Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Business Transition Academy entitled “How to Find the Right Buyer for Your Business, Part 1” discusses how business owners can properly prepare to sell their business and how to decide who the right buyer is. Some think it’s all about who will write the biggest check, but there’s more to it.
The first consideration when it comes to choosing a buyer is whether you plan to sell internally or externally, and what options exist within each of these strategies. As you consider potential buyers, it is important to consider how each can affect value, fees, taxes, the business and you.
Internal buyers may include a manager, employee, family member or shareholder.
External buyers may include a customer, competitor, supplier, financial buyer or private equity group.
Click here to read the full article.
A recent blog post from Viking Mergers & Acquisitions entitled “What is the Effect of COVID-19 on Business Valuations?” discusses how COVID-19 can impact business valuations in different ways. With the economic effects of COVID-19, this question is top of mind for many business owners, especially those who plan to sell in the next few years.
One consideration is the timing of the business valuation relative to when COVID-19 was considered known or knowable in the U.S. Valuations dated prior to when COVID-19 was known or knowable may not be impacted at all, whereas valuations dated after are more likely to be impacted.
Another consideration is if COVID-19 is considered a subsequent event, meaning even if the valuation was dated prior to when COVID-19 was known or knowable there may need to be explanation of the effects of COVID-19 since the valuation.
It is also important to consider the valuation method being used. The Discounted Cash Flow method may allow for year-by-year modeling to show how the business will normalize over time. The Market method may require analysis and adjustments of similar past transactions relative to COVID-19.
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A recent article from Chief Executive entitled “M&A During Covid-19: Another “New Normal” or Back to Business?” discusses the impact of COVID-19 on mergers and acquisitions, and what CEOs can do about it.
COVID-19 has brought great economic uncertainty, negatively impacting valuations and making it very difficult to prepare accurate financial projections. M&A activity saw a sudden drop in activity in the early months of the pandemic, however deal activity has started to slowly pick back up as companies with cash have begun to make moves.
CEOs can respond to these shifts by making sure communication with key shareholders is strong, assessing corporate preparedness, evaluating ways to bridge gaps in value, and expecting a longer deal process.
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Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Axial entitled “Preserving Value After the Deal” explores how a company can foster long term success after acquiring another company. This acquisition was made for a specific reason, so it is important to keep this reason top of mind in order to realize the intended outcome.
Buyers can take the following 3 steps to help increase their chances of success after purchase:
- Create and implement a comprehensive action plan to guide the integration process
- Effectively communicate with all employees of the acquired company regarding how they fit into the plan and why you value them
- Put a project manager with M&A experience in place to oversee the integration of the two companies
Click here to read the full article.
A recent article from CEOWORLD Magazine entitled “Buying Or Selling A Business? Why The Pandemic May Be The Right Time” discusses how the COVID-19 pandemic has created opportunities for sellers and buyers. Interest rates are low which gives buyers the chance for a more financially favorable deal and which creates motivated buyers for sellers.
Tips for buyers include:
- Be ready to look at lots of opportunities before finding the right one
- Gather as much information as you can about any businesses for sale that you are considering
- Look into seller financing
- Be thorough with due diligence
Tips for sellers include:
- Thoroughly prepare for the sale
- Get specific with what you are selling
- Have a business valuation done so you know what the business is worth
Click here to read the full article.
A recent article from Divestopedia entitled “Turning Over a New Leaf: Life After Selling Your Business” discusses the importance of business owners thinking about what life will look like after they sell their business well before they actually sell.
The business owner should have honest conversations with their closest confidants to make sure they aren’t surprised about post-sale life and so they start to identify a new purpose. Will the owner start a new business, invest in an existing business, continue to work for the business, or retire?
It is also important to consider how the owner will use their new found time and capital, and how that ties to their new purpose, their post-sale goals, and their financial future. Creating a wealth management plan is key.
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Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Milwaukee Community Journal entitled “4 Factors To Consider Before Buying An Essential Business In COVID Times” discusses a rising interest among buyers in essential businesses. The COVID-19 pandemic has many buyers rethinking what type of business they might want to own, often turning to those deemed essential such as grocery, delivery, cleaning and home services.
When looking into buying an essential business, consider the following suggestions:
- Focus on successful types of essential businesses, those that are more likely to succeed even when economic conditions are poor
- Consider franchise opportunities which offer training and support
- Be able to decipher between a bargain and a bad investment
- Make sure that owning a business is right for you and that you are right for the business
Click here to read the full article.
A recent article from Forbes entitled “Deal Terms To Reduce The Risk When Buying A Business Now” explores the current state of the market and what it means for those looking to buy a business.
The market is presently filled with unknowns, both short term and long term. It is important to realize, however, that the stock market shouldn’t be treated as a barometer for main street small businesses. The buyer must evaluate each individual opportunity based on its unique circumstances and how those circumstances relate to the larger economic environment.
When evaluating a distressed business, it is important to consider how distressed the business is and what capital it will need from you as the new owner to weather the storm.
When evaluating a business that has remained strong, the reality is that multiples (and selling price) will likely remain steady. However, funding is limited with SBA resources tied up in stimulus lending. This leaves two likely ways to finance a deal – all cash (at a possibly reduced price) or seller financing. Buyers should also consider including earnouts in the deal to help protect themselves.
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A recent blog post from Viking Mergers & Acquisitions entitled “3 Reasons Entrepreneurs Want to Sell Their Business” identifies three major reasons why business owners decide to sell.
These three reasons include:
- Burnout – The workload that comes with owning a business can be overwhelming, and many owners just put more into the business when they feel the demands growing, often leading to burnout.
- Desire to do something different – Eventually a business owner may become bored with the business and put less effort in, leading to burnout as they try to manage the business while feeling detached.
- Retirement – Many business owners put years into developing and growing a successful business, and selling that business is their retirement plan.
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Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Inc. entitled “Small-Business Acquisitions Pick Up Steam With High Demand for Thriving Businesses” discusses acquisition activity and opportunities for buyers coming out of Quarter 2 in light of COVID-19 economic conditions.
While the beginning of Quarter 2 saw widespread mandated closures of businesses and an abrupt pause on deal activity, the end of Quarter 2 saw businesses reopening and deal activity resuming. Some businesses have struggled, some have maintained a relatively normal financial picture, and some have thrived. This varying financial state of businesses has presented a variety of opportunities for buyers.
Essential businesses may be appealing to buyers due to their resilience and growth opportunities. However, buyers may have to pay a premium for these businesses.
Distressed businesses are those that are facing financial challenges but may be able to rebound over time. These businesses may be appealing to patient buyers who are prepared to meet cash flow shortages and are looking to buy at a discount.
Some businesses may be forced to conduct an asset sale, presenting an opportunity for buyers to acquire prime real estate, FF&E, inventory, and other material assets.
Click here to read the full article.
A recent article from Financial Planning entitled “5 tips for helping business owners sell during a pandemic” offers advice for business owners who have decided that now is the time for them to exit their businesses.
This advice includes:
- Know the company’s valuation
- Focus on cash flow
- Engage employees and tap into their growth ideas
- Avoid shiny new business opportunities and focus on long-term growth
- Focus on the four intangible capitals – human, social, customer, structural
Click here to read the full article.
A recent article from Herald-Tribune entitled “Are you ready to sell your business?” discusses what motivates business owners to sell, what selling options exist, and why so many businesses never sell.
Push factors that lead to the decision to sell include cashing out, peaked market, need to diversify, health concerns, retirement, stress and boredom. Pull factors include philanthropy, starting a new business, hobbies, improving health, family and travel. In general, the presence of more push factors than pull factors is more likely to lead to regret after the sale.
Selling options include an outright sale, transferring ownership to a team, selling only part of the business, transitioning to children, and liquidation.
Of businesses that survive ten years, more than half will never sell and instead shut down. Businesses may not sell due to unreasonable buyer or seller demands, seller misrepresentation, economic uncertainty, lack of capital to finance, insufficient cash flow, no market, or a valuation gap in pricing.
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Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent podcast episode from The Sustainable Business entitled “Selling Your Business During Pandemic – Barbara Taylor” discusses selling a business and buying a business amidst the current pandemic.
In the episode, Barbara Taylor explores topics including:
- The M&A world during the pandemic
- Why it’s an excellent time to buy
- Who can help you buy or sell a business
- How the pandemic impacts the business sale process
Click here to listen to the episode.
A recent article from JD Supra entitled “Is Now a Good Time to Acquire a Business? Opportunities and Risks for Buyers in the Era of COVID-19” discusses the effects of COVID-19 on buying a business.
Current economic conditions have led to a more favorable environment for buyers who are well-positioned to make an acquisition. Deal volume is down and many previous buyers have put their activities on hold, meaning there are more opportunities for those who are ready to buy. There are also a significant number of businesses that have been negatively impacted financially and may be motivated to sell.
Despite these favorable conditions for buyers, there is also ongoing economic uncertainty and associated risks. Buyers should take a measured approach with heightened due diligence, thorough risk identification, and strong documents and recourse. Plus there are unique considerations related to CARES Act loans.
Click here to read the full article.
A recent blog post from Viking Mergers & Acquisitions entitled “Key Mistakes to Avoid When Selling Your HVAC Business” discusses critical pitfalls that can impact the value of your HVAC business and hurt your chances for a successful sale.
These key mistakes include:
- Failing to set the business up to operate without you (the owner)
- Putting all of your eggs in one basket and not diversifying your services
- Having inaccurate or incomplete financials
- Not having a 5 year plan
- Allowing past due receivables to get too old
- Not getting key team members on board with working with a new owner
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