Is a 9 to 1 Increase in Company Valuation Acceptable?

If we could work with you to increase the value of your company by $1,000,000, would it bother you if we were paid $100,000? And we don’t want to get paid until you get paid, so we’re not asking to get paid on some theoretical increase in value, but an increase that comes from a recapitalization or sale transaction. In fact, if we increased your value by $10,000,000 – would you really care about the $1,000,000 we would be paid. If you’re smart, wouldn’t you want us to get paid $5,000,000? The way we look at this is that you get 9x what we get, yet we are in a joint venture / partnership where we assist your company. If we yield zero value, we get zero. If we help you create value, we get 10% of the increase – not 10% of what your company is already worth – that’s all yours – but 10% of the increase in value. Can we do this for anyone? No. We need to be highly selective about the companies we work with for the simple reason that we still only have 24 hours in a day, so we can only take on …

M&A Advisor

Do M&A Advisors Add Value?

Billy Fink, Marketing Manager at Axial just published a great article in LinkedIn entitled “M&A Advisors Proven to Improve Valuations“. He states that advisors, 1) create competition in the sales process, 2) are more important in private transactions and 3) provide extra-valuation benefits.  And he is exactly right — a good M&A advisor should create far more value to the seller than the fee paid. This opens up another area for discussion:  What is the proper role for third-party advisors when growing & ultimately selling a business? You’ve probably met the CEO who insists that he/she can do the accounting, corporate legal reviews, raise money for the business, be the H/R director and find the right buyer for the business.  If you’ve met this person, you know that this CEO is wasting precious resources.  Even if the CEO is multi-talented, if doing the accounting is his/her best use of time, then the business has real problems. Mr. Fink’s article hits a cord with M&A advisors.  I’ve met lots of CEOs who think they will “save money” by doing it themselves.  What typically happens is that business is never sold, or if it is sold, a LOT of money has been …

entrepreneurial ceo

Searching For 3 Entrepreneurial CEOs in 2015

Business Owner / CEOs who want to sell some or all of their business often have a problem.  Some CEOs are savvy enough to know they have the problem — most may never know, and that lack of knowledge will result either in failure to find a buyer, or in a purchase price well below what is possible. One CEO (we will call him George) didn’t realize that he had a problem until after a failed attempt to sell his business.  We represented George as a sell side investment banking adviser.  He came to us with a buyer and our job was to advise him in the transaction.  Result?  We advised him NOT to do the deal – and he agreed. Why would we advise NOT to do a deal?  After all, our fee is based on a transaction getting done! Easy answer – the price & terms he was offered were much too low.  His business was not “ready” to be sold.  While he had a successful business, it had not grown in 5 years, fluctuating between $10-12 million in annual sales. I asked him a simple question. “George, would you like to double or triple your revenue, improve …

#1 Mistake Business Owners Make When Ready to Sell

You’ve built a nice business, congratulations. Now you’re ready to sell.  Would you like to receive the full value for your business, or would you rather just get 60-80% of the value? Stupid question, right?  Not really. Please allow me to let you in on a secret … entrepreneurs are typically horrible at getting their business ready for sale!! Don’t believe me?  Ask M&A attorneys who get the call from their client that they want to sell, and would like the process completed in 4 months and want to maximize value in an all cash sale. I can’t tell you how many times we’ve talked with a CEO/Owner and they want to start the process today.  Sometimes they tell their lawyers.  Sometimes their accountants.  But more times than not, owners who want to sell start with the assumption that the business is ready for sale … and even worse, that the CEO is really ready to sell the business. Let’s ask a few very basic questions: Is the corporate structure ready for a transaction?  We worked with one client for over a year, just to get the corporate structure in such a form that a transaction was possible.  We obtained …