The business sale process has a number of distinct stages and typically takes 6 to 10 months to complete.
There are strategic and financial buyers. The best buyer is the one that benefits the most from the purchase.
A business's value is determined by market comparables as well as business specific analysis.
Whether a transaction is defined as a merger or an acquisition is determined by a number of accounting tests. Simply put, both parties in a merger need to meet a number of equality tests and, when met, transactions classified this way can be more tax efficient. Because of the strict rules that apply here, most…
A working capital adjustment is required when a going concern business is acquired by way of a share purchase agreement. This is the case for two main reasons: (i) because working capital changes every day as revenues come in and payments are made and (ii), because working capital is easily manipulated in a material way…
There have been numerous studies on the difficulties of successfully completing acquisitions. Some studies suggest that the majority of all acquisitions fail. We won’t debate what is a success or failure, and over what time frame it should be measured here but what we will do is review four leading Canadian software companies and examine their…
Buyers remorse: does paying more for a business than anyone else mean you have overpaid? Not necessarily. When managing a company divestiture, there comes a point when interested parties are requested to provide non-binding expressions of interest (called an EOI, this is the first indication of value based on reviewing the CIM and answering select questions,…
Revenue quality is an area of focus for buyers and venture capital/private equity investors. High revenue quality companies are valued higher than low quality revenue companies. But what does this really mean and why is this? It is simply a question of risk. High quality revenues reduce risk and therefore result in a higher valuation. What…
Rising interest rates will lower the value of your business. Why? Because valuation multiples are based on interest rates; let me explain… Interest rates in the United States reached an all time high of 20 percent in March of 1980 and then declined to a record low of 0.25 percent in December of 2008. Since…
Unsolicited offers tend to come at inopportune times. While some are actually opportunistic, most come out of the blue when the potential seller is not ready to receive them. Unsolicited offers for private companies tend to come from immediate competitors, customers or suppliers and, these days, private equity is also actively searching for new platform…
What is a financial buyer and what logic drives their approach to price and structure? A financial buyer is one who is buying strictly for a financial return. Financial buyers include individual investors, who have either saved up or cashed out, and institutional funds such as Venture Capital Funds, for early stage high growth opportunities,…
