This issue of Capital Ideas, our quarterly newsletter dedicated to business selling, business buying and financial resources for mid-market companies.
So You Want to Successfully Sell Your Business? Don’t Forget the Missing Link
By Jim Eaton, Managing Director, Los Angeles Office
Statistics show that many companies, particularly of the privately held small-to middle-market variety, are simply not ready to be sold once ownership decides to pull the trigger and enter into a potential transaction process. The investment banking community is full of examples of clients desiring to sell and/or with deals on the table only to see them collapse during due diligence, if not before, because of false value expectations or a lack of strategic organizational structure and execution capability.
Clearly, such sell side companies arrive on the radar screen of strategic or financial buyers alike for one reason or another, such as market position, proprietary product(s), financial strength, etc. These attributes are typically quite visible in the marketplace and are pivotal to any potential transaction. However, it is what can’t be seen at the expression of interest, management presentation, plant tour, or letter of intent stages that has the potential to sour the deal to some degree or perhaps even in total.
So what is the “missing link” to a successful and satisfying negotiation, due diligence and close process for all parties? ... Read more
Establishing Unique and Proprietary Products and Services
By Michael Weiss, Managing Director, Seattle Office
When you finally decide to sell the business that you’ve dedicated your life’s work to create, there is one critical component that will be sought after by every potential buyer… your differentiation. If you are that company in your industry that has a product or service so proprietary and so unique that it cannot be replicated, you move miles ahead of your peers when investors are considering a purchase. However, that differentiation doesn’t just happen over-night. It takes vision, strategic planning and time to create a proprietary base that is highly sought after by others.
A proprietary product or service is any idea or object that is owned entirely by the owner, and cannot be recreated without the owner’s consent. The advantage to a business owner is that these products open up an unrestricted revenue base, which has the potential to change the financial fortunes of the company. The bottom line is, if managed properly, proprietary product lines and unique brands have a positive impact on cash, accounts receivable, inventory, and debt on a company’s balance sheet. The company, in turn, has a better liquidity and a greater overall value. Clearly there are many advantages to owning your own product lines, but it is also essential to know about how to manage unique product lines and ways to avoid the stigma of proprietary products and the wrong shadow they sometimes cast on sellers … Read more
Situation: Avogadro Group, located in the San Francisco Bay Area, is a recognized leader in the regulatory compliance testing and monitoring of stack gasses in the power generation, petroleum refining & exploration, and other industries that release gasses and smoke into the atmosphere. The owner spent over 15 years building the company to its current size, with offices in Arizona and the Pacific Northwest. The growth of the company had reached a plateau where outside capital was required to take the business to a higher level.
Solution: CFA San Francisco was initially hired by Avogadro to assist them in responding to an unsolicited offer from an East Coast-based $300 million firm interested in expanding to the West Coast. Discussions were unsuccessful; however, the owner’s motivation was undeterred. Subsequently, Montrose Environmental Corporation contacted Avogadro on an unsolicited basis. Montrose was formed by Yukon Capital to build a leading, diversified environmental service enterprise. They had previously acquired SCEC, a Southern California company providing services similar to Avogadro, and Associated Laboratories in Los Angeles, which provides environmental analytical laboratory services. CFA provided critical advisory services, and a letter of intent was signed on March 21, 2013 for Montrose to acquire 100% interest in Avogadro. The transaction closed on July 5, 2013.
Corporate Finance Associates (CFA) is a founding member of ICFG, the 14th largest mid-market M&A firm in the world with over 40 offices in North and South America, Europe, and Asia. Since 1956, CFA has completed more than 5,000 transactions. CFA is ranked among the top ten of mid-market investment banks in North America and top eight in Canada by Thomson Reuters.
For additional information contact:
Douglas Nix, CA | Vice Chairman
Corporate Finance Associates | Toronto West | 905-845-4340 x211 | firstname.lastname@example.org