Background Representations and Warranties insurance (“R&W insurance”) helps secure investments and enhance returns. Concerns about known and unknown risks can prevent a deal from closing or leave buyers with unwanted liabilities, placing both sellers and buyers at risk of not realizing their desired goals. The use of this insurance can protect buyers from losses resulting from a breach of the seller’s or target company’s representations in a purchase agreement, thereby eliminating the need for a robust indemnity. It also allows sellers to walk away cleanly from a deal. Representations and Warranties insurance is a proven tool that can allow deal professionals [...]
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So far Laura Wright has created 37 blog entries.
Secrets of Market Multiples in Valuation Ever wondered why two seemingly similar companies sell at significantly different multiples? What are buyers considering in ostensibly comparable companies that cause sale price differences? Let's discuss five key secrets of market multiples: 1. Revenue/Earnings Growth Potential Buyers are willing to pay more for companies with high growth potential than companies perceived as having low growth potential. The reasons are those high-growth-potential companies: • create exceptional customer value; • exploit high-growth market segments; • are innovative; • have a strong brand identity; • create service differentiation; and • invest in the development and delivery of [...]
Why “One (Buyer) Is the Loneliest Number” You own a successful business that you’ve grown through the years. You’ve just recently thought about selling. Lo and behold, another business in your industry approaches you to see if you’d like to sell. What great timing and what an opportunity, right? Wrong! If you are serious about selling your business, you need to go to market and not settle for one buyer. If you focus on just one buyer, you’ll be going down a path with no leverage. Here are 4 reasons why you do not want to talk to only one buyer [...]
Due Diligence: Preparation Saves Time and Money When talking about selling a business, we talk a lot about a buyer doing their due diligence. What does that mean for the seller? What will the buyer be looking for? The answer is actually contained in a long and thorough checklist. As a seller, it means you must be prepared to present paperwork or reports that answer due diligence inquiries, and that any area where you are not prepared can potentially delay the sale or worse, derail it altogether. This is one of the reasons due diligence is such an important thing to [...]
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 [...]
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 [...]