Takeaway: A seller who is looking for capital and expertise to continue growing the business may want to consider being part of a roll-up. Creating value when acquiring and combining companies is not easy. In theory, the sum of the parts will be more valuable than each part individually. However, there needs to be some cohesion to a roll-up. Alternatively, you end up with a disjointed company that does not command a valuation premium, but rather should be discounted to its peers. How do financial buyers generate additional value when they combine companies? Here are some value creation techniques used in roll-ups. As a seller, you [...]
About Laura WrightThis author has not yet filled in any details.
So far Laura Wright has created 23 blog entries.
Takeaway: The customer experience is a vital part of the success of your business, so figuring out how to engage your employees to work the business like you would is important. About the Host Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs called Growth and Exit Planning that helps in exit planning, value building and financial management. About the Guest A driven entrepreneur [...]
Takeaway: We all have to exit our companies someday, but whether we do it well or poorly can be decided by some good planning. We understand that business owners are so busy addressing today’s economic challenges that they can overlook the critical task of exit planning. We also understand that, at some point, all owners exit their businesses. When that day arrives, owners want to exit on their terms, the most important of which are financial independenceand choosing the person or entity that will receive or buy the business. Designing a Good Exit Plan Designing a comprehensive exit plan — which is both based on your [...]
Where the Past and the Future Collide: Internal versus Tax Depreciation In previous articles, I have stated that all business valuations are forward looking. I still believe this is true. I also discussed the potential impact that the bonus depreciation provision of the Tax Cuts and Jobs Act can have on a business valuation by providing real tax dollar savings. Within these two topics lies a possible valuation minefield that can be easily overlooked. What happens if you are a new minority interest investor in a Company and you miss out on a big year of bonus depreciation? If the Company is a C [...]
When Distress Means Opportunity: The Value of Article 9 Re-organizations for Private Equity Investors and the impact to Seller Subordinated Debt. As a private equity investor group, subordinate debt is the single greatest challenge to the efficiency of any model -- whether that model involves investing in equity, debt or assets. Add business distress to that sub-debt complexity and executing a purchase/exit can become difficult and time-consuming at best. Unless you know how to apply Article 9 of the UCC code. Simply put, subordinate creditors create obstacles to closing, they pose risk, and they drain time and money, negatively impacting [...]
Wayfair – Where Are We Now? Since the U.S. Supreme Court decision in South Dakota v. Wayfair last June, there have been numerous questions raised regarding how this decision will impact businesses. The U.S. Supreme Court ruled that taxpayers no longer need an in-state physical presence to create sales tax nexus. States can now require an out-of-state seller to collect sales or use tax on sales to customers in that state, even though the seller lacks an in-state physical presence. Essentially, having in-state customers can be sufficient to trigger economic nexus. For additional background information, specifics of the case and the [...]
Ten Tips for Aspiring Intermediaries When I decided to get into this business at the old age of 28, my only advantage was a full head of brown hair, a youthful charisma, a sharp analytical mind and a strong desire to succeed. I had spent the prior 10 years in academia in undergraduate and graduate studies in engineering followed by a brief stint in teaching. I had absolutely no knowledge of business and finance, and very, very minimal experience in sales. Starting in 2006, I was also jumping into a pool as the water was draining out the bottom. In fact, [...]
EBITDA Engineering Before Selling a Business Takeaway: Take control of your financial statement by learning how accounting policies can positively impact EBITDA. EBITDA is a commonly used metric for the valuation of mid-market businesses. Now, the appropriateness of using EBITDA can be debated, but the fact is that most estimates of business value start with this number. So needless to say, increasing EBITDA will increase the value of a business. Most often, business owners of privately held companies are motivated to minimize taxes. They will try to expense as much as possible and even defer recording revenue to reduce taxable income. Business brokers or investment bankers will often normalize the results of a [...]
Can Your Clients Sell their C Corp Stock Tax Free? by Al Statz In some cases yes. Congress has long recognized that small businesses investment is an important driver of the U.S. economy. Back in 1993, to incentivize investors, they developed a rule that eliminates federal income tax on some (later revised to all) of the gain on the sale of certain C Corporation stock issued after August 10, 1993. As M&A advisors we should try to point out potential tax breaks to clients and in this article I’ll discuss Qualified Small Business Stock (or “QSBS”) from a business sale perspective. QSBS Requirements [...]
Understanding Return on Equity for Privately Owned Businesses I am a big fan of Robert Slee, an investment banker, author, and investor in the middle market. His most well-known book is Private Capital Markets: Valuation, Capitalization, and Transfer of Private Business Interests, and his teachings are centered around the following key fundamentals issues plaguing the lower middle market: Value creation occurs when returns on equity are greater than the cost of equity; 70% or so of private business owners are not increasing the market value of their firms; and Most business owners are not generating returns on equity investment greater than their company’s cost of equity capital. [...]