Business Value – What’s It Worth?
Business valuations are at best, an inexact science. There are many formulas and approaches used by appraisers to assess the “stand-alone” value of a company. In fact, we receive phone calls every month from CPAs and Appraisers looking for “second opinions” or sanity checks. Many factors impact value. Some of these include: financial information; the “quality” of revenue and earnings; trends; industry sectors; business history; management depth; structure of deals; terms; assets; competition; client concentration; suppliers; margins; barriers to entry; legal; environmental; vulnerabilities; external factors; strengths; weaknesses; and others. Issues like these, along with the ability of a buyer to grow the company profitably, impact risk and stability.
Financial analysis – historic and projected – must be evaluated closely. Defensible recasting and reconstruction of financial information is critical. This exercise must comprise sound arguments and a rational basis for all financial adjustments. Poorly conceived arguments will raise the specter of instability and initiate questions about the true financial strength and earnings of the company. Concerning these and other valuation issues,“ beauty is in the eye of the beholder.” Buyers often evaluate companies from different vantage points, and thus, render materially different value conclusions.
We present compelling arguments to maximize value, structure, terms and conditions. There are two sides to every issue; however, we know how to position your company.
Frequently, selling the “synergistic value” that may be reaped by a strategic buyer can significantly enhance value and ultimately price. One of the best methods to maximize value is to market a company aggressively to the best “universe” of strategic buyers. By doing so, we can generate a
competitive environment, thus leveraging the best price and terms for your benefit.
We will provide you with our opinion of value after reviewing financial information and discussing the operational and infrastructural intricacies of your business.
Should You Go It Alone or Hire a Professional?
Many people prefer to work alone without collaborating with experts, because it is difficult to ascertain whether a so-called expert can truly add value. Unfortunately, many so-called experts misrepresent their knowledge concerning one of the most important financial decisions of your life.
We are your experts and your advocates. We are intensely engaged to help ensure a smooth and successful result. We bring discipline and value to the process, and do everything possible to make sure you don’t leave any money on the table.
- We focus on getting you the best deal and are sensitive to your goals and needs
- You focus on your core competency (your business) and don’t become distracted by unscrupulous buyers or tedious, time consuming issues
- We become knowledgeable about your company and industry so we can articulate its strengths and provide “perspective” regarding perceived weaknesses
- We prepare a professional and compelling package that highlights attributes and generates buyer interest
- We qualify buyers for financial and business credibility
- We position your company assertively and defend against criticism and problematic issues
- We understand fears and expectations, and prepare you accordingly
- We defend against confidentiality leaks
- We provide an emotional buffer during the process
- We provide due diligence preparation and assistance
- We provide strategic, proactive marketing to the best buyers
- We suggest tax saving strategies
- We provide coaching for meetings with sellers,buyers and/or lenders
- We help you navigate through the transaction minefields
- We help procure efficient financing
- We negotiate so that you get what you deserve
You need a partner that will roll up their sleeves and “drive” deals to the finish line.
Mistakes and Misconceptions
Many sellers and buyers assume they know how to manage and handle all aspects of a business sale, merger or acquisition. Inevitably, they make mistakes that significantly impact the final outcome. Frequently, they do not even know they have left “money on the table,” however, some time after closing, they will discover that their assumptions and actions irrevocably compromised what should have been a better result. Those who seek to sell or buy without the advantage of value-added expertise, are often unprepared for the complexities of the process and are prone to committing serious errors.
Vigilant and diligent preparation must address these issues:
- Value enhancement – analyze numerous issues, i.e.,not just financial statements
- Selling at the right time – timing is key to maximize interest, as well as ultimate terms, structure and proceeds
- Selecting the right buyers – people or entities the seller knows or conducts business with are often not the right or best buyers
- Understanding buyer motivations – motives, priorities, financial capability, growth strategies, synergistic benefits and corporate expansion initiatives
- Complete, comprehensible documentation – well-prepared, accurate documentation is a must
- One buyer – too often, a seller tells us that they have one interested buyer. One buyer limits selling leverage and frequently compromises results
- Focusing on the future – present the past, but sell the future and the potential likelihood of future earnings and growth
- Breaking gridlock – unlike attorneys, we can address and communicate with all parties during every stage of the process including: grievances; floating different proposals; clarifying real intentions; and breaking “transaction gridlock”
- Valuation multiples are misleading – frequently “so-called” industry multiples are irrelevant unless you evaluate all the issues that contribute to value and impact price, terms and conditions
- Cash and structure – structure and terms can sometimes be more valuable than an all cash price
- Consideration – the acceptance of thinly traded stock or stock of a weak company can be a costly mistake
- Impropriety perception – an objective internal review to identify potential problems, challenges or improprieties is critical to a successful closing
- Truth and material issues – telling half-truths or not disclosing material issues is a big mistake
Whether you’re selling or buying, if you are well prepared and well represented, you will be positioned to optimize transaction results and minimize risk.