The Sale Process

The Sale Process

The business sale process has a number of distinct stages and typically takes 6 to 10 months to complete.

The Business Sale Process

Finding the Right Buyer

Finding the Right Buyer

There are strategic and financial buyers. The best buyer is the one that benefits the most from the purchase.

Finding the Right Buyer

Valuation

Valuation

A business's value is determined by market comparables as well as business specific analysis.

Valuation

Mergers and Acquisitions

M&A Acronyms, Abbreviations and Definitions

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…

Normalization Adjustments

EBITDA Normalization Adjustments: Where do you Stop?

For public companies, the most cited valuation multiple is the after tax net income multiple (the price-earnings multiple or PE multiple).  For early stage companies it is quite often a multiple of revenues because, either they are not profitable or, they are in a high growth phase, where profit levels are depressed as a result…

NDA-non-disclosure-agreement

NDA Agreement: Meaning and Sample Clauses

A Non Disclosure Agreement (NDA, also called CA for Confidentiality Agreement and MNDA for Mutual Non Disclosure Agreement) are contracts that stipulate that information received from a counter-party will only be used for the purpose as defined in the NDA.  Meaning, it will not be used as a basis for competitive tactics or shared freely…

Revenue Quality

Revenue Quality: What Does it Really Mean?

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.…

Private Capital

Navigating the World of Private Capital

What is private capital?  Private capital includes all forms of long-term capital other than publicly traded equity or debt.  For the purpose of this overview, we are setting aside publicly traded common and preferred shares and publicly traded debt such as secured notes or high-yield (also called “junk”) bonds as well as crowd funding. Providers…

Raising Capital

Raising Capital? Prepare Well in Advance

Raising capital for a private company can be time consuming and expensive.  Capital may be in the form of a loan or an investment.  The lender/investor will seek a return on the capital in the form of interest, royalties, dividends, and/or capital gain.  Different forms of capital require different degrees of investment in time, due…

Winners Remorse

Buyers Remorse: Does the M&A Process Lead Buyers to Overpay?

Buyer’s remorse, also called winner’s remorse or winner’s curse is the realization that you have won an auction by paying more than anyone else was willing to pay.  Does winner’s remorse mean you have overpaid?  Not necessarily. When managing a company sale, there comes a point when interested parties are requested to provide non-binding expressions of…

working capital adjustment

Working Capital Adjustments in an Acquisition

Working capital adjustments are required when a going concern business is acquired by way of a share purchase.  This is the case for two main reasons: (i), because working capital changes every day as revenues are generated and supplier and payroll payments are made, and (ii), because working capital is easily manipulated in a material…

earn-out

Form of Payment: Should You Accept an Earn-Out?

Consideration (i.e. amount to be paid) in private company acquisitions will usually include a sizable portion in cash (50 to 100%) and will often include an unsecured note, and/or an earn-out.  This is because: (i) the buyer does not have the amount of cash required for an all cash transaction (particularly in the case of…