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The Value of Professional Merger and Acquisition Guidance

By Generational Equity

Business Climbing Stairs

As we discussed last Friday, The M&A Advisor, a leading mergers and acquisitions trade organization, along with Katz, Sapper & Miller, a CPA firm, conducted a survey of experienced M&A professionals.

The aim of the study was to delve into trends and developments impacting M&A deal making in 2016 and how those issues might impact 2017. The survey results and accompanying interviews provide real insight into current M&A trends.

On Friday, we looked at some of the challenges professional buyers are facing today in closing deals. Today we are going to examine the value that investment banking firms and M&A advisors, like the Generational Group, bring to the table.

According to Amy Margolis, principal at a private equity firm:

[W]hen working with a seller who has not hired an outside advisor, it can be particularly challenging to manage ‘the expectations, getting them to the table, getting them comfortable that we do want them to stay on, or whatever their reservations are … seller’s remorse is always something to consider. At the end, they feel this has been their baby. This is a company that they’ve had in their family. They don’t have someone potentially to take over. Can they really let go? … That’s one of the biggest challenges we face if we are pursuing a business owner who has not hired an experienced M&A advisor.’

This is a theme that we touched on Friday, and it is abundantly clear if you review the entire study that it is a major issue buyers encounter regularly where the seller is not using an M&A firm. Simply put, an experienced dealmaker will ensure that the client is truly ready to talk to buyers before even entering the market. A professional dealmaker works with hundreds of buyers every year and has a reputation in the market that needs to be maintained. For that reason, a dealmaker will spend time with his or her client to clearly determine the financial needs that the seller has and, most importantly, where the individual is psychologically in relation to departing the company.

Business Enterprise Value

Another key facet that an M&A firm brings to its clients is the ability to educate them on the market value of the business. This is also a huge challenge for professional buyers that are working with sellers who do not have professional representation. Here is how the study by the M&A Advisor described it:

Hand-in-hand with the issue of buyer remorse is the challenge that comes with the valuation of the company by the buyer. “Sellers see larger companies that are getting these crazy valuations and feel, ‘My Company is just as good as theirs. That’s my expectation.’” The advisor’s challenge is to help sellers understand why their company may be different from a larger company in the same industry and why they may not get the same valuation.

One of the keys to the Generational Group’s success has always been its valuation team (in fact, we won Valuation Firm of the Year in 2015). Before we take any client to market, we conduct a thorough, detailed, in-depth evaluation on the client’s firm. We do this for two equally important reasons:

  1. To give the seller a realistic expectation regarding current market value
  2. If the value is below the client’s financial needs/expectations, then value building strategies are provided to improve the company’s value over time

Obviously, not every privately held company is adequately prepared for buyer scrutiny the moment we conclude our evaluation. Most in fact have areas that need attention to make the business far more buyer ready. The two dozen metrics that we look at are designed to help an owner improve the realistic value opinion we have over a three-year to five-year timeframe.

This is the great news about working with the Generational Group of companies: we establish relationships with our clients that are long-lasting. In fact, we provide two updates of value (after the initial valuation) at no additional cost over a five-year window. In partnering with an owner, our goal is to help them build a company the optimal way in order to gradually improve the business value.

Again, from a buyer’s perspective, having a seller with an M&A advisor in tow is far more optimal than the opposite. Even if the investment bank drives the value up, it is in many cases far more beneficial to the buyer to pay a bit more simply to ensure that the deal does close.

I hope that you have found these concepts from a buyer’s perspective to be helpful. The more you as a business owner can get inside the mindset of a buyer, the better off you will be when you present your company to them. This educational component is what we emphasize heavily in the executive exit planning conferences that we hold. Our professionals have one goal in mind: at the end of the meeting we want our conference attendees to be thinking more like buyers than sellers and to use that mindset to grow their businesses.

If you are interested in learning more about how you can build a buyer ready business in today’s market, you should set aside a day and attend one of our meetings. To learn more, call us at 972-232-1121 or visit our website and provide us with your contact information.

By Carl Doerksen,  Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC. All Rights Reserved.

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Bil MacLeslie, CEO, ipHouse
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
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.
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.
Shane and Johanna Kline, Owners of Vision Upfitters
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
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.
Rick Greene of Dobbs Equity Partners LLC
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
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.
JoAnn Ellis, Owner of Fondren 5 Star Kennels
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.
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!
JoAnn Ellis, Owner of Fondren 5 Star Kennels
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.
Caroline Connelly, CEO, OptoTest
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 were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.
Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
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 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
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward. P.S. Given my experience with GE I felt comfortable enough to sign up with Generation Wealth Advisors!
Tom Currier, Former President & CEO, Rackmount Solutions
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
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Betty L. Brennan, President, Taylor Studios
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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
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
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
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.
Salvo Stoch, Founder and CEO of Sleeping Partners
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Jay Dinnison, Owner of Sharpe Mixers
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Larry Moore, Owner, A Company Portable Restrooms
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Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
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.