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May 9, 2019

Most business owners are selling for lifestyle, not financial, reasons. Common lifestyle reasons are retirement, becoming tired of the business, health, or the need to move elsewhere. The reason we say that these are lifestyle reasons rather than financial is that the motivation is based on lifestyle considerations, rather than financial. In most business sales of a successful business, the return on the sale proceeds, after taxes on the sale price, will be less than the owner was earning out of the business.

In many sales for lifestyle reasons, the owner may not have a choice on the timing. But, in some others, particularly retirement, there is a choice in timing. Some factors that come into play may be when the owner will collect social security if that is going to be a significant source of income. A financial planner can help a business owner, who wants to retire, see when they can afford to do so. It’s likely that there is some flexibility in that date. The sale price of the busine...

April 5, 2019

It is important to understand the various aspects of confidentiality when it comes to selling a business. This can involve understanding what to disclose and when, and the legal obligations that need to be met by business sellers.

Knowing What to Disclose and When

Knowing what to disclose and when can have a significant impact on the sale of your business, so hiring a business broker who can advise on such matters is an important step. From a buyer’s perspective, they want to know as much as possible about the operations and performance of the business so that they can make an informed decision whether or not to offer and at what price.

Account details such as cash flow and existing contracts may be requested. Because of the sensitive nature of some of this information, particularly when it comes to existing relationships and contracts with suppliers and customers, business sellers may be reluctant to reveal more information than is absolutely necessary.

Once people involved with the busin...

March 7, 2019

The quarterly IBBA and M&A Source Market Pulse Survey was created to gain an accurate understanding of the market conditions for business being sold. The national survey conducted and compiled by the Pepperdine Private Capital Markets Project is intended to provide a valuable resource to business owners and their advisors.

The following graphs and charts provide highlights of the most recent quarter and provide some guidance as we enter 2019 and beyond. If you are interested in the complete report please contact me at mike@vbbadvisors.com.

The intense pace of mergers and acquisitions that shaped Main Street and the Lower Middle Market last year is likely to continue into 2019. But, advisors don’t expect the run to last much longer.

“Increased deal activity is being driven
by in part by the low unemployment rate
which makes it hard for businesses to grow organically,” said Craig Everett, PhD, Assistant Professor of Finance and Director of the Pepperdine Private Capital Markets Project. “Th...

February 1, 2019

The following is an excerpt from investor Brent Beshore’s recent book, The Messy Marketplace: Selling Your Business in a World of Imperfect Buyers. Beshore is founder and CEO of adventur.es, a Midwestern-based permanent equity firm.

As a seller, it can be easy to fixate on the numbers. “My business is worth X. I’m going to get Y cash at close.” These figures will represent some of the largest you’ve seen in your lifetime. The focus on valuation is understandable, but remember that structure and terms are equally important in negotiation.

When negotiating with a qualified and trustworthy investor (a.k.a. the type of buyer you probably want), you should take advantage of their expertise. While this may seem counterintuitive, they have spent their careers understanding creative ways to structure a deal, from responsible options and uses of debt to how to properly incentivize existing leadership to ensure a smooth transition. Your best path is to tell them what is important to you and why, a...

December 4, 2018

Two obvious and essential drivers of business value are business profits and growth potential, but eliminating risk and increasing the quality of your business can also make a dramatic difference in the value. Owners should review all facets of their businesses for improvement. There are three common and critical areas that deserve scrutiny regardless of industry. Here is a partial list of best practices in each of these areas:

Human Capital:

▪Recruit and hire a talented management team (COO and CFO at minimum)

▪Cross-train to secure backup for key employees and their duties

▪Implement incentive plans so key employees will stay before

▪Benchmark your compensation and benefits to be sure they are competitive

▪Take HR compliance seriously

▪Upgrade your advisors as you grow


▪Consider a Quality of Earnings engagement to ensure the quality of financials

▪Limit owner personal expenses and document them

▪Resist the temptation to depress earnings and minimize income taxes

▪Set up proper intern...

August 13, 2018

For business owners, summer often brings extra challenges like slower sales cycles and the musical chairs of employee vacations. However, summer is also a good time to unplug and take stock of where you are in your life and your business. If that process leads you to think about a sale of your business, you’re going to want to get ahead of the game in three key areas:

#1: Deal with the things that scare buyers away

There are a few big red flags that scare buyers away, especially financial buyers who play an increasing role in one’s exit options today. You will want to review your business, acknowledge where you have weaknesses, create a plan to improve what you can, and be ready to explain what you cannot. 

Some common red flags include:

* Revenue Concentration: Avoid the situation where 20% or more of your revenue is concentrated in one or two customers

* Customer Churn: Buyers are seeking long-term stable revenue streams. Maintaining existing customers is as important as gaining new ones...

July 5, 2018

If you have ever sold your home, you are probably familiar with the term “staging.” Staging is the process of giving your home curb appeal, depersonalizing it, de-cluttering it, making needed repairs, and putting it in its best condition—all in all, making it SHINE! Top realtors agree that the first impression is crucial; after all, there is only one first impression. You have to entice potential buyers to take a closer look inside. Better yet, you want them to fall in love with your home and offer their highest price on your terms.

But what if what you were considering selling wasn’t a home but your business? Is there such a thing as “staging” a business? The answer is a resounding yes. To accomplish a successful sale in this very competitive marketplace, dressing your business for success can have a dramatic impact on your price, the time to a transaction, and making your business one of the fortunate one in five that actually sells. Unlike preparing a home for sale, staging your busi...

June 8, 2018

The M&A market remains white hot and the lower middle market is no exception. Sellers are undoubtedly benefiting from today’s strong market conditions. “The market is as robust as it’s ever been. We are seeing high valuations. Average purchase price multiples are at an all-time high in mid seven times EBITDA,” says Graeme Frazier, president of Private Capital Research LLC and a founder of GF Data, a data provider that tracks companies with enterprise values of $5 million to $250 million. “Even rising interest rates are not quelling demand.”

There are multiple factors leading to the frenzied deal pace in the lower middle market. First, there’s a tremendous amount of capital in the market. The abundance of dry powder has been well documented over the years. Second, the lending markets are feeding the frenzy. According to GF Data, debt multiples have reached a total of 4.2 times EBITDA and on the senior side they have inched up to 3.4 times EBITDA in the lower middle market. “It’s not a re...

May 8, 2018

There are several specific places where companies routinely stub their toes when making acquisitions. Get them right instead — and your prospects will soar.

1. People

Acquisitions rise and fall on the quality and dedication of the people called upon to carry them out. For this reason, successful acquirers begin to address their people issues almost immediately upon identifying a target.

Start with your executive leadership team. Determine the composition of the new management team as far ahead of time as possible. Once those decisions are made and the leaders secured, then junior managers can be appointed. This helps communicate internally that the integration process is beginning to unfold smoothly and sensibly.

Then identify those individuals (and occasionally teams) that are outside the leadership realm, but still essential to retain. They can be high producers, key coders or designers, or wizards on the production floor, for example. Develop specific strategies to keep them engaged.


April 6, 2018

When selling a business, time is not your friend. Time is the enemy of all deals. In fact, "time wounds all deals" is an expression that can be associated with many different industries, but is especially relevant to business acquisitions. So, the key to a successful deal is to prepare well, come out strong and maintain momentum throughout the business sale process. The deal clock is set in motion as soon as your company hits the business-for-sale market, not later in the process when a buyer presents the first offer.

So, to generate deal momentum, a business owner should be ready for the trip to the marketplace before the train leaves the station. This means organize your documentation and vet potential roadblocks that can derail or delay reaching the done-deal destination.

Don’t let time work against you. Ready up with these 14 karats of knowledge so when the sale train does leave the station, it will have the momentum necessary to reach a timely closing.

14 Karats of Knowledge

1. Know w...

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Vending Business Mergers and Acquisitions