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How to build the best exit team (& what it will cost)

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BizON had the honour of sponsoring the Business Transition Forum! We would like to share some valuable information with our audience from the forum in case you did not have the opportunity to attend!

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How to build the best exit team (& what it will cost)

  1. 1. MODERATOR Dr. Basil Peters, CEO, Strategic Exits Corp and Author of: “Selecting Your M&A Advisor” and “Early Exits” PANEL Darin Brock, Business Development, TorQuest Partners Inc. Ed Giacomelli, Managing Director, Crosbie & Company Inc. Bruno Suppa, Partner, Financial Advisory Services, BDO Canada LLP Randy Williamson, Partner, Aird & Berlis LLP HOW TO BUILD THE BEST EXIT TEAM (& WHAT IT WILL COST)
  2. 2. OUTLINE • Introductions • Building the Ideal Exit Team • Terminology • M&A Advisor Success Rate • Selecting Your M&A Advisor • What the Team will Cost • Resources
  3. 3. THE IDEAL EXIT TEAM • The single most controllable factor in determining whether a saleable company will actually be sold is the capability of the exit team • Who are the ideal members of an exit team?
  4. 4. WHAT IS AN M&A ADVISOR? • Is that the same thing as an Investment Banker? • How is that different from a Business Broker? • What do M&A Advisors do and why do you need one?
  5. 5. M&A ADVISOR QUALITY • With almost every service, there are varying quality levels available. • For M&A advisory engagements, what’s the difference between: 1. Gold (premium) 2. Silver (mid-range) 3. Bronze (economy) • Service levels?
  6. 6. TYPES OF M&A TRANSACTIONS • What is a fully marketed transaction? • What is an unsolicited offer? • What are the differences?
  7. 7. M&A ADVISOR SUCCESS RATE • One of the secrets of the M&A business is that paid M&A professionals very often fail to complete a transaction • There are no statistics available on this and the professionals almost never talk about it • After a company engages an M&A advisor, what are the probabilities they will actually end up completing the sale?
  8. 8. M&A ADVISOR SELECTION CRITERIA • Reputation for transaction completion rate • Reputation for getting exceptional price and terms • Reputation for being a good 'bad guy' • Chemistry and experience with seller psychology • Geographic proximity • Post transaction service (warranty work) • Domain expertise • Fees
  9. 9. M&A ADVISORY FEES • For a “fully marketed” global search – researching 50 to 250 companies • And a “Gold” quality service • Work fees usually $50,000 regardless of the company size (less if not busy) • Success fee, including the work fee, from: o 8 to 10% for sales under $5 million o 5 to 8% for sales from $10 to 30 million o 2 to 4% in the $100 million range
  10. 10. SUCCESS FEES VS QUALITY AND SCOPE FOR A $20 TO 30 MILLION TRANSACTION Service Level Fully Marketed Global Search Limited to 3 or 4 Buyers Gold 7% 3.5% Silver 5% 2.5% Bronze 3.5% 1.75% Reference: http://www.exits.com/blog/ma-advisor-fees-selling-business/
  11. 11. PRICE RECEIVED AND M&A ADVISOR FEES -50% 0% 50% Low Average High PriceandFeeDifferences* M&A Advisor Quality Additional Cash to Shareholders Reduced Cash *Estimated Ranges Price Received  Fees Paid 
  12. 12. LEGAL AND ACCOUNTING FEES • Legal and accounting fees vary widely depending on the complexity, not the size • For a simple, clean transaction legals might only be $25,000 • But for a complex deal can easily be $1 million or more • Accounting costs can be a few thousand to over $100,000 if audits haven’t been done

BizON had the honour of sponsoring the Business Transition Forum! We would like to share some valuable information with our audience from the forum in case you did not have the opportunity to attend!

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