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 Talk Business & Politics entitled “M&A broker says business owners are confident in ability to recover from COVID-19” explores how business owners feel about recovering from COVID-19 related economic struggles and how this affects their future plans to sell.
Barbara Taylor of Allan Taylor & Co. polled business owners about these topics. Her findings were that most businesses have experienced a negative impact from the economic shut down, however they are generally confident they will be able to recover over time.
Taylor also found that business owners are still thinking about selling, with some moving forward and some hitting pause for now.
Click here to read the full article.
A recent article from Birmingham Business Journal entitled “2020 Insights into Mergers and Acquisitions” offers insights from two M&A professionals regarding COVID-19 and mergers & acquisitions.
Questions answered include:
- How has COVID-19 affected the M&A pipeline? Is it causing business owners to delay plans to sell?
- What about valuations? How is COVID-19 affecting them?
- In this type of environment, what questions should sellers ask themselves or their advisers before pursuing a sell? What about buyers?
- Are there any tax considerations or COVID-19 relief measures that should be considered when contemplating an M&A deal?
- On the buying side, what should I be looking for when considering buying a company? Are there any particular areas that could be red flags?
- Considering the economic turbulence and potential for a lingering recession, how should buyers and sellers approach M&A transactions?
- What types of firms or companies can assist my company through the M&A process? What types of questions should I ask when choosing one?
- How important is the culture of the other party when considering an M&A deal?
- Are there any special M&A considerations for family-owned businesses?
- How is the aging of the baby boomers affecting the M&A market?
Click here to read the full article.
A recent article from Business 2 Community entitled “5 Facts You Must Know to Successfully Sell Your Business” gives business owners five helpful tips to foster an easier and more successful business sale.
The five tips offered include:
- Failing to prepare, is preparing to fail – Thorough preparation is critical when it comes to selling a business.
- Confidentiality is key – Utilize NDAs and a timed release of sensitive information to help protect the business.
- Detailed Heads of Terms are vital in protecting value – As a seller, utilize the Heads of Terms to agree to as many key points as possible while you still have power in the deal process.
- Focus on quality, not quantity of buyers – Concentrate on strategic buyers who are a good fit for your business so that you can maximize value.
- Don’t do it alone – Assemble a deal team to help with the heavy lifting and ensure a successful transaction.
Click here to read the full article.
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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 Monitor entitled “AICPA Offers Insight for Valuing Businesses Affected by COVID-19” discusses recently released FAQs from the American Institute of CPAs which are designed to help adjust business valuations based on the CARES Act.
The COVID-19 pandemic and related economic challenges have brought on tax law changes, PPP funding, EIDL funding and the Small Business Debt Relief Program. All of these recent developments bring the potential for one-time events that could alter figures that are inputted when conducting a valuation.
In response to this dilemma, the American Institute of CPAs released a series of FAQs to help valuation professionals navigate these issues when conducting a business valuation.
Click here to read the full article.
A recent article from Pet Age entitled “Building Value When Exiting Your Business” discusses what business owners can do to maximize value when they sell their business. The reality is most businesses are not ready to be sold for top dollar. So what actions can business owners take in the present to prepare for a future sale?
Major areas to look for improvement include:
- Accounting & Financial Reporting – Are your historical financial reports ready, accurate, and insightful?
- Personnel – Do you have the right team in place to support a new owner?
- Process & Infrastructure – Do you have a marketing plan, operations manual, employee handbook and business systems to support growth?
Click here to read the full article.
A recent blog post from Viking Mergers & Acquisitions entitled “10 Tips When Preparing Your Business For Sale” offers advice to help business owners prepare for an eventual sale. The process of selling a business is complex, however it can be made easier by properly planning for the sale.
10 tips for preparing to sell your business include:
- Hire an outside CPA to complete a profit & loss statement and balance sheet monthly
- Complete your tax returns on time
- Carefully track discretionary expenses
- Discuss tax implications of selling your business with your CPA
- Be committed to selling when you put your business on the market
- Record revenues and expenses in real time
- Maintain your facility and keep up the curb appeal
- Get rid of old and unsellable inventory
- Make sure equipment is working properly
- Hire a business broker to represent you
Click here to read the full article.
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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 M&A Source entitled “What is Needed to Restart M&A Markets Post-Pandemic?” discusses the likelihood of M&A activities coming back and what it will take to get there.
Prior to the COVID-19 pandemic, M&A activities were very strong with plenty of deal making. However, this all came to a halt due to the pandemic. Will M&A activities revert back to pre-pandemic levels? The author feels they can, with cooperation between sellers and buyers.
Valuation is based on past financial performance. A drop in cash flow, which has happened for a large number of businesses during the pandemic, would typically mean a drop in value. But this time, the drop is not due to changing consumer preferences or technological advances, it’s due to a one-time global health crisis. In this case, sellers and buyers can agree to treat this as an anomaly and adjust 2020 cash flows accordingly.
Click here to read the full article.
A recent blog post from Allan Taylor & Co. entitled “Are Business Owners Facing an Exit Plandemic? [SURVEY RESULTS]” discusses the results of a survey of 39 business owners about their intentions to sell their business and how COVID-19 has impacted their plans.
Key takeaways from the survey results include:
- Prior to COVID-19, 31% of respondents planned to exit within the next 5 years and 36% planned to exit within the next 2 years
- Due to COVID-19, 23% said their plans to exit are on hold indefinitely, 23% said their plans to exit are on hold temporarily, and 54% said there is no change in their plans to exit
- 59% of respondents said their intended exit strategy is to sell to an outsider
- 51% of respondents said their business value is down temporarily due to COVID-19
- 62% of respondents said 2020 sales will be down significantly and 28% said 2020 sales will be down slightly
- 46% of respondents said their business will recover but it will take more than a year to do so and 26% said their business will recover quickly
Click here to read the full article.
A recent article from Lexology entitled “How Does COVID-19 Affect Buying a Business?” discusses key considerations for those seeking to buy a business in light of COVID-19.
These key considerations include:
- Valuations have become more challenging due to the pandemic shutdown impacting 2020 financials
- Ease of obtaining financing, how long it takes to close, and financing terms have all been impacted
- Due diligence has become more intricate as the need to dig deeper has increased, yet due diligence is more difficult to accomplish due to restrictions on in-person meetings and activities
- Agreement conditions, representations, warranties, clauses and covenants are evolving
Click here to read the full article.
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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 “Lower Middle Market Deal Makers Lean Into Digital Tools” discusses how deal making has taken on an increased level of digital activity due to the effects of COVID-19.
In recent years, digital tools have already become a significant part of deal making. Online deal sourcing, virtual data rooms, and back-office technology are some of the ways deal making has gone digital.
The COVID-19 pandemic has caused an increased need for digital activities as in-person meetings have come to a sudden halt. Video conferencing is now being used for negotiation and due diligence. However, most deal professionals feel only so much can be done digitally and at some point in-person meetings are necessary in order to close the sale.
Click here to read the full article.
A recent blog post from Exit Strategies Group entitled “Valuing a Business in the Time of COVID-19” discusses the processes involved with and benefits of valuing your business during a situation such as COVID-19.
Difficult times can sometimes bring a sense of urgency to make a quick decision. However, it is better to slow down and analyze. A valuation does just that. Three key inputs for determining value include cash flow, growth and risk. Once a formal valuation is completed, you’ll know how much your business is worth today.
Once you know what your business is worth, you can start analyzing your options. Options may include developing an exit strategy, option plans, gifting and bankruptcy.
Click here to read the full article.
A recent article from Mondaq entitled “Looking To Buy A Business? M&A Due Diligence In The Age Of COVID-19” explores important considerations for buyers in light of COVID-19.
Buyers who are well-prepared and well-positioned to make an acquisition may be seeing more opportunities to purchase a business in the coming months. These opportunities are likely to be different than a typical acquisition, however, due to the effects of COVID-19. Many businesses have had to make significant changes and decisions in order to survive.
The following questions should be raised during due diligence:
- Third Party Agreements – Is the business in default of any contractual obligations? Have any arrangements been made to defer or alter contractual obligations?
- Supply Chain Disruption – Have any suppliers been unable to fulfill their obligations? Can the business pivot to another supplier if needed?
- Insurance – Does the business have any insurance policies with coverage for ongoing or future losses due to the pandemic?
- IT Systems – Are sufficient systems in place to ensure productivity and facilitate staff functions? Do these systems have ample security?
- Employees – Have there been layoffs, changes in compensation, or changes in responsibilities that may involve liabilities? Are there clear policies to protect the safety of employees?
- Government Benefits and Measures – Has government aid been accepted and have all related requirements been met? Have taxes been deferred?
Click here to read the full article.
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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 BizBuySell entitled “The CARES Act May Allow You to Buy a Business for Effectively No Money Out of Pocket” discusses how buyers can benefit from recent legislation.
The CARES Act was signed on March 27, 2020. Part of the CARES Act involves the SBA paying 6 months of SBA loan payments for current SBA loans and new SBA loans closed before September 27, 2020.
This is a significant opportunity for buyers which could produce savings of tens of thousands of dollars on a single transaction. Given the September 27 deadline, buyers should start looking for a business to purchase now or very soon.
Click here to read the full article.
A recent article from Small Business Trends entitled “57% of Small Businesses are Optimistic Despite COVID-19” explores the results of the recent State of Small Business Report from Facebook and the Small Business Roundtable.
86,000 small businesses were surveyed about COVID-19 related topics. Highlights of the survey results include:
- 57% of businesses are optimistic or extremely optimistic about the future of their businesses
- 31% of businesses had stopped operating as of April 2020
- 79% of businesses have changed and adapted in some way to cope with COVID-19
- 76% of businesses that remain open worry about cash flow
- 11% of businesses that are still operational expect to fail in the next 3 months if current conditions continue
Click here to read the full article.
A recent article from Forbes entitled “Important Updates To The PPP May Equal More Money For Your Small Business” discusses an updated Payroll Protection Program FAQ fact sheet recently released by the SBA.
The fact sheet features 17 pages, 46 points and several reference documents. Some of the highlights include:
- PPP loans under $2 million are eligible for forgiveness without proof of financial hardship
- Partnerships and seasonal employers may be able to increase their loan amount
- There is still money available and businesses can still apply for a PPP loan
Click here to read the full article.
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