotiations between the U.S. and China, as well as the result of the March expiration of the OPEC+ pledge between OPEC and non-OPEC partners for deeper production cuts.

 

Ready to explore your exit and growth options?

 

Coal

The coal industry continues to experience challenges, including declining demand, bankruptcies, climate concerns, ownership changes, and mine closures. Coal production in the U.S. is expected to decline, along with the amount of energy production that relies on coal, which is at its lowest level in more than 40 years. In contrast to the struggling coal industry, increased growth is forecasted in the renewable energy sector. According to the IEA, market share for coal will fall from 38 percent today to 25 percent in 2040, largely due to a surge in more affordable solar power.

Renewable Energy

The outlook for the renewable energy industry in 2020 is quite favorable. The sector has already seen unprecedented growth propelled by increased demand, competitive costs, innovation, and the uniting of industry forces. Renewables are likely to become a preferred provider in electricity markets this year, as customers are more concerned with saving money and addressing climate change issues. Last year, renewable energy eclipsed coal for the first time ever in the United States, with wind and solar energy accounting for about half of renewable power generation. Companies that are poised to innovate and jump on new opportunities will be in a position to thrive in this new growth phase.

Some key points regarding this sector include the following:

  • China has been the largest investor in renewable energy capacity, committing $758 billion over the past decade. The U.S. follows at $356 billion, with Japan third at $202 billion.
  • Lower prices for renewable sources and battery storage have helped to drive growth in this industry, making wind and solar more competitive with traditional energy sources.
  • Several utility companies have already outlined goals for de-carbonization and more are expected to follow suit.
  • Renewable energy will need to be scaled up significantly in order to meet the goals outlined in the Paris Agreement.
  • In 2019, 11 of the 28 countries in the European Union already met their 2020 renewable energy targets, but there has been a gradual slowing of the rate of renewable use because costs have fallen and less investment is needed to install the same level of power capacity.
  • Grid modernization projects will also contribute to growth, as renewable microgrids are becoming more popular solutions for increased efficiency.
  • In the U.S., the Production Tax Credit has been extended for 2020. However, the amount of the Solar Investment Tax Credit will be reduced from 30 percent to 26 percent. Both of these credits have been important drivers of growth in this market.

 Electricity

Power and utility companies will face several priorities and challenges in 2020, but with a balance of careful strategic planning, digital innovation, and risk management, the industry can sustain growth throughout the year.

  • Clean energy remains a major priority, as many power and utility companies are setting their own clean energy goals to help customers make the transition.
  • Cyber security is an increasing concern, with vulnerabilities being a clear and present danger.
  • Preparation and response for natural disasters will be more significant as major storms have become more common around the world.
  • Providers will continue to be more focused on improving the customer experience.

Let’s Discuss Your Options

Please contact us at Benchmark International to talk about how we can help you grow your business or formulate a solid exit plan for the future, no matter what industry in which your company operates. We look forward to hearing from you.

READ MORE >>

Do You Want To Be Featured At The Savca 2020 Southern Africa Industry Conference?

Get Your Business Showcased At The Local Industry's 'Must Attend' Event

Benchmark International is pleased to announce that we will be contributing material to the attendees’ welcome pack at the SAVCA Southern Africa Industry Conference from February 25th-27th at the Spier Wine Farm.

In 2019, the SAVCA Conference attracted 437 Private Equity delegates and 195 Venture Capital delegates who represented local and international institutional investors, fund managers, advisors policy makers and entrepreneurs.

 

Learn More About the SAVCA Southern Africa Industry Conference Here

Would you like to be showcased to these industry leaders with strong, acquisitive appetites? We will be including a limited number of client investment profiles in the flyers which will form part of the delegate bags. Contact us now to ensure your business is included.

Schedule A Call

READ MORE >>

2020 Global Outlook For The Media Industry

The New Media World

The media industry has undergone several major transformations in the Internet age. Magazines and newspapers have been disrupted by digital publications. News consumption has been significantly altered by the existence of social media. Broadcast radio is now challenged by satellite radio, podcasting, and both free and fee-based music-streaming services. Television continues to undergo sweeping changes that come with more and more people cutting the cord, smart TVs, and the inundation of subscription streaming platforms on a variety of scales. And all of these sector trends affect how advertising dollars are being spent and how audiences are being targeted. 2020 proves to be no different, as these trends will continue to reshape the industry.

Streaming Wars

Companies and TV networks are faced with the task of inventing new offerings for delivering content in ways that facilitate direct relationships with consumers. New bundling and tiered options will be more in demand as viewers grow frustrated with having to manage various streaming options amid a crowded sea of subscription services that go beyond Netflix and Amazon Prime. Individual TV networks are offering their own on-demand services (such as HBO Now), and big industry players are getting in the game with their own digital networks such as Disney+. And the availability of tiered streaming platforms such as BritBox and Sling TV continues to grow. The major streaming networks will be faced with how to leverage an influx of competition. These options will also need to address how advertising is delivered regarding ad-free options and ad-supported video.

Podcast Popularity

There are currently more than 700,000 active podcasts, and research shows that the consumer appetite for podcasts continues to thrive. Podcasts are going to be seen as a new vehicle for content and will garner more advertising money, with predictions that the spending amount will surpass $1 billion by the end of 2020.

 

Ready to explore your exit and growth options?

 

For the Love of Data

As media companies compete for more audiences, data will become more imperative to achieving the goals of these companies. This means that the data platforms used by media companies and advertising agencies are going to become paramount. The gathering and processing of the third-party data needed to create more meaningful and personalized experiences and services for consumers will be essential to the ability to remain competitive.

User-Generated Content

In today’s social-media-driven world, users are able to generate their own content through various mobile applications such as SnapChat and TikTok. As more of these types of platforms emerge, larger parent companies (such as the Facebooks and Googles of the world) may be inclined to acquire them to diversify their offerings and expand their user bases.

M&A Opportunity

As media companies continue to need more diverse content and content delivery options, it creates significant opportunities for mergers and acquisitions. This M&A activity is expected to be on smaller scales than the megadeals that occurred in the last couple of years. This is because there are fewer opportunities for the major networks to consolidate, especially as there is a growing over-supply of third-party streaming applications and the content rights are being withdrawn. 

Contact Us

If you think that it is time to sell or grow your company, or even start your exit planning strategy, please reach out to our experts at Benchmark International. We look forward to taking your future to the next level.

READ MORE >>

Why 2020 Is The Right Time To Transition A Business

When determining the best time to sell or exit a company, unfortunately nobody has a crystal ball. However, there are several circumstances that should be considered, from fundamental business positions to external influential factors.

The state of the M&A market is among the most significant factors in a decision to sell a business. The market held steady from 2015 to 2017, and optimism skyrocketed in 2018. In 2019, the market dipped slightly but remained strong in deal volume and value, with a wave of multi-billion-dollar megadeals being completed.

While some expect a modest drop in global M&A value in 2020 due to what is perceived as inevitable economic correction after a lengthy, seemingly unstoppable up-cycle, many experts predict that little change is expected due to sustained economic growth, low unemployment, low inflation, high consumer confidence, and strong corporate earnings. Companies still have a need to diversify their portfolios, acquire talent, and innovate technologies in order to stay competitive—all needs that are best addressed through M&A. Also, plenty of capital is available and private equity has amassed the dry powder that can drive larger deals, even in the event of an economic downturn.

Additionally, there is potential for more aggressive M&A strategies earlier in the year to get ahead of a potential downturn and downgrade in valuations. Companies that have proven to perform well during times of recession may be especially appealing targets.

The 2020 U.S. Election

Regarding a potential downturn, one of the major factors that play into the state of this year’s M&A market is the upcoming November 2020 presidential election in the United States and the issue of impeachment of the current president. History indicates that economies typically perform well in election years. However, as uncertainty looms contingent upon the results of the election when it comes to topics such as trade and regulation, acquirers may become hesitant and the M&A market could lose momentum leading up to November, with the market remaining slow in the months following, depending on the election results.

Another matter affected by the election results is capital gains taxes, which is a matter of concern if you are selling a company because how much profit you yield from the sale will be taxable. Some presidential candidates are proposing higher taxation of the highest-income taxpayers’ accrued wealth and income, and this includes capital gains. Most candidates’ plans would tax capital gains at ordinary income rates, with just the very top marginal tax rates varying at incomes of more than $488,850.

The closer the election nears, the more every single day counts. If you hope to sell, the sooner you initiate the process, the better, as most M&A deals take several months.

Ready to explore your exit and growth options?

Brexit

As of January 31, 2020, the United Kingdom is officially no longer part of the European Union, but a second round of negotiations will continue with the goal of reaching a deal by the end of 2020. With lessened political uncertainty now that an initial Brexit deal has been made, there is heightened confidence in deal-making activity. The inability to make a second deal by the end of the year will mean higher costs and barriers to trade.

The Brexit situation is affecting changes to M&A strategies. M&A could be used to secure an operational presence in the EU to maintain access to European markets. M&A could also facilitate access to markets outside the EU. Additionally, some companies could be facing new pressures that can directly impact share prices.  

The Boomer Retirement Wave

While it seems as though we have been talking about it for years, the Baby Boomer generation remains a factor in 2020.

According To Pew Research Center population data, 10,000 Baby Boomers will turn 65 on each day of this year.

In the U.S. alone, Baby Boomers own 2.34 million small businesses, and employ more than 25 million people. This aging ownership pool points to a flood of M&A activity in the lower and middle markets this year, especially in certain sectors such as those that offer professional services.

As this population retires, there will be an increased need for consolidation, succession planning, and exit planning. If Boomers do not properly plan for these scenarios, it could result in an economic crisis that in turn affects millions of jobs. Also, most of these business owners have the majority of their net worth tied up in their company. This means that if the company should lose value, so does the owner’s ability to retire.

The unfortunate reality is that the majority (75%) of owners of small to mid-sized businesses choose to procrastinate and do not have a plan in place. If you are a part of this generation, you should most certainly already have your plans for the future underway. Even if you are not a Boomer and are considering selling, this is the time to get ahead of the massive wave of businesses that are expected to hit the market this year.    

Are You Ready to Sell?

If you are considering selling your business, we encourage you to enlist the expert M&A guidance of Benchmark International’s team to create your growth strategy, exit strategy, or company sale for maximum value. The time to start planning is now.

READ MORE >>

2020 Global IT Industry Outlook

The global Information Technology industry encompasses the sectors of hardware, software and services, telecom, and emerging tech including ‘as-a-service’ solutions under the umbrella of the Internet of Things (IoT) and automating technologies.

 The global IT industry is projected to reach $5.2 trillion in 2020, with global spending growing 3.7%

As the world continues to be more digitally connected and industries become more automated, technology will remain a massively growing market in the beginning of the new decade, especially as companies focus less on cost reduction and more on innovation.

The United States is the world’s largest tech market, accounting for one-third of the total market, and exceeding the gross domestic product of most other industries. Although the US market is so large, the lion’s share of tech spending actually happens outside of the US (68%) and is made by enterprise or government entities. Western Europe is a major contributor in the global tech market, and China is also a significant player with focuses in robotics, infrastructure, software, and services.

 

Ready to explore your exit and growth options?

 

Forecasted IT Spending

In 2020, IT spending budgets will be largely driven by the needs to upgrade outdated infrastructure, address security issues, and accommodate growth. The amount of spending and the mix of services will vary by company size.

  • Smaller businesses are expected to spend more on hardware such as servers and laptops.
  • Mid-size companies will be spending more on mobile devices.
  • Larger corporations will spend more on managed infrastructure IT services such as power and climate solutions.

For software spending specifically, small businesses will focus their spending on operating systems. Mid-size companies will have a larger budget for productivity software and business support applications. Large enterprises will be spending more of their money on virtualization, database management, and communications software. Cloud services and recovery software will represent major budget allocations in the coming year and cloud spend will vary by company size.

Cloud Security

With the increasing popularity of cloud-based software and services and hybrid cloud solutions comes the increasing concern regarding cloud security. This is further reinforced by an ongoing rise in cyber attacks and data breaches. Cloud-based security solutions will remain a growing need across several sectors, especially in highly regulated ones such as finance and government. The global cloud security market was anticipated to garner $8.9 billion by the start of 2020. This need will create more opportunities for companies, entrepreneurs and investors.

 

Feel like it's a good time to sell?

 

The Year of 5G

The highly anticipated 5G technology will see a much more momentous rollout in 2020, in contrast to the lackluster emergence in 2019. Hundreds of millions of 5G-enabled smartphones are expected to ship in 2020. 5G will deliver significantly high speeds and remarkable data capacity to expand the financial possibilities for businesses. It is able to support billions of connected devices across sectors, allow new innovation for the IoT, Artificial Intelligence, and Virtual Reality. It will also enable a new world of autonomous vehicles and smart cities through a fully connected society, shattering boundaries to create a scalable global marketplace through unified technologies. Businesses will need to be prepared with how this new technology is going to dramatically alter the possibilities of the cloud and the need for virtualization-based networks as opposed to fixed-function equipment. While it is not going to happen overnight, 5G technology will grow increasingly more available throughout 2020, changing the availability of certain devices and transforming industrial possibilities.

Edge Computing

Edge computing is not a new concept, as it has existed for years. However, the value opportunity that it represents across industries is enormous. 2020 is anticipated to be a highly emergent year for edge computing due to the availability of faster networking technologies such as 5G and analytic capabilities in smaller devices.

Edge computing allows data processing to be done physically closer to where the data is generated (the edge of the network) rather than at a massive data processing center, which in turn reduces latency and processes the data much faster. This opens up countless new opportunities. Additionally, this technology offers several benefits for businesses, such as reduced costs, improved energy efficiencies, predictive maintenance, increased reliability, smart manufacturing, and security enhancements.

Let’s Talk Soon

At Benchmark International, our team of M&A advisors is ready to help you plan the next steps for you and your company. Whether it is selling your business, creating an exit strategy, seeking investor assistance, or finding ways to create growth, we are here to work on your terms to help you make your future as bright as possible.

READ MORE >>

14 Common Misconceptions About Selling A Business and Engaging an M&A Firm

1. “I can conduct the sale myself.”
You could. But you are likely to get a much better deal if you have the guidance of an M&A professional on your side. Not to mention, you are going to have far less of a headache if you do not take on this complex process on your own. It’s going to take a good bit of time and is going to involve meticulous details. The help of an M&A expert also allows you to remain focused on running your business instead of getting caught up in the sale process and being overwhelmed by trying to juggle both, just to get a smaller profit.

2. “I already know my buyer.”
You know your business better than anyone, so it is easy to assume that you will know your perfect buyer. But it is a competitive world and there are many types of buyers that could be a great fit. Fixating on one type of buyer limits your options. Exploring all of your prospects will allow you to maximize your sale potential. This includes buyers that may not even be in your same industry. You are more likely to find the right buyer with the help of an M&A firm that has global connections and vast experience brokering these types of deals.

3. “Selling will only take a few weeks.”
It is very rare that any merger or acquisition is completed quickly. It typically takes months to years to find the right buyer and iron out the details of the sale. Six months is a common estimated timeframe for small to mid-sized businesses.

 

Feeling unfulfilled? Explore your options...

 

4. “Asking price will be the purchase price.”
These are not the same thing. Following negotiations, it is common for the sale price to be lower than the asking price. A qualified M&A advisor can determine the fair market value of your business, help to maximize this value, arrange a better deal, and manage your expectations regarding the transaction.

5. “A buyer's financing is not my problem.”
A buyer's financing should surely concern you because they cannot buy your company without the capital needed to do so. You can play a role in moving the process along by boosting lender confidence through your testament as to how the business can continue to thrive under new ownership.

6. “I already have the advisors I need.”
As a business owner, you have skillful attorneys and accountants on your side that deserve credit for the fine work that they do in their areas of expertise. But it is unlikely that they are experienced in conducting complicated M&A deals. Even if they have a small level of experience with M&A, it probably is not enough to ensure that you get the best deal possible. Remember that selling your company is a monumental one-time deal that will impact the rest of your life. Consider how much you really want to risk your life’s work in the hands of someone who is not a consummate M&A expert.

7. “Next year, I can sell for more.
Markets can be extremely unpredictable, especially in certain sectors. While timing is important to a sale, it is possible to wait too long and miss out on your best window of opportunity. Working with M&A professionals can help you make better decisions based on reliable data and knowledge, best determining when you should sell.

8. “My business is entirely different.”
It’s not out of the ordinary for a business owner to feel that their company is worth more than it actually is simply because of their emotional connection to it. While most businesses do have their own unique aspects, the reality is that unicorns are rare. You are better off to keep your expectations down to earth, because your business is likely not immune to middle-market norms.

9. “Selling means getting what I want.”
You deserve a deal that delivers on your goals for your future. But remember that a sale is going to have to work for both sides—otherwise you might as well not even consider selling. Many buyers are savvy and recognize when a seller is going to be unreasonable. The best way to fulfill your aspirations is to work with an M&A advisor that knows how to communicate with buyers and negotiate on your behalf while being mindful of how to make the deal enticing for them.

 

Ready to explore your exit and growth options?

10. “I can wait to sell when I am ready.”
If you are seeking disappointment, this is the attitude to have. Waiting until you feel ready is a major pitfall. There are several factors regarding the economy, your industry, and the state of your business that must be considered into the timing of a sale. You might finally be ready, but you may not get what you could have if you went to market at a more suitable time. If you plan to sell eventually, the smart move is to start preparing your business sooner rather than later.

11. “Things are going great. So why sell now?”
Because when your business is trending upward, you are in a much more advantageous position to sell. You are more likely to see increased competition to buy and higher company valuations, and you will be under less pressure to accept any old offer.

12. “My company is ready to sell.”
Properly preparing a business to be taken to market takes quite a bit of work, time and energy. The level of detail that a business owner puts into compiling finances and business records, increasing marketability, planning for the transition, and crafting an exit strategy, directly impacts the salability of a company. If these matters are not in order, your company is not ready to sell.

13. “I must sell 100 percent of my business.”
There are some buyers that are content to providing capital for a minority ownership stake. This type of deal can give you capital to put back into the business and facilitate growth while you still remain the owner. Working with an M&A advisor can help you identify these buyers.

14. “Negotiating is over once I sign the LOI.”
Signing the letter of intent (LOI) is very important, but negotiations do not end there. There will be comprehensive due diligence leading up to the drafting of the purchase agreement. Negotiations continue until the purchase agreement is signed.

Let’s Talk
If you are considering selling your company and enlisting the help of passionate M&A experts like ours at Benchmark International, we are ready to become your partner in success

READ MORE >>

5 Qualities The Best People In The M&A Industry Tend To Have

1) Discretion

Privacy and confidentiality are absolutely essential to any M&A deal. Anyone handling or involved with the sale of a business must be trusted implicitly to maintain discretion around all details of the business and any sensitive materials, including intellectual property.

Discretion is also important to ensuring that both employees and customers do not hear that the company is for sale before the intended timing. This can result in unnecessary panic and the loss of clients and valued talent. Sellers should seek out an M&A advisory team that has an established reputation of trustworthiness in such delicate matters. 

2) Passion

The best people in the M&A industry do not just like what they do—they absolutely love it. When you love what you are doing, it is easy to be truly dedicated and passionate about it. That kind of passion translates into the ability to deliver on the best interests of the seller and arrange a deal that helps them fulfill their aspirations for their business and their future. When your entrusted M&A expert is passionate about delivering life-changing choices for you, it will be evident in their actions and the options that they bring to you.

 

Ready to explore your exit and growth options?

 

3) Analytical Thinking

M&A transactions are very complex and require assessment of a great deal of data and financials, knowledge of valuation techniques, the ability to market a company, and many other aspects. Navigating through so many details with precision is crucial to any lucrative transaction. A highly analytical mind is needed in order to process massive amounts of information and develop an accurate and error-free evaluation in every step of the process.

4) Experience-based Vision

In order to sell or grow a company through M&A, there must be a clear understanding of the seller’s industry, the market, the competition, and applicable geographic regions and their related nuances. An effective M&A strategy for maximum success comes with pertinent experience and the ability to define a clear path to creating value and reaching the best possible outcome. A quality M&A partner will have a proven track record with all of these aspects. 

5) Compassion

To be truly successful as an M&A advisor, there should be a compassionate understanding of the client being served. Business owners have worked so hard through their entire lives to build their companies and selling is a very personal, emotional journey. They are going to have fears and doubts that need to be mitigated. Empathy during the process is key to fully understanding a seller’s motivation and goals for their future. It also facilitates better communication and the ability to bring people together. A truly good M&A team will never force a seller into a deal with which they are not 100% comfortable. This requires a willingness to see everything from the seller’s perspective throughout the entire journey.

Contact Us

If you are ready to engage in a deal to sell or grow your company, please reach out to our esteemed experts at Benchmark International. As a passionate and compassionate M&A team, we take a personal stake in formulating the ideal path to achieving your goals and maximizing the value of your business.

READ MORE >>

The Biggest Trends In M&A This Year

As we approach the end of 2019, it’s a great time to take a look back at trends in mergers and acquisitions activity that emerged around the world throughout the year. Overall, there was an increase in the number of reported M&A transactions and total deal value worldwide.

Four industries experienced significant increases in deal value from the first half of 2018:

  • Industrial (22.6%)
  • Energy and power (11.2%)
  • Health care (6.1%)
  • High tech (2.8%)

New M&A Motivation

A growing trend that is permeating all industries is the deal activity that is occurring as a result of companies needing to integrate technology into their offerings, altering the business landscape. Companies are being compelled to work with a much wider scope of partners to accomplish their tech-enabled goals. For this reason, we are seeing more non-traditional partnerships with different depths of cross-industry integration. These nontraditional deals include joint ventures and alliances, corporate venture capital investments, and the purchase of minority stakes. An example of these types of alliances in 2019 include Uber Advanced Technologies’ (their self-driving car unit) raising of $1 billion in funds from Toyota, Softbank’s Vision Fund and auto components manufacturer Denso.

First Quarter

During the first quarter of 2019, we saw relatively few cross-border megadeals. This could be because of fluctuating geopolitical factors such as increased trade tension between the United States and China. Amid this year’s early cross-border megadeals was the acquisition of Canadian company Goldcorp by Newmont Mining Corporation, a U.S. company. The deal was a stock-for-stock transaction valued at $10 billion.

In the middle market, M&A activity remained robust through the first quarter. Transaction volume was up slightly over the previous year’s period. Private equity funding and a high level of strategic buyer activity continued to drive deals significantly. Foreign buyer activity increased to account for almost 16% of middle-market deals. 

 

Ready to explore your exit and growth options?

 

Second Quarter

Megadeals heated up in the second quarter of 2019, especially in North America. Of the 21 megadeals announced in the first half of 2019, the highest in value included:

  • AbbVie’s $62 billion buyout of Allergan
  • Fidelity National Information Services $35 billion purchase of Worldpay
  • Saudi Aramco’s $69 billion majority-stake purchase of petrochemicals group Sabic
  • Bristol-Myers Squibb’s $74 billion acquisition of rival Celgene
  • The $121 billion merger of United Technologies and Raytheon

The second quarter also saw an increase in deal volume in the middle market, up from the same period in 2018. Foreign buyer activity accounted for almost 14% of middle-market deals. 

Third Quarter

By the third quarter, global M&A activity dropped 16% year-on-year to $729 billion, the lowest quarterly volume since 2016.

In Europe, M&A activity reached $249 billion, up more than 45% over the same third-quarter time period in 2018. With a 6.4% share of global M&A and $177 billion worth of transactions, Britain was Europe’s biggest M&A market in 2019. This is due in part to the uncertainty regarding Brexit turning companies into bargain acquisition targets. Additionally, Ireland showed strong M&A activity through the first half of 2019 with deal value up 24% compared with the previous year, while later slightly slowing amid economic uncertainty.

Third-quarter megadeals in the U.S. included:

  • The $24.6 billion merger of drug giant Pfizer’s off-patent branded drugs business with Mylan NV
  • Media companies CBS Corp. and Viacom Inc.’s $20 billion merger in an all-stock deal

In the middle market, global third-quarter deals closed totaled $600 billion, remaining on pace with the first three quarters of 2018. The largest of these deals included Norwegian company Equinor ASA’s $965 million acquisition of U.S.-based Caesar Tonga Oil Field.

 

Feeling unfulfilled? Explore your options...

 

High Tech M&A

The technology sector continued to be ripe for M&A transactions in 2019. However, we have witnessed a softening in tech M&A activity in the second half of the year. This could be due in part to enhanced scrutiny that tech companies are facing around issues of consumer privacy, regulations, and misuse of market power. Such scrutiny can be the source of some apprehension to invest in these types of businesses.

Among the notable mega tech deals of 2019 were:

  • Apple’s $1 billion purchase of Intel’s modem business
  • Google’s $2.6 billion acquisition of Looker
  • Nvidia’s $7 billion acquisition of Mellanox
  • Salesforce’s $15.7 billion acquisition of Tableau
  • Uber’s $31 billion purchase of their rival Careem

In the first half of 2019, the largest North American middle-market technology deals (each valued at $500 million) included:

  • JPMorgan’s acquisition of InstaMed
  • Envestnet, Inc.’s acquisition of PIEtech, Inc.
  • Kohlberg Kravis Roberts & Co. L.P. takeover of OneStream Software LLC

Globally, the largest middle-market technology deals included:

  • Canada Pension Plan Investment Board and Insight Venture Partners LLC’s acquisition of Switzerland’s Veeam Software AG
  • GEMS Education’s purchase of Ma’arif for Education & Training
  • TPG Capital/Insight Venture Partners’ buyout of Kaseya Limited

Is a Deal in Your Future?

If you feel the time is right to sell or grow your business, our team of M&A advisors at Benchmark International would love to hear from you. We look forward to partnering in your success and making extraordinary things happen for you and your company.

READ MORE >>

Common Pitfalls Owners Face When Selling A Business

Not Knowing the Value of Your Business

As important as it is to know the value of your own business, the reality is that 65 percent of business owners do not know their company worth. Valuation is a crucial step in taking your business to market. Simply put, you cannot negotiate the best selling price for your company if you do not know what it is worth.

Selling at the Wrong Time

Market timing is important to a business acquisition because it can directly affect a company’s value based on competition, demand and economic factors. You do not want to rush to sell, but you also do not want to wait too long. Finding this delicate balance is crucial to maximizing your company value prior to your exit. Professional M&A experts can assist you in properly determining the right time for you to sell your business because they have a strong understanding of the markets and have exclusive access to opportunities that can play into the timing.

Lack of Preparation
The most frequent mistake made by business owners in sale is not properly preparing for it. Before taking a company to market, there are several factors that must be addressed. These include detailed documentation regarding finances and profitability, contracts, personnel, exit planning, and other issues that will affect both value and salability. Proper preparation can take anywhere from months to years, depending on the size and complexity of your business. It is smart to seek the guidance of a professional M&A advisor to help you with these details to ensure that nothing is overlooked. 

 

Ready to explore your exit and growth options?

 

Misunderstanding Future Cash Flow

As a business owner, it is easy to focus on liquidity as a result of a deal and fail to consider how timing and proceeds will be factored into your retirement plan and how it conforms to your standard of living.

Studies show that 70 percent of business owners do not know what after-tax income they need to support their lifestyle. 

You need to have a clear and detailed understanding of your risk and liquidity profile to help you discern if and when you should sell your business. This includes the calculation of your net worth by comparing your financial assets with your financial liabilities, sources of cash flow, and income tax liability.

Not Having an Exit Plan

A staggering 85 percent of business owners have no exit strategy—something that every business owner absolutely should have in place. 

Exit planning is extremely important for several reasons. A solid exit plan will help you outline your goals for the future of your business as well as your financial retirement goals. It also helps you determine a timeframe for when you want to sell, can enhance the value of the company, gives you a blueprint for success, and protects you in the event of unforeseen circumstances.

Misrepresentation
Of course you want to portray your company in the best light, but you must be careful to not misrepresent it to prospective buyers. Avoid the urge to inflate numbers, exaggerate projections or try to hide issues. Providing inaccurate information can blow a sale and erode your reputation with other potential buyers, derailing any possibility of a deal. Your honesty and transparency will also earn the trust of investors, increasing the likelihood of a sale.

 

Feeling unfulfilled? Explore your options...

 

Breaking Confidentiality
When selling a business, even if only considering it, it is important to carefully handle who knows what—and when. It will not be a good situation if your staff hears about the sale from anyone other than you or your leadership team and they descend into a panic. You also do not want your customers or clients finding out and jumping ship. Another reason to be careful with confidentiality is because it can affect the sale if a buyer feels that you cannot be trusted or that they are getting damaged goods.

Not Addressing the Transition
Selling a business is a major undertaking and it is easy to get so caught up in the details of the sale that you overlook the transition process that will need to happen after the deal is closed. You will need to work with the acquirer to determine if you need to stay on with the company for a short time to help move the transition along smoothly, or if it will be an immediate exit. There are also other factors that will play into the transition, including how it will affect the management team and the staff. It is important to make plans for the transition completely clear to avoid confusion, frustration and fear of the unknown.  

Is it Time to Sell?

Enlist the expertise of the M&A advisors at Benchmark International as your partners in achieving the highest standards for the sale of your company. Our team will make sure you avoid pitfalls that you are not even aware may exist, and we are dedicated to arranging the very best deal with your goals and best interests as our top priority every step of the way.

READ MORE >>
1 2
»

    Subscribe to Email Updates

    Recent Posts

    Follow Us on Twitter

    Archive

    see all