M&A in 2009 was soft at best. The continuing tepid lending environment combined with a general malaise and caution led to record levels of deals falling out during the year. Deals did get done, and I was pleased that through some hard work some of my own got done, but the industry overall was quiet. There is pent up demand for M&A, at the lower end of the middle market and within the middle market , to resume to more normalized levels in 2010 and beyond.This Media Post article gives one view of the industry returning to a more normalized state.To learn more about how your business is prepared for 2010, feel free to contact us for a free consultation on your business valuation, exit planning and/or mid-market diverstiture needs.
If you’ve given any thought to selling your business it is important to understand the distinctive roles your advisor(s) must play. Besides a CPA and Attorney, or sometimes a Financial Planner, the two key roles in the divestiture process are those of the Valuation Analyst and the Business Sales Intermediary (sometimes referred to as an M&A Investment Banker). Early in the process of understanding if or even when you may choose to sell your business determining value is an analytical process. The analyst looks at key and measurable drivers of value and applies that data to a variety of different models. Certain assumptions are made during the process, like “a market exists” or “neither buyer nor prospective seller are under duress”. Discount rate assumptions are made, and other mathematical assumptions, based on very specific methodology are made as well. Moreover, the financials are recast for non-recurring and key discretionary items to present the business in a “normalized” state. The analyst typically derives either a “Conclusion of Value” or a “Calculation of Value”.
But when an owner decides to sell their business the role of the advisor is different. While they will rely on business valuations, their role is to be your advocate in arguing every possible driver of the ultimate purchase price. And every concept available in the M&A toolbox becomes a lever point to argue for higher price. So, while the analysis uses models to consider value, the intermediary argues all lever points to prospective buyers.
Sometimes the individual doing the valuation is the intermediary. In this specific case it is important that they are able to seamlessly transition from their valuation work to being the owner’s advocate. For more information on this subtle distinction please contact us at 877-VALU-BIZ.
Posted by: John Klearman, Fair Market Valuations