Insights

Disclosure is at your discretion. Naturally, there will be some individuals whose involvement in the process will be critical, but they don’t need to be involved in the preliminary stages. More often than not, will be team members that the acquirer will want to retain post-transaction.

There doesn’t have to be a negative impact. Indeed, it’s quite likely that many of your employees will be asked to stay on to ensure the continuity and continued success of the business. Often, employed family members and key team members are the ones who provide continuity during the transition period. Depending on their positions, responsibilities and desire to remain with the company, you can negotiate their stay with an employment contract. These are all part of the conversations to be held with the acquirer while conducting due diligence. Through discussions and the offering documents (CIM or CIP), the importance and relevance of this issue will be clearly communicated to the acquirer.

Our founder David Mahmood believed that those who plan ahead are more successful than those who don’t. Or, stated another way, it’s better to be proactive than reactive. You should know what your options are and continue evaluating the marketplace for a potential sale at all times. That’s what the corporate development teams of large corporations do for their companies. That’s the service we provide to the lower middle market. You don’t necessarily need to do a transaction to consult with an M&A specialist, but you should know your options. You don’t have to sell 100% and walk away. There are deal structures where you can take some chips off the table, reduce your risk, maintain some ownership but assign responsibility for managing the business to someone else. You can have the best of both worlds without all the financial responsibility if you find the right company to partner with.

We recommend that you have an M&A attorney on your side of the table once you begin to receive offer letters (also known as Letters of Interest, or LOI’s). Your attorney is an integral member of the overall transaction team who, like an M&A advisor, will save you time and money and prevent you from making potential mistakes in closing the deal.

Disclosure is at your discretion. Naturally, there will be some individuals whose involvement in the process will be critical, but they don’t need to be involved in the preliminary stages. More often than not, will be team members that the acquirer will want to retain post-transaction.

Our experienced professionals will take all the necessary steps to mitigate this risk and ensure that the transaction is managed with total and complete confidentiality until the sale is completed and our clients have approved the appropriate public announcement. Prior to the marketing phase of the transaction process, our M&A advisor will review with you the list of prospective buyers, which you will approve and/or edit prior to our contacting them. Additionally, our advisor will obtain a signed confidentiality agreement before any information is shared with a prospective investor.

There is no substitute for good financial records. Audited statements help, but are not required. Most acquirers will do their own financial analysis and, more than likely, prepare a Quality Of Earnings report (QOE) to satisfy their internal financial requirements.

There is indeed a heavy time demand on the front end of the transaction process. This is when we need to understand your company, inside and out. A sizeable amount of data and information is required in order to prepare a compelling CIM (Confidential Information Memorandum) or CIP (Confidential Investor Presentation) that we will utilize to generate interest and successfully market your firm. By engaging an experienced M&A advisor, company owners can keep their primary focus on running the business while the advisor manages the sale process. This is why we advise against a DIY approach to the sale process. An M&A advisor is already familiar with all the potential time-consuming impediments or deal breakers that a company may encounter during the sale process and can proactively address them before they become an issue.

There is no set timetable for any transaction. With today’s very detailed analysis, however, it is possible to complete a transaction within 12 to 18 months⎯with the caveat that no two transactions are ever alike. When we commit to taking a client to market, our focus is on speed, with an understanding that the required process and response time from all players inevitably affect the deal-closure timeline. Our bankers understand this and put together a well-organized schedule that our clients must adhere to in order to keep their deals on track for timely closure.

It will vary, anywhere from 2 to 5 years, if it’s necessary at all. Depending on the type of business and the acquirer, the current owner(s) may be asked to remain affiliated with the company in some capacity. In some cases, acquirers will want to retain the management structure, and will put employment agreements in place to secure the services of key personnel. Unless there is an immediate desire to separate from the company, the chance to remain engaged can be a great opportunity for the sellers. Remaining on as an employee or equity owner can provide sellers post-transaction upside by way of earn-outs, profit sharing and/or stock options. The banker managing the transaction will walk you through the various scenarios and provide comparisons of the offers received during the marketing phase of the transaction process.

We structure most transactions on a debt-free, cash-free basis, which calculates the company’s value as if it has no debt. This may provide you an opportunity to pull cash out of the company through its accounts, working capital and inventory.

Firms typically “trade” on a multiple of earnings. Although comprised of several factors, a multiple is specific to the industry, size of the company and projected growth. Additionally, a valuation will factor in the geographic location and/or customer concentration. A specific valuation of any given company can only be calculated after a review of its operations and financials.