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The Proven Generational Equity M&A Process

By Generational Equity

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Attendees of our M&A conferences often ask us to explain what makes the Generational Equity process so unique and successful? Our answer is simple: Throughout the years through lots of hard work, dedication, and collaboration, we have perfected a system that may not work 100% of the time (quite a bit is out of our control as you can imagine) but more often than not leads to a successful culmination of a merger or acquisition event (either a 100% sale or a partial sale).

So that you can visualize our process, I am providing you with the following flow chart that identifies the key steps we follow:

Now don’t get me wrong, most middle-market M&A advisors will follow a similar process, especially after the “Go To Market” decision is made. However, two things make our system work so effectively: the prep phase (boxes 1-5) and the skill and resources of our professionals. Let me elaborate on both a bit.

Preparing To Sell A Business

First, if you look closely at the second box, you will see that three documents are listed. Each of these is vital to our success as a deal team. From the Evaluation flows the REV (Roadmap for Enhanced Value) and the OM (Offering Memorandum). The evaluation is the key first step in what we do. It is comprised of several components that all work together to allow us to ultimately develop the enterprise value for each of our clients:

  • Financial analysis
  • Recasting of historic financials
  • Industry and market position review
  • SWOT analysis (strengths-weaknesses-opportunities-threats)
  • Creation of a five-year pro forma
  • Determination of value based on multiple valuation methods

Once our evaluation is completed (a process that typically takes 2-3 months depending on how quickly financial data is given to us), we provide the business owner with what we believe is the fair market value for the business. This number is what a willing and informed buyer would pay based on the projected growth of the business. It does not factor in (nor could it) any value of the intangible assets that the business has that for specific buyers would drive a premium value above and beyond the current enterprise value (this is where the offering memorandum comes into play).

After the value is determined and provided to our client, he or she obviously has two options: Go to market immediately OR hold and grow the business for a future sale. This is where the REV document comes into play. The reality is not every business is “buyer ready” when they come to us. Some need financial guidance, others need to focus on operational improvements, some are owner-dependent and need to develop middle-level managers, and finally, a portion may have customer concentration (usually more than 20% of revenue coming from a single client) that needs to be addressed.

The REV document is designed to ferret out these issues that need to be worked on so that the value can be “enhanced.” The key here is that our relationship with our clients does not end when the evaluation is completed. And this is a unique feature of our model as well: Our clients are entitled to two updates of value at no additional charge during a five-year period. This enables our business owners to spend time working on improving the bottom line of the company and come back later with an improved opportunity and logically a better fair market valuation.

The final product is the OM. This is the document that is created by the deal team once the business owner decides to move forward and approach buyers. It is designed to attract buyers that will be an “optimal” fit for the business, buyers that will be willing to pay a premium above the market value based on unique features that the business may have. This is where the skill of the deal maker and his/her team come into play and leads me to the second feature of our system that makes it work so well: our talented, knowledgeable, and experienced deal makers and their resources.

Skills and Sources

Lots of financial analysts that join our organization aspire to one day become a deal maker, although the skill set required to be a successful deal person is rather unique. You have to be able to understand great quantities of financial and marketing data, while at the same time translate them into the language of an entrepreneur. You have to have incredibly thick skin because half the time the buyer is mad at you because of the hard work you are doing to drive the value up, and the other half of the time the seller is mad at you because you aren’t driving the value up high enough!

Your typical deal maker also is a marital and family counselor, helping to maintain familial peace and harmony during a very stress-filled process. This role cannot be underestimated in the sale of a family-owned business and is another example of why business owners should have professional representation when going to market. If you don’t have a professional on your team to handle the tough parts of negotiating with buyers, it will add additional strain to your life and your family during an already stressful time.

Our deal professionals have, in many cases, decades of real world experience in the M&A trenches. There is an old axiom in deal making that is so very true: A deal isn’t a deal unless it falls apart at least once. And another: At least 60% of all deals fall apart in due diligence, so be ready to pick up the pieces.

On top of their skills, our deal teams also have tremendous resources available to them. Not only does this include the dozen or so M&A research databases we subscribe to, but also our proprietary database of registered buyers that now numbers over 34,000. Why is this proprietary? Because these are buyers that we are in regular contact with who tell us specifically what they are looking for in acquisition opportunities, including location, industry, size (revenue and earnings), growth potential, and intangibles. These characteristics are updated regularly to reflect any changes in a buyer’s preferences, and every client we take to market gets passed through this database to look for matches. As you can imagine this system produces very good combinations of buyers for our clients.

Again, our overall system is not that much different from other competitors of ours. However, what sets us apart is that we do the following very, very well:

  • Objectively advise you of the current market value of your company so you can make an informed decision at the outset
  • Provide you with growth strategies should you decide to hold and grow (REV)
  • Give you two updates of value after the initial valuation
  • Produce a very effective OM when you move into the market
  • Provide you with a deal team that has produced proven results
  • Give your opportunity the widest viewing possible in the buying universe
  • Negotiate and close the optimal deal for you and your family

And it is these features that have enabled Generational Equity to be recognized for numerous awards including M&A Consulting/Advisory Firm of the Year in 2016, 2017 and 2018 by the M&A Advisor, a leading M&A trade group. In addition, we have been ranked No. 1 in deals closed in North America valued less than $25 million for the past eight years, and we are consistently ranked in the top ten in deals below $100 million. We are quite justifiably proud of our successes, but our success is due to our proven system and skilled, talented professionals.

However, many of you will, for a variety of reasons, decide to pursue buyers without our help. If so, then you can follow the process outlined above to do so. I have not even touched on the last 11 steps in the process. If you would like to delve deeper into these latter steps so that you can ensure success despite going it alone, attend a Generational Equity M&A workshop. Most of the business owners that attend our seminars do so because of the quality of information we provide, and only a minority of attendees ever become clients.

If you would like to find out how to attend a seminar in your area, please give us a call at 972-232-1121 or fill out a contact form and we will see if your company qualifies you to attend. 

Carl Doerksen is the Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC All Rights Reserved

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We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.
Karen S. Williams, CFO, BW Manufacturing
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.
Michael J Polarek, President, Paragon Packaging
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.
Michael J Polarek, President, Paragon Packaging
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.
Shenille Engelhart, Owner – CLS Technology
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!
Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”
Karen S. Williams, CFO, BW Manufacturing
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers