Tag M&A

Recap: 5 Tips Surrounding an M&A Deal

0 comments By TRMoore Filed in General, Mergers & Acquisitions Tagged with , , , , , November 17th, 2011 @ 3:07 pm

“What if my competitor is trying to buy me out?” This business owner concern was among many addressed by Managing Partner Tim Moore and Certified M&A Advisor Steven Silverman during a roundtable discussion held on Nov. 11 for local entrepreneurs. Also on hand was a TR Moore & Company client who recently went through a business sell-side transaction, and shared her M&A experience and what the process entails. Insight included:

  1. Know your optimal timing. Typically, the best time to sell is when a business is on the rise. Profitability and high growth attract the buyer’s eye. In some cases, once a business has reached its peak, the buyer will begin to question how much of the business is left to grow.
  2. Be aware of perceived versus actual business value. Often when deals are on the table and the seller is experiencing rapid growth, his perception of business value changes, and deals fall through the cracks. Keep in mind that the economic and industry climates are never certain. Also, maintain accurate financial information and normalized numbers to produce a realistic valuation of the company.
  3. Always be prepared to sell. Simply said, “You never know when a buyer will come knocking with the right sale price.”  Therefore, owners should run their business in line with eventual goals to sell. Whether your timeline is 90 or 900 days, you’ll be increasing your business value to potential buyers.
  4. Consider your personal goals. There are many personal questions to ask, including, “How will selling my business contribute to my desired personal goals? Will I have enough money to live comfortably once I sell?” If you answer “yes,” then you’re ready to sell. If you answer “no,” then continue focusing on building business value.
  5. Your management team will be an important consideration. Buyers always ask, “If I buy your company, and you’re leaving, who will run the business?” Most buyers, particularly a private equity group, will want to ensure a strong management team is in place, whereas a strategic buyer may already have a team.

To be put on our invitation list for our next M&A discussion, please contact April Morgan at 713.789.7077 or via email.

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5 Personal Questions to Ask Before Considering a Business Sale

0 comments By TRMoore Filed in Exit Strategy, General, Mergers & Acquisitions Tagged with , , , , October 20th, 2011 @ 3:50 pm
by Tim Moore, Managing Partner, TR Moore & Company, A Doeren Mayhew Firm

You probably think of a business sale as a financial transaction, but have you considered the personal ramifications of selling?  Sometimes, getting the highest price must take a backseat to other priorities. Be sure to weigh the following:

  1. Do you want/need to sell quickly or are you willing to wait for higher offers to come along? Business sale timelines can vary significantly based on the industry, company size, transaction size, number of eligible buyers and economic trends, so your timing can impact your ultimate sale price as these factors fluctuate.
  2. Do you need payment in cash or will you accept stock or even be willing to partially finance the deal? In a recent GF Data report measuring private equity transactions in the middle market, 70 percent of deals had some noncash component. Consider your level of flexibility, if any, in advance.
  3. Have you made comprehensive retirement and estate plans so you know how much money you’ll need and where it will go? Having a realistic end goal is critical for aligning your business and building the value you need to reach it.
  4. Have you planned for the tax impact of your sale? You’ll want to calculate your current estimated value, then determine what the approximate after-tax proceeds will be and whether they will meet your exit objectives. If you discover your business is not quite where it needs to be to take the company to market, there are steps you can take to build its value and better meet your exit objectives.
  5. Do you plan to continue working for the company after it’s sold? Especially in the case of a private equity deal, you may be expected to remain on board to help the company continue to run smoothly post-transaction. Know where you want to be on the other end before entering the sale process.

Tim Moore is managing partner at TR Moore & Company, the Houston location of top 100 CPA and consulting firm Doeren Mayhew. Leveraging nearly 30 years experience, Tim also leads the firm’s Mergers & Acquisitions Division, specializing in building business value, marketing companies for sale, analyzing after-tax proceeds and negotiating on behalf of the client.

Securities Offered Through Grant Williams, LP. Member FINRA & SIPC.

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On Target With Seyfarth Shaw’s Anthony Newton

0 comments By TRMoore Filed in General Tagged with , , , , , August 26th, 2011 @ 5:38 pm

Meet Anthony Newton at the Business on Target workshop on Sept. 29.

As Partner at law firm Seyfarth Shaw, Tony Newton advises mid-sized businesses in the mergers and acquisitions process, helping entrepreneurs exit with minimal liability and maximum value.  His motive?  Helping business owners (like his parents) make informed decisions, start in the right direction and stay on track.  A Business on Target workshop sponsor, Newton provides insight on current M&A activity and more:

  1. What is currently trending in your industry? Has it made a positive or negative impact on your clients?
    The M&A cycle has been up and down for about three years, and what we’re seeing is a lot of earnouts, which means the seller is paid a certain amount of money now, and if the company achieves what the business owner has projected in the near term, additional purchase price is paid.There can be both a positive and negative impact based on the state of your business at the end of the transaction.  For example, if you believe your company is worth $10 million, but a buyer is only willing to give you $7 million now, you may consider it negative that you’re not receiving what you think it’s worth up front.  At the same time, the business still has an opportunity to command full value if the anticipated projections are met at the end of the transaction.
  2. What inspired you to choose your profession?
    It gives me the opportunity to help people.  A common statement I hear from clients is, “If I’d had known this, I would have made other decisions and run my business in the marketplace differently.”  So, whether it’s working with a business owner to liquidate his life’s work or assisting with an acquisition, helping the business owner exit on his terms is what I enjoy most.
  3. What are you reading now? Do you have any recommended reading for business owners?
    Right now, I’m reading Dr. Seuss with my 5-year-old son, but an interesting book I’ve read is Liar’s Poker: Rising Through the Wreckage on Wall Street by Michael Lewis.  The book considers four perspectives on the recent real estate market and how they were able to make a lot of money through the Wall Street crash in 2008.  These characters anticipated the real estate bubble to burst and it was very interesting to read their perspectives on how they figured out it.  I learned that if you walk with your eyes open, are able to spot the bubble and react properly, you may actually gain from it.
  4. What is the best piece of business advice you have ever been given?
    “There is no such thing as luck.”  Practicing law is like having my own business, so I have to treat my profession as a mini-business within a bigger business.  As a business owner, when you hit the intersection between hard work and opportunity, make sure you’re being responsive, focusing on growth and taking care of your customers.  In the end, opportunities will come your way, and your business will be in a position to take advantage of them.
  5. Your workshop sponsorship is helping to fund a scholarship for the University of Houston’s Wolff Center for Entrepreneurship. Do you have advice for aspiring business owners?
    Conduct market research and study your demographics so you can make an informed decision on what you’re going to do with your business, where you’re going to put it and who you’re going to target.  The key to business success is being as prepared as possible.

Anthony Newton is a Partner at Seyfarth Shaw, where he specializes in mergers and acquisitions and taxation. You can meet him at the Business on Target workshop on Sept. 29. Read more and register by contacting Melinda Genitempo or Geoff Gallo at info@trmoore.com or 713.789.7077.  Anthony can be reached at 713.238.1812 or via email.

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Know Your Buyer Types: Courting Private Equity

0 comments By TRMoore Filed in General, Mergers & Acquisitions Tagged with , , , , , August 16th, 2011 @ 9:46 am

by Steven Silverman, CM&AA, TR Moore & Company, A Doeren Mayhew Firm

The private equity (PE) sector represents possibly the largest prospective pool of business buyers today. PE investors have largely sat out the economic downturn and are estimated to be holding more than $500 billion in uninvested cash. Unfortunately, these buyers can be hard to reach.

Unlike international buyers, which are actively making acquisitions again, many PE investors remain wary of the M&A market. And many of the unfunded PE firms continue to experience difficulty in cost effectively financing their transactions.    

Just back from the recent Alliance of Mergers & Acquisitions Advisors summer conference, I can tell you that my conversations with PEs in attendance rang the same – there are simply fewer quality deals in the current environment. To increase odds of attracting these buyers today, sellers must be aware of the obstacles in dealing in the PE universe as well as the opportunities to position their businesses favorably:

Know your PE types – and the potential pitfalls associated with each. When seeking PE investment, sellers need to do their best to avoid financing contingencies. We’ve heard of  “fundless” PEs shopping for financing post closing (a sign and subsequent close) or even simply have their deals fall apart at the last minute when they are unable to obtain financing.

Showcase your resilience. Many PE investors have remained on the sidelines over concern that, given the fragile nature of the economy, deals have a high likelihood of failure. A company could look attractive on initial inspection, but suddenly diminish in value if the economy stumbles. Sellers in cyclical industries such as manufacturing and construction  are particularly vulnerable.

To attract PE buyers sellers must, therefore, showcase their stability. This means emphasizing:

    • Recession-proof qualities. If possible, sellers should highlight their record of reliable revenues in various market environments. Positive returns during the depths of the current recession, for example, tell a buyer that your company can handle almost any crisis.
    • Efficiency. Show how you reduced expenses during the recent downturn. The ability to trim inventories and cut debt will appeal to PE firms looking for healthy balance sheets and less risky acquisitions.
    • Steady cash flows. Even cash-rich PE investors will find a seller with robust cash reserves appealing. Such targets can provide buyers with financing to make additional deals in the future.
    • Collateral. Your company’s liquidation value — cash flows, physical assets and intellectual property — reduces risk for PE investors. Such collateral will help determine the deal terms that are offered.

Consider your industry. Being in the right industry or sector also plays a role in attracting PE money. Recently, these investors have favored fragmented industries (those that lack one dominant player), where performance has remained relatively high through the recession.

For example, in August 2010 several PE firms bid for McKechnie Aerospace, which competes in the fairly fragmented aerospace parts sector. Several PE firms also vied in May 2010 to acquire RBS Plc’s Priory Group, which operates health care services. Sellers in these sectors would probably have a better chance of selling to a PE firm during this timeframe. But you can also raise your profile by approaching PE groups directly or agreeing to participate in a special deal auction made up of PE buyers.

Many of the factors that drive PE firms to make acquisitions — financing, stock market performance, industry health — are out of a seller’s hands. What sellers can do, however, is work with knowledgeable advisors to prepare for sale, learn what PE buyers are looking for and then promote the most compelling compatibilities.

As M&A Director, Steven Silverman guides mergers and acquisitions transactions on behalf of business buyers and sellers at TR Moore & Company, the Houston location of top 100 U.S. CPA and consulting firm Doeren Mayhew.

Securities Offered Through Grant Williams, LP. Member FINRA & SIPC.

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Tim Moore on Attracting Business Buyers

0 comments By TRMoore Filed in General, Mergers & Acquisitions Tagged with , , , July 7th, 2011 @ 12:38 pm

Managing Partner Tim Moore was featured in the June 2011 edition of EO's "Octane" magazine.

With the mergers and acquisitions marketplace on the rebound and the gap between seller and buyer pricing expectations beginning to close, entrepreneurs are asking, “Should I start thinking again about selling my business?”

Tim Moore, managing partner at Doeren Mayhew firm TR Moore & Company, addressed this question in the June 2011 edition of the  Entrepreneur Organization magazine Octane, and provided tips on how entrepreneurs can make their businesses more attractive to potential buyers. Read more below, and check out the full edition of Octane here.

In my experience, when it comes to selling a business, entrepreneurs worry that they’ll either sell too soon or wait and miss another opportunity to exit their business at maximum price. I always tell my clients to run their businesses in line with their eventual goals to sell. Whether their timeline is 90 or 900 days, they will be increasing value to potential buyers should they come knocking, which can translate into improved profits in the meantime.

Here are three more ways entrepreneurs can make their businesses more attractive for potential buyers:

  1. Understand your buyer universe. If you took your business to market, who would your potential buyers be? The more plentiful, the higher your chances of commanding a desirable bid on the business. Understanding who your potential buyers are today allows you to take measures to expand that universe, if necessary. For example, a client who services the commercial construction industry is considering expanding into residential, which would double potential buyers of the business.  
  2. Think like a potential buyer. If you were considering buying your company, what would motivate you to pay more? Conversely, what would make you ask whether the selling price is too high? Key value drivers you can focus on today to impact buyer perception tomorrow include your management team, client base, and proprietary products and services.
  3. Retain key employees. Losing critical employees during a sale can be a deal breaker because they are often integral to the new owner’s success. Keep employees in place for future buyers through employment agreements and stock options. Leading up to the consideration of a sale, maintain confidentiality to help deter panic and sudden turnover, and help the buyer keep employees on board post-sale.

It may take you anywhere from several months to several years to sell your business. In the meantime, I’ve learned that the key to the perfect sale is to preserve and build value so you can maximize price when that buyer comes knocking.

Tim Moore is managing partner at TR Moore & Company, the Houston location of top 100 CPA and consulting firm Doeren Mayhew. Leveraging nearly 30 years experience, Tim also leads the firm’s Mergers & Acquisitions Division, specializing in building business value, marketing companies for sale, analyzing after-tax proceeds and negotiating on behalf of the client.

Securities Offered Through Grant Williams, LP. Member FINRA & SIPC.

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