This document outlines seven core principles for business owners to maximize the value of their business during its operation and upon sale. It discusses building a strong management team, diversifying customers, maintaining quality financials, developing proprietary products/services, focusing on profitability, having a business plan, and seeking professional advisors. It also covers how these principles influence valuation multiples and different transaction structures like strategic sales and private equity-backed recapitalizations.
What makes a business model viable? How to move it from viable to great? What are the key metrics to analyze business model performance? How and when should you decide to change your business model? How to manage the transition?
How to prepare your business for a transition.
This presentation covers:
1. Prepping for the transition from an organizational, emotional and financial standpoint
2. Financial options for transitioning your business or transitioning shares
3. Where and how to begin
If your company’s revenues have been flat to declining over the past eight quarters you are probably ‘Stuck in Neutral.’ There are no magic bullets when it comes to reversing long term flat to declining revenue trends for tech companies. Companies get ‘stuck in neutral’ for a reason. Most of the time it is a market problem versus a ‘people’ problem. Breaking out of the rut, however, takes courage and decisive action. This presentation is an overview of three part strategy for getting your revenue growth back in gear. In the coming weeks we will explore each of the three strategies in depth.
What makes a business model viable? How to move it from viable to great? What are the key metrics to analyze business model performance? How and when should you decide to change your business model? How to manage the transition?
How to prepare your business for a transition.
This presentation covers:
1. Prepping for the transition from an organizational, emotional and financial standpoint
2. Financial options for transitioning your business or transitioning shares
3. Where and how to begin
If your company’s revenues have been flat to declining over the past eight quarters you are probably ‘Stuck in Neutral.’ There are no magic bullets when it comes to reversing long term flat to declining revenue trends for tech companies. Companies get ‘stuck in neutral’ for a reason. Most of the time it is a market problem versus a ‘people’ problem. Breaking out of the rut, however, takes courage and decisive action. This presentation is an overview of three part strategy for getting your revenue growth back in gear. In the coming weeks we will explore each of the three strategies in depth.
Exit Planning - Maximizing Value Through Pre-Transaction ReadinessDominic Brault
According to numerous surveys, more than half of business owners intend to transition ownership of their business during the next 10 years. Yet most business owners do not have a formal strategic or financial plan, and many are unaware of the possible tax and estate implications. As a result, there is a real need for business exit planning. A robust exit plan will help chart a course toward extracting maximum value from the company to reach the seller’s goals.
Knowledge Session on Startup Valuation: How does a Startup approach valuations? Best Practices, Models, Examples of good and bad valuations, etc. ELEVATE 100, an initiative of the Department of Information Technology and Biotechnology, Government of Karnataka aims to provide a comprehensive entrepreneurship platform for startups. The top 100 technology based startups chosen through a rigorous hunt across Karnataka State will tap into a whopping sum of Rs.400 Cr of Government funds. This is the largest pool of funds ever offered by any State Government to Startups.
* Understand the financial components of business
* Identify the levers that affect profitability
* Relate your personal finances to business finances
* Make more profitable decisions
Most clients achieve over 3,000% ROI when investing our services
More than 70% clients overcome financial distresses and avoided undesired consequences
Over 90% clients stay with us more than 10 years after engaging us
Complete integrated multi-disciplines for all SMEs’ management, marketing, IT, & financial needs
1st Ever Comprehensive Framework To Grow Company Healthily & Holistically With +Ve Cashflows
For the first time, developing a business plan can be daunting. In our simple guide, we explain the importance of a business plan and just as critical the importance of having a compelling business idea for your business in the first point. We then step by step take you through the eight critical elements of a good business plan and provide you with checklists at the end of each section.
These eight are;
1) Product/ Service - what is it you are offering?
2) The Market and Competition
3) Marketing
4) Business System
5) Organisation and HR
6) Opportunities and Risks
7) Implementation Schedule
8) Your Financial Plan
Not all customers are the same. Tiering analysis helps companiesto segment their customers by size and contribution so thatmarketing, sales, & support strategies and resources can beoptimally aligned
Stepping into a role which requires business finance knowledge? Here is a short guide offering advice, tools, and expertise that you will need to equip yourself with to be successful. Check out our Diploma in Business Finance for more.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
Exit Planning - Maximizing Value Through Pre-Transaction ReadinessDominic Brault
According to numerous surveys, more than half of business owners intend to transition ownership of their business during the next 10 years. Yet most business owners do not have a formal strategic or financial plan, and many are unaware of the possible tax and estate implications. As a result, there is a real need for business exit planning. A robust exit plan will help chart a course toward extracting maximum value from the company to reach the seller’s goals.
Knowledge Session on Startup Valuation: How does a Startup approach valuations? Best Practices, Models, Examples of good and bad valuations, etc. ELEVATE 100, an initiative of the Department of Information Technology and Biotechnology, Government of Karnataka aims to provide a comprehensive entrepreneurship platform for startups. The top 100 technology based startups chosen through a rigorous hunt across Karnataka State will tap into a whopping sum of Rs.400 Cr of Government funds. This is the largest pool of funds ever offered by any State Government to Startups.
* Understand the financial components of business
* Identify the levers that affect profitability
* Relate your personal finances to business finances
* Make more profitable decisions
Most clients achieve over 3,000% ROI when investing our services
More than 70% clients overcome financial distresses and avoided undesired consequences
Over 90% clients stay with us more than 10 years after engaging us
Complete integrated multi-disciplines for all SMEs’ management, marketing, IT, & financial needs
1st Ever Comprehensive Framework To Grow Company Healthily & Holistically With +Ve Cashflows
For the first time, developing a business plan can be daunting. In our simple guide, we explain the importance of a business plan and just as critical the importance of having a compelling business idea for your business in the first point. We then step by step take you through the eight critical elements of a good business plan and provide you with checklists at the end of each section.
These eight are;
1) Product/ Service - what is it you are offering?
2) The Market and Competition
3) Marketing
4) Business System
5) Organisation and HR
6) Opportunities and Risks
7) Implementation Schedule
8) Your Financial Plan
Not all customers are the same. Tiering analysis helps companiesto segment their customers by size and contribution so thatmarketing, sales, & support strategies and resources can beoptimally aligned
Stepping into a role which requires business finance knowledge? Here is a short guide offering advice, tools, and expertise that you will need to equip yourself with to be successful. Check out our Diploma in Business Finance for more.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
A summary of a key business valuation method, current EBITDA multiples, the drivers that influence the value of a business and how to increase the value of a business
How To Hire A Ceo / Professional Management Team to Enhance Selling A Businessjoerodwell
We at Exit Planning LLC have expertise in helping owners find and hire a CEO to lead the company. We meet with owners to understand the company, including its strengths and weaknesses. We then tailor-make a Job Description, create an Ad based on the Job Description, post the Ad and receive resumes. We select the top resumes for a 1st interview and choose the top three for a second interview with the owners. Contact us to help you find your own professional management team!
During a business turnaround, the first thought is to dive into the financial condition of the business and immediately develop methodologies that improve cash flow and reduces expenses.
I submit that a deep dive into the fitness of the organization will reveal deep fissures in how the company is being managed; then study the leadership team, the business plan and the goals and objectives of the company.
The article “Organizational Fitness Improves Business Turnarounds and Revenue Growth” was developed for business owners and CEO’s that are the center of influence in their companies.
Understand and maximize the Value of your Business.David C. Smith
This presentation outlines basic information used to value a business and identifies the 4 points of Sellability that can be used to increase the businesses value.
Many small and medium sized enterprises [SME] owners already know what needs to be done to grow their business but lack the time and/or resources to bring about the necessary changes.
Others may simply be reluctant or restrained by tradition to make a shift.
Change is difficult.
This series attempts to help answer the question, "How will owners [like me] make the necessary changes to aggressively grow their business in 2014 — and beyond?”
Opportunity-based Growth: How GrowthPath Drives Cash and ProfitTim Richardson
Opportunity-based Growth for small and medium sized businesses is the proven approach to prosper under economic and technological change. It's GrowthPath's speciality.
Organizational Fitness blends two passions of mind–leadership and fitness–and refers to the perpetual growth and productivity of a company, team, or organization based off the people that serve the company’s purpose. Having the wrong person in a critical job position is like trying to fit a square peg in a round hole–it may fit eventually, but the end result won’t be pretty.
A “fit” organization is one that is both willing and able to face new threats as they emerge based off the people that define its culture and the competencies such people have that create value for the organization.
This presentation will show you how organizational fitness can create value for businesses and help turn your business around for long-term sustainability.
Sales compensation expert Mike D’Amico, VP of Human Resources at Stratford managers shares his deep experience in implementing successful sales compensation programs.
Exploring a representative case study, you will learn how to assess your organization's readiness to implement a sales compensation program. You’ll then get practical tools to help launch a pilot program and transition sales staff into an effective program.
Rob Jones, managing director of Peloton Partners, shares emerging pricing trends in the industry based on data from 70 advised firms across Australia, and strategies for advice practices to extract latent value out of their business.
The KPI - Cash Flow Modeling and Projections (Series: MBA Boot Camp 2020) Financial Poise
You can chase a lot of financial measures of your business, but nothing stacks up to cash flow. Like a boat captain on a rough sea, being able to see what is coming at you financially is absolutely invaluable. Cash flow models are the absolute go-to tool for reviewing companies in distress, yet they are also invaluable to venture capitalist who must manage long range investments as well as fast growth. This webinar discusses the basic components of a cash flow model, why it is weekly and not monthly and why 13 weeks is the usual length. This webinar also discusses what type of data is best for making an efficient and practical cash flow model, as well as best practices for reporting and pitfalls associated with modeling and balance roll forwards.
Similar to 7 Steps to Maximize the Value of Your Business (20)
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3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
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Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
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Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
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Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
Website – www.pmday.org
Youtube – https://www.youtube.com/startuplviv
FB – https://www.facebook.com/pmdayconference
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
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Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
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➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
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➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
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Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Discover the innovative and creative projects that highlight my journey throu...
7 Steps to Maximize the Value of Your Business
1. Seven Core Principles to Maximize the Value of Your
Business During its Life and Upon its Sale
Presented by
Doug Hubert
Managing Director, CBIZ Mergers & Acquisitions Group
Steve Henley
National Tax Practice Leader, CBIZ MHM National Tax Office
2. Strategic Edge Series
• Seven Core Principles to Maximize the Value of Your Business During Its
Life and Upon its Sale – May 18th
• Creative Compensation Strategies to Maintain Morale and Retain Talent –
June 22nd
• Don’t Be Held Captive: Go Captive to Manage Your Risk and Expenses –
July 20th
• Federal Incentives That Can Show You the Money – August 17th
• Protecting Your Legacy with Succession Planning – September 21st
• State Tax Nexus: No Physical Presence Required – October 26th
All these webinars are from 2:00 – 3:00 ET. Here is the link for registration for
any of these webinars - www.cbiz.com/strategicedge
2 Seven Steps
3. Agenda
• The Seven Steps to Increase the Value of your
Company
• How is Value Influenced - Pricing
• How is Value Influenced – Transaction Type
• Strategic Sale vs Leveraged Recapitalization
• How is Valued Influence – Tax Considerations
3 Seven Steps
4. 1. Build a Deep Management Team
• Building a deep management team is one of most
difficult challenges for business owners.
• Significant Value Driver: Management depth is the
difference between a good and great company.
• Jack Welch, former CEO of General Electric
considered talent development his most important
job.
• Tactic: A formal talent recruitment and development
plan should be established. Further, a management
retention program should be considered.
4 Seven Steps
5. 2. Diversify Your Customer Base
• Ideally, a company’s largest customer should
represent no more than approximately 15-20% of
revenue & profitability.
• If any customer becomes too large, then to some
degree, the customer owns the business.
• Like management team depth, customer
concentration is a significant value driver.
• Diversifying customer base may cause short-term
sacrifice, but it will create long-term stability and
value.
5 Seven Steps
6. 3. Maintain Quality Financial Information
• Lack of quality financial information is a consistent
weakness among middle-market companies.
• Prior to a transaction of any form, a company should
transition from their current attest level to a formal audit.
• Audited statements provide credibility with bankers,
insurance companies, and investors (both private and
public).
• In a sale transaction, audited financials reduce chance of
purchase price reduction due to lack of certain accruals.
• An audit is also a powerful management tool.
6 Seven Steps
7. 4. Develop a Proprietary Product or Service
• To thrive in any marketplace, a company must offer
unique product or service that isn’t easily replicated.
• While an obvious value driver, few companies are
dedicated to creating this distinction.
• It should be easy for customers, employees, or
competitors to quickly describe what makes a
company unique?
• Superior products or services can create pricing
advantages (in good times) and customer loyalty (in
challenging periods).
7 Seven Steps
8. 5. Focus on Profitability
• Too many business owners measure success on
revenue rather than profitability
• A $30 million revenue company with $5 million in
profits is worth more than a $60 million business
with $2.5 million in profits
• Another common mistake is desire to limit
profitability to limit taxes
– Focus becomes tax avoidance rather than operational efficiency
and profit maximization
– Explore tax efficient strategies such as pass through entities (S-
Corporation or LLC’s)
8 Seven Steps
9. 6. Prepare and Execute a Business Plan
• Establish operational and financial plans and goals
for your business in one, three and five year
increments and share them with your employees
– Plans should take into account various economic, industry and
company specific scenarios and how management would react
to each
– Thorough planning creates roadmap for future growth, focuses
employees and management on quantifiable goals and allows
for better decision making
9 Seven Steps
10. 7. Seek The Help of Professional Advisors
• Qualified advisors can provide valuable advice as you
grow your business while also allowing you to avoid
disastrous legal, financial and operational mistakes that
may have significant financial consequences down the
road
– Accountants
– Attorneys
– Insurance Agents
– Investment Bankers
• Recruit a Board of Directors (or seek counsel from other
entrepreneurs)
10 Seven Steps
11. Pricing – How is Value Influenced?
• Review of factors that increase or decrease valuations of
businesses
– CBIZ M&A handles “middle-market” assignments – generally
companies with revenue between $10-300 million
– Valuation in the middle-market is typically expressed as a
multiple of EBITDA (Earnings Before Interest Taxes
Depreciation and Amortization)
– A M&A banker will also make adjustments to EBITDA to “add-
back” various expenses and personal perks that would not
continue under new ownership – “Adjusted EBITDA”
11 Seven Steps
12. Pricing – How is Value Influenced?
• Review of factors that increase or decrease valuations of
businesses
– To understand how these seven principals affect valuation, we
will walk through hypothetical valuation drivers
– For purposes of this example, based on our experience, please
assume that Company “A”, a healthy middle-market business,
has a “base” valuation multiple of 5x Adjusted EBITDA
12 Seven Steps
13. Pricing – How is Value Influenced?
1. Size – (as expressed in adjusted EBITDA) – a larger
business is viewed as having more stability (reduced
risk), is easier to finance, and generally will attract
larger and more financially capable buyers
EBITDA Level Multiple Adjustment
> $10 MM add 2x
$5-10 MM add 1x-2x
$2-5 MM no change
$1-2 MM deduct 1x
< $1 MM deduct 2x
13 Seven Steps
14. Pricing – How is Value Influenced?
2. Depth of management – does the company have a
deep and well-rounded management team?
Factor Multiple Adjustment
Deep Management Team add 1x-2x
One “Boss”/Limited Team deduct 1x-2x
14 Seven Steps
15. Pricing – How is Value Influenced?
3. Customer diversification – does the company have any
customer concentration issues (i.e. a customer
representing more than 20% of revenue/profit)?
Factor Multiple Adjustment
Diversified customer base add 1x-2x
Concentrated customer base deduct 1x-2x
15 Seven Steps
16. Pricing – How is Value Influenced?
4. Audited Financials – Does the company have audited
financials and a strong CFO/financial controls?
Factor Multiple Adjustment
Audited Financials/clean records add 1x-2x
Unaudited Financials/poor records deduct 1x-2x
16 Seven Steps
17. Pricing – How is Value Influenced?
5. Proprietary Products/Services – Does the company
have a proprietary or commodity product/service?
Factor Multiple Adjustment
Proprietary Product/Service add 1x-2x
Commodity Product/Service deduct 1x-2x
17 Seven Steps
18. Pricing – How is Value Influenced?
6. Profitability (expressed as a percentage (%) of
revenue) – What is the company’s EBITDA margin?
EBITDA Margin Multiple Adjustment
> 20% add 2x
15% - 20% add 1x-2x
10% - 15% 0x – add 1x
5% - 10% deduct 1x-2x
< 5% deduct 2x
18 Seven Steps
19. Pricing – How is Value Influenced?
7. Sale Process – Is the company only talking to one
buyer or has the company hired an investment banking
firm to create a controlled auction?
Factor Multiple Adjustment
Multiple Buyer Auction add 1x-2x
One Buyer Process deduct 1x-2x
19 Seven Steps
20. Pricing – How is Value Influenced?
• Two Strategies –
1. Strategic Sale
2. Leveraged Recapitalization
20 Seven Steps
21. Strategic Sale - Description
• Sale of the stock or assets of the company to a company
in the same business line or a similar business line.
• Sale can either be full or partial.
• Example: the 1996, $13.3 billion stock for stock merger
of Boeing and McDonnell Douglas, creating a larger
Boeing.
21 Seven Steps
22. Strategic Sale - Advantages
• Typically creates highest valuations (at transaction
closing) due to the value of synergies.
• Ideal for business owners who wish to maximize their
proceeds at closing and eliminate future risk
• Reduced post-closing role for selling shareholders.
22 Seven Steps
23. Strategic Sale - Disadvantages
• After a 100% sale, selling shareholders are unable to
take advantage of future growth opportunities.
• Culture of the company often changes to that of the
acquiring company.
• A strategic sale does not usually create an opportunity
for remaining management to obtain any ownership
stake.
23 Seven Steps
24. Private Equity Sponsored Recapitalization -
Description
• The sale of a portion (usually majority interest) of the
stock or assets of a company to a Private Equity Group
(PEG).
• A PEG is a firm that has raised a fund (or funds) to make
leveraged investments in privately and publicly held
companies.
• Ideal for business owners who need a financial partner
to pursue growth opportunities while reducing a portion
of their financial risk
24 Seven Steps
25. Private Equity Sponsored Recapitalization -
Description
• General Mechanics of Leveraged Recapitalization –
– Owner sells 100% of business –
• Receives cash (and possibly notes) and continuing ownership
interest in business
– Can be up to 49% as most PEG’s wish for majority ownership
– Continuing Ownership Stake is purchased on a leveraged basis (same
equity basis as the PEG)
– PEG and Owner work to aggressively grow business
– Company is typically sold (or recapitalized) four to six years later
– Attractive option if owner believes future value of business will
be materially higher than value at initial sale
25 Seven Steps
26. Private Equity Sponsored Recapitalization -
Advantages
• Allows ownership to monetize their investment in the
company, often maintaining a substantial (typically minority)
ownership stake.
• Ownership continues to run business
• PEG funds can materially accelerate growth through organic
and acquisition strategies as well as managerial assistance
• Provides remaining ownership with a “second bite of the
apple” when exiting the company.
• Post transaction culture of the company typically remains
intact.
• Potential opportunity for management to earn equity.
26 Seven Steps
27. Private Equity Sponsored Recapitalization -
Disadvantages
• The post transaction company is typically substantially
more leveraged than it was prior to the transaction.
• Enterprise values (at initial transaction) are typically less
than a sale to a strategic acquirer.
• Unlike a sale to a strategic acquirer, because selling
ownership typically reinvests in the new company, cash
proceeds at close are typically lower.
27 Seven Steps
28. Entity Structure is Important
• C Corporation
• S Corporation
• LLC
• Partnership
– General
– Limited
28 Seven Steps
29. Entity Structure is Important
• Stock Sale
– Buyer
• Takes entity liabilities and risk exposures
• No step up in basis of assets (lower
depreciation/amortization) absent § 338(h)(10) election
when eligible
– Seller
• Capital gains
• No continuing liability
• Transition may be secured by employment continuation
– May be required by current contracts not being assignable
29 Seven Steps
30. Entity Structure is Important
• Asset Sale
– Buyer
• Avoids entity liabilities and risk exposures
• Step up in basis of assets (higher depreciation/amortization)
– Purchase price allocation required
– Seller
• Different tax treatment between C corporations and pass-
throughs
• No continuing liability
• Transition may be secured by employment continuation
30 Seven Steps
31. Entity Structure is Important
C Corporations Pass-Throughs
• Generally limited to a Stock • S Corps, LLCs, Partnerships;
Sale (if corp gain on assets • Allows Asset Sale;
can’t be offset by NOLs); • Buyer get’s basis step up
• No Basis Step Up for Earnings • Seller avoids double tax and
Pre-Deal; basis increase for past
• Pre-deal dividend distributions earnings
subject to double tax • Post deal seller tax benefits
should drive higher purchase
price
31 Seven Steps
32. C Corp Conversion to S Corp
• Make sure you meet S Corp Eligibility Requirements;
• Elect S Corp Status
• 10 Year “Built-In Gain” Period;
• BIG Tax Paid on Conversion Date Gain in Assets if Assets disposed
within 10 Years;
• If Company is expected to appreciate substantially over the next 3-5
years prior to sale, this should be beneficial;
• Option to do a stock sale to avoid BIG tax still exists
32 Seven Steps
33. Recapitalization Structure
• Recap defined:
– Seller has a continuing interest
– Seller participates in future value creation to the extent of this
continuing interest
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34. Recap: S Corporation
• Use of LLC structure to facilitate sale can accomplish asset step up for
Buyer’s portion;
• Seller continues with a continuing interest;
• Target’s shareholders recognize gain (OI or CG) on the asset sale of
target’s assets;
• Special allocation of depreciation/amortization to the Buyer group;
• Be careful to avoid issues with continuing interest and anti-churning rules
34 Seven Steps
35. Recap: LLC or Partnership
• Seller continuing for a minority share can be accomplished more
easily with an LLC or Partnership;
• More flexibility in percentage interest retained by Seller;
• Buyer can get basis step up for consideration given to sellers;
• Special election made to achieve basis step up as a result of
purchase of seller’s units
35 Seven Steps
36. Recap: C Corp
• Buyer purchases majority control from seller;
• Buyer unlikely to achieve basis step up unless a deemed asset
election can be made and corporate level tax is sheltered as
previously mentioned
• Seller should receive capital gain on shares sold
36 Seven Steps
40. CBIZ Financial Solutions, Inc. Disclosure
CBIZ Mergers & Acquisitions Group is a division of CBIZ
Financial Solutions, Inc., which is a wholly-owned
subsidiary of CBIZ, Inc. (NYSE:CBZ)
Securities & Investment Advisory Services offered through
CBIZ Financial Solutions, Inc., member FINRA, SIPC
and Registered Investment Adviser
40 Seven Steps