This document discusses how the COVID-19 pandemic has affected business valuations and strategies for selling a business over the next two years. While private equity and corporate buyers are still active, valuations are lower and deals are taking longer to complete due diligence. Owners should get 2019 financials verified, document 2020 COVID impacts, evaluate strategic buyers, stress-test their business model's resiliency, and develop a growth strategy to strengthen their positioning for a sale. Taking these steps now can help optimize the future sale valuation and process.

1. Selling Your Business in a
Post-Corona World
Jim Cumbee JD, MBA
April 27, 2020

2. “Just the facts, ma’am”
“How do the events of 2020 affect
my business valuation, and my
strategy to sell it sometime over
the next two years?”

3. Agenda
✓What’s going on in the market
✓Valuations
✓Specific things you can do now if you think you
might want to sell within the next two years

4. The Market for Private
Companies Today
Good News
• Private equity is still looking
• Corporate buyers (strategics)
still realize growth thru
acquisition is faster
• Interest rates will remain low
Bad News
• Shell shock ☞ fear ☞ risk
adjustment
• It’s now a buyer’s market
• Valuations are a moving target
• Due diligence is more extensive
• Getting around the bases takes
longer

5. Getting Around
the Bases
Come to the plate: consider exit objectives (amount &
timing), select advisors, prepare business profile & marketing
materials
First base: prepare prospective buyer target list and start
exploratory discussions
Second base: conclude exploratory discussions, start specific
negotiations and sign Letter of Intent
Third base: Start due diligence, prepare legal documentation,
and effectuate HR integration
Home: Closing and integration

6. Valuations
• Quantitative factors
- EBITDA x Multiple
- Terms
• Qualitative factors: “Seven principles of
irresistibility”

7. 2019 EBITDA can be your baseline IF you can show your
EBITDAC is pacing back toward your baseline year.
EBITDA ☞Earnings Before Interest, Taxes, Depreciation &
Amortization
EBITDAC ☞ Earnings Before Interest, Taxes, Depreciation &
Amortization during Coronavirus

8. Multiples & Terms
✓Expect 10%+/- change in multiples
✓Expect terms vs. all cash at close
• earn outs
• holdbacks
• seller financing
• equity rollover
Revenue
increase
7X+
3 - 5X
4 - 6X
0 - 3X
Profit
margin
20%
15%
10%
7.5%
0%

9. • Diverse customer base
• Sustainable revenue stream
• Reliable financial statements
• Demonstrable scalability
• Unique market position
• Owner independence
• Believable growth story
What has COVID revealed about the
fragility of your business model?

10. Things You Can Do Now
• Get 2019 financials audited or
reviewed
• Document COVID-related impacts
to your 2020 financials
• Evaluate potential strategic buyers Competitors
small large
Customers
Suppliers

11. Things You Can Do Now
• Get 2019 financials audited or reviewed
• Document COVID-related impacts to your 2020 financials
• Evaluate potential strategic buyers
• Stress-test the resiliency of your business model
• Develop growth strategy
Should

12. Growth Strategy
New products/services
in existing markets
New products/services
in new markets
Existing products/services
in new markets
Existing products/services
in existing markets

13. Things You Can Do Now
• Get 2019 financials audited or reviewed
• Document COVID-related impacts to your 2020 financials
• Evaluate potential strategic buyers
• Stress-test the resiliency of your business model
• Develop growth strategy
Should

14. V W LU
“Only the Paranoid Who
Do Something About
Their Paranoia Survive”

15. Jim Cumbee JD, MBA
(615) 390-9966
jim@tnvalleygroup.com
Good Luck!!