When Companies Hold On Too Long: An Exit Planning Guide

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The final stage in any mergers and acquisition deal is the exit planning. This is when the company handles all the processes involved in the transition and completion of the agreement. Typically, this should take a few months. However, exit planning for a company could be delayed due to a common mistake some professionals make during the earlier stages of the M&A.

The mistake is either holding out for too long or selling too late. Many entrepreneurs often go with their gut feeling in giving finality to huge decisions. Their intuition should allow them the freedom and opportunity to properly gauge situations and react.

Unfortunately, going with the gut could be a deterrent to efficiency in many mergers and acquisitions. Too often the target company is edged out by another more aggressive, less hesitant company.

One must remember that many takeovers are a matter of projected income and ease of transition. Buyers usually look for the best deals. If too many complications arise, the logical move of the buyer would be to walk away.

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This can be easily avoided by setting a complete disclosure schedule in advance. A disclosure schedule is provided in any acquisition proposal. It details all information regarding key contracts, intellectual property, pending litigations, insurance, etc. This document is incredibly time-consuming but reduces the risks of a delayed takeover. Target companies are less likely to hold on too long if they have all information in their hands. Furthermore, the provisions in the document restrain the seller from breaching warranties, thereby easing the mind of the buyer.

Companies are recommended to seek the advice of their trusted M&A firms to enlighten them about procedures and expediting processes.

Generational Equity is composed of professionals who help business owners in the middle market anticipate challenges and prepare for every stage of an M&A transaction. Headed by Ryan Binkley, it has helped dozens of companies seamlessly transition their ventures. For more information about the company’s services, follow this blog.

Jumping Board: Understanding Platform Acquisition

When a private equity firm decides to invest in a new industry or investment type, it can initially do so by acquiring a platform company. The acquisition will then serve as a foundation for the purchase of smaller firms, called add-ons, that will be synergistic to the operations of the platform firm.

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A platform company should, therefore, have a strong and experienced management team that has proven to have the ability to develop or grow a business. It will also help if it is a major player in the industry to make it a strategic buy for a private equity firm.

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Since the buyer would be acquiring a new business it could not combine with its existing investments, it has to make sure that the platform acquisition will generate attractive returns.

For add-on acquisitions, on the other hand, private equity firms would be looking at the acquisition’s complementary fit and strategic benefits to the initial transaction.

Business owners looking to fund growths with partners should look into platform acquisition as a way to do so. Private equity firms are always on the lookout for lower middle-market companies they can use as an entry to new business niches.

And if these businesses are not considered large enough to be a platform company, it is still possible for the company to be acquired as an add-on to a synergistic portfolio holding.

Ryan Binkley is Generational Equity’s president. The Texas-based M&A firm specializes in the middle-cap market. Read more on his credentials by visiting this website.

How Clean Financial Statements Can Help Close a Sale

The process of selling a business cannot be simplified to just a few easy steps. Some areas need to be addressed first to ensure that the business is ripe for selling after a tedious check by the buyer.

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There are various ways to increase the saleability of a business, but one that should not be neglected is getting the financials in order. Unfortunately, in an effort to save costs, some business owners do not place enough resources and effort to maintain a clean and adequate financial and accounting system.

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Potential buyers can somehow overlook a firm’s operational, administration, HR, and customer challenges and issues, as long as the company is financially sound.

A seller can be as honest as he wants to and present what makes his company successful, but the absence of readily available financial information can be a cause of concern for the buyer. Some deals can even be called off due to this.

By utilizing an accounting system that accurately keeps track of company financial statements, hiring a qualified accountant, and teaming up with an established M&A partner, potential buyers will gain a clearer picture of the state of the company they wish to acquire and make it easier to push through with the transaction.

Ryan Binkley is the president of Generational Equity, an M&A firm that has helped numerous buyers and sellers complete beneficial partnerships. Learn more about his work by visiting this LinkedIn profile.

Sensible sale: Factors to consider before selling a business

Putting up a business for sale is not a quick process. Deciding to sell is a tough choice to make even for seasoned entrepreneurs. Choosing when to sell is also a significant consideration especially in times of not so favorable economic climate and industry demand. Right timing is a major factor as it dictates a company’s value in the market. 

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Other owners just want their company sold because they might have outgrown it. When a better opportunity presents itself, a business owner and other members of the management must consider other factors involved such as their employees, clients, and even pending workload. Moving on from an old endeavor is a part of life. However, it can be done in such a way that will profit all the parties involved. 

Before selling a business, fixing the company’s financial assets and books must be prioritized. When the financial side isn’t in place, it reveals that one of the most important aspects of the business has been neglected. All business owners desire to sell their business at the best price. To fulfill this, they need the services of an M&A specialist who will guide them through the process. With a firm or an expert’s professional advice, owners will be able to present their sale-ready companies to potential buyers. When all considerations have been fulfilled, the time spent building and eventually selling a company will be worth it. 

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As the president of Dallas-based Generational Equity, Ryan Binkley specializes in the middle-cap market with extensive experience in business services and management. For more information about Ryan and his company, visit this website.

A Closed Deal: Understanding Mergers and Acquisitions

Is it time for you to sell your business? Here are things not a lot of business owners recognize when they take their company out for an M&A.

People, not companies, buy startups: An M&A happens when a CEO or a VP sees a strategic gap in the future of the company. They get startups to see what they can get done in the next few months with a deal that can be found in the business being offered.

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M&A can be capricious: Priorities may change along the way. Your company may be a good strategic fit in a year’s time, but if priorities change, you can be just a memory.

Selling your company does not mean you have to leave: M&As aren’t like grocery purchases that you just pay off the counter. Most deals have two to three-year retention, vesting, and re-vesting programs and potential earn-outs. If you are committing to an M&A, you have to work for two to three years at the acquirer’s company.

Some big company bosses look for M&As for the wrong intentions: A merger may have to do with glory-seeking than improving business strategy. Some CEOs want to prove their worth by signing in as many startups as they can, but they do not see potential hazards of their “company-hoarding.”

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Before signing and agreeing to the terms of an M&A, management should evaluate if it is the best option for the company.

Ryan Binkley is the president of Generational Equity, a Dallas-based M&A firm. Follow this Twitter account to know more about business trends and issues.

Exit Strategies: The Art and Business of Cashing Out Investments

Business ventures of all types are not always guaranteed of success, regardless if they are backed by an excellent business plan or manned by a talented workforce. However, whether these endeavors become profitable or not, planning an exit strategy is always a must. Particularly in equity ventures, such strategies are very common. Equity investments aren’t like loans where the principal earns interest. Investors do not earn until they cash out of their investment. In addition, entrepreneurs love the idea of starting up a venture and then offering it to investors while still highly marketable. An exit strategy helps optimize a good situation, rather than get out of a bad one. Below are some of the most common exit strategies that have been proven to do financial wonders to both the entrepreneurs and their investors:

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1. Merger and acquisition. M&As involve two or more companies being merged or a smaller company being acquired by a larger conglomerate. The businesses may specialize in the same field or work on different functions but still under the same industry. M&As happen not necessarily because one company is failing. Such business agreement is a win-win situation for all parties involved as it offers increased workforce, expanded customer base, increased assets and capital, and combined expertise.

2. Initial Public Offering (IPO). When a company goes public—which means that practically anyone can be an investor—it easily gains additional capital to fuel expansion and other growth plans. IPOs are often considered the quickest way to riches, especially if the public sees a company to be highly profitable.

3. Cash cow. When a venture has successfully established a stable revenue stream and secure marketplace, owners may seek a trusted professional to run it on their behalf, while they build a new fund to develop their next great idea. This way, entrepreneurs retain ownership of the company while enjoying annuity.

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The president of Generational Equity, Ryan Binkley has remarkable acumen for performing valuations and building exit strategies for companies of all sizes. More about him can be read here.