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Exit strategy planning ppt 6 6 11
- 2. Introduction Transaction Types Potential Buyers Current M&A Environment Critical Seller Decisions Creating Value in Your Business Preparing Your Business for Sale Selling Your Business – The Process Financing the Deal
- 3. Valuing Small Businesses ◦ Shannon Pratt M&A Source 5/3 Bank – May 5, 2011 Capital Strategies Update The $10 Trillion Opportunity ◦ Richard Jackim and Peter Christman Selling Middle Market Businesses ◦ Russell Robb
- 4. ESOPs Family Succession Sale Partnerships Stock Sale Asset Purchase Non-tax Issues – Stock vs. Asset Sale Cash/working capital Liabilities/Limiting assumed liabilities Assignment of critical contracts Transfer of licenses
- 5. Private Equity Groups (PEGs) Strategic Corporate Buyers High Net Worth Individuals
- 6. Approx. 1,500 active PEGs Platform investments – larger investments in certain categories “Add-on” investments – smaller investments added to platforms Build financial leverage and critical mass Typically want to invest all money within 5 yrs. and sell within 10 yrs. Often want business owner to stay on for several years
- 7. Have specific reasons for wanting to make a particular purchase – distribution, new products, financial leverage, new footprint May be able to pay a premium due to synergy Generally looking for companies in the same or related industry May have management team in place for transition
- 8. Usually on the smaller end of middle market Bring specific expertise to transaction Relies on strong, existing management team Financing can be an issue –need personal guarantees
- 9. Seller’s Market ◦ Many prospective buyers for too few strong businesses Business Values are on the rise ◦ Back to levels of 3-4 yrs. ago ◦ 3-4X for smaller companies with modest growth; 5-7X for larger businesses with strong projections Depends on industry, capability of management, balance sheet Strategic and PEGs are flush with cash Banks are lending Potential for capital gains tax increases
- 10. Timing ◦ Planning can take 2-3 yrs. ◦ Sale process can take 6-18 mos. Pre-sale self assessment ◦ What are your motives ◦ Desired outcome ◦ Timeline ◦ Financial ◦ Buyer – what type of buyer do you want ◦ Business Continuity ◦ Prepare yourself – time, energy, disclosure, money
- 11. Evaluate your business ◦ Financial health of business ◦ Non-financial aspects ◦ SWOT analysis ◦ Transferability Take the time to improve where needed ◦ Management team ◦ Customer base ◦ Brand ◦ Balance sheet ◦ Facilities
- 12. Assemble your team ◦ Accountant ◦ Attorney ◦ Financial planner ◦ Estate planner ◦ Banker ◦ M&A Intermediary/Business Broker Set the right expectations ◦ Business valuation, real estate appraisal, equipment valuation Perform pre-sale due diligence Develop/update strategic plan and forecast
- 13. Develop marketing materials ◦ Offering Memorandum ◦ Blind profile/teaser Prepare target list of buyers Launch campaign Interview prospective buyers/screen Manage due diligence/data room Structuring and negotiating the deal Close sale Implement transition plan
- 14. Financing Sources ◦ Commercial banks ◦ SBICs/SBA ◦ Subordinated debt funds Things Banks care about ◦ Cash flow (EBITDA) ◦ Balance sheet ◦ Collateral (and ability to gain first lien position) ◦ Personal Guarantees
- 15. Financing Sources ◦ Commercial banks ◦ SBICs/SBA ◦ Subordinated debt funds Things Banks care about ◦ Cash flow (EBITDA) Does not include Seller’s discretionary expenses ◦ Collateral (and ability to gain first lien position) ◦ Personal Guarantees
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- 17. 1129 Miamisburg-Centerville Rd. Suite 200 Dayton, OH 45459 937-866-4611 dayton@sunbeltnetwork.com www.sunbeltofmiamivalley.com www.facebook.com/sunbeltbusinessadvisors www.twitter.com/sunbeltmvoh