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Creating Owner Value

Given that most business results are improving, interest rates are rising and life only gets shorter, many business owners are considering the sale of their business or, at least, transitioning into a less active role. On the buy side, companies are actively seeking quality acquisition candidates to enhance operating efficiencies and expand market access. Here are a few points for prospective sellers (or buyers) that are far from original, but worth repeating:

  • It's not all about the price. You'll quickly discover that the terms of the deal can be far more important than the price.
  • Oftentimes, owners' financial energies focus on improving cash flow by meticulously scouring monthly P&L’s. Don’t forget your Balance Sheet. Debt restructure or better working capital management can quickly overshadow the benefits of reducing office supplies.
  • If you're profitable with over $5M in sales, be prepared to deal with the PEG's (Private Equity Groups). They're much more data-driven and, while they may not fully appreciate ACC basketball, they have a lot of dry powder (i.e., capital ready to invest).
  • Not all EBITDA's are the same. "E" is much more important than "D" and multipliers can vary widely by industry and geographic region.
  • There is always a friendly competitor who has expressed interest in buying your business. It's easy and you trust them. But it's rarely the best opportunity for you or your employees.
  • If you are the seller, selecting a business intermediary with strong buyer relationships is important, but databases stocked with qualified buyers may be more important. Big data has real value.
  • Most realtors do not recommend selling your house “as is.” The same is true for your business. Consider developing a multi-year plan to enhance the long-term value of your business.
  • Assemble an experienced, quality team of experts to help guide you. The emphasis should be on the team — not individual expertise. "It takes a lot of unspectacular preparation to have spectacular results in both business and football." — R. Staubach

NextGen CFO has participated in a variety of successful transactions. Our contributions have included pre-sale business improvement, earnings analysis and projections, financial coaching for key accounting personnel, deal evaluation and due diligence facilitation.

Our goal is to create owner value. Let's discuss how we can help guide you through the process.

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