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Why You Need to Hire an M&A Firm When Considering Your Exit

By Generational Equity

Jenga Business

One of the most important decisions a business owner can make is also the one that is often delayed the longest: How and when will you exit your business? For those that are proactive, this concept is studied and considered years before the time of the departure.

Unfortunately, one of the biggest challenges we face as exit planning advisors is getting busy entrepreneurs to realize the importance of preparation and that planning for an exit is a process, not an event. The sooner the process begins, the better off the transaction will be for the seller.

Why?

Because it is rare that a privately held company will be ready for a transition to new ownership the instant the owner decides to sell. Many need preparatory work that can take time to complete. As M&A advisors, and one of the most successful operating in the lower middle-market, we see some common issues that can (and often will) negatively impact the value paid for a business. Some of these include:

  • Excessive owner dependence
  • Significant customer concentration
  • Lack of adequate financial reporting/controls
  • Very little (if any) repeat business
  • No middle management
  • Very little documentation regarding processes/programs
  • Lack of strategic planning and foresight

The good news is that, individually, none of these are deal breakers; what they do impact, however, is the time it takes to close a deal and the ultimate valuation paid by the buyer for the business. In order to optimize both the deal value and deal velocity, we recommend that areas such as those listed above be addressed as early as possible (and in many cases, even while we have a seller in market).

And that is another great feature of working with Generational Equity when considering a sale: We help our clients “enhance” the value of their operation by providing what we call a “Roadmap for Enhancing Value.” We typically look at 15-20 metrics and key measurements that are designed by our valuation team to provide our clients with firm ideas on how to enhance valuation and salability via implementation of key strategies.

For example, as part of our financial analysis, we will typically review profit margins by major clients to determine if there is any price flexibility that can be achieved by restructuring key deals and contracts. Often many business owners have never done this analysis and are amazed to learn that many of their larger contracts are coming at a significant discount to earnings and that overall margins can be dramatically improved by employing some pricing discipline.

This is just one example of the type of analysis we bring to our engagements. And, even though every company is obviously different in terms of industry, operations, size, etc., the common areas that cause buyers concern – if addressed strategically – can have a positive impact on value and speed of deal closing.

But the key here is starting early.

We emphasize this heavily in our exit planning conferences that we hold throughout North America. Our challenge again is getting the attention of business owners who often do not want to consider exit planning until external circumstances force them to. Do not fall into this group because you will not get an optimal deal at full price.

To learn more, attend a Generational Equity exit planning conference near you. Our meetings are designed to be highly educational and will introduce you to new concepts and ideas that will most likely radically alter the way you look at your exit plans. Contact us using the following links to learn more:

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

© 2017 Generational Equity, LLC. All Rights Reserved.

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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
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
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
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
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
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 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
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
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
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.
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 would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
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
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.
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.
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
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
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Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
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
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse