Business Broker Chicago

Our Client Exits in Style

noreply@blogger.com (Dave Kauppi) — Thu, 29 Sep 2011 16:27:00 +0000

I know that we have often posted advice on how to exit your business, but quite frankly, it is seldom completed without some bumps in the road. We recently assisted one of our clients in his business sale and I have to say that the process was the smoothest we have ever experienced in over 15 years of deal making.

Don't get me wrong, we would love to claim credit for this positive event, but we pretty much did what we always do. The reason this transaction went so well was because of the seller. We knew things were going in the right direction when he made it clear to us that his people were his top priority. He was realistic about his company's value and he was engaging in his dealings with both our firm and the buyer.

Anyway, yesterday I sent him an email asking if we could use him as a reference for a new engagement that we are pursuing. You will love this. I got a text back this morning:

Dave...... I'm currently at the foot of Mt. Kilimanjaro. Back Oct 19.

Enough said. Bravo Gene. Enjoy your next adventure.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more information about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist

noreply@blogger.com (Dave Kauppi) — Tue, 28 Jun 2011 20:16:00 +0000

New blog post entitled Selling Your Software Company May be the Best Path to Product Success http://ping.fm/WDmOt

noreply@blogger.com (Dave Kauppi) — Tue, 21 Jun 2011 21:11:00 +0000

To read the full blog post, click here http://ping.fm/KI86B

noreply@blogger.com (Dave Kauppi) — Tue, 21 Jun 2011 21:09:00 +0000

To read more about the art of valuing a software company click here http://ping.fm/BcDC1

noreply@blogger.com (Dave Kauppi) — Thu, 16 Jun 2011 22:43:00 +0000

New blog post Capturing That Elusive Strategic Value in a Business Sale http://ping.fm/NypPh

Capturing That Elusive Strategic Value in a Business Sale

noreply@blogger.com (Dave Kauppi) — Thu, 16 Jun 2011 22:37:00 +0000

In a business sale two different buyers can view the value of the target company far differently in terms of value. One buyer may look at paying a rule of thumb financial multiple while another recognizes meaningful growth potential and is willing to pay way beyond an EBITDA multiple.

Wow did I get a real world demonstration of the saying, "Beauty is in the eyes of the beholder." If I could rephrase that to the business sale situation it could be, Strategic Value is in the eyes of the particular buyer." We are representing a small company that has a patented and somewhat unique product. They have gotten distribution in several hardware store chains, Lowes, and are going into Wal*Mart next spring.

The owners are at a cross-roads. To keep up with their growth in volume they recognize that they require a substantial capital investment. They understand that they have a window of opportunity to achieve a meaningful footprint before a much better capitalized competitor produces a similar product and undercuts their price. Finally they realize that a one product company at a big box retailer is quite vulnerable to the inevitable rotation of buyers or a change in policy that bumps them out of 25% of their sales volume.

The good news is that their product is unique and is protected for 15 more years with utility patents. It is not a commodity so it achieves healthy margins. The product is an eco friendly product so the retailers value that. Finally, the product can be used in retailer programs where it is combined with other same category products for the spring tune up and the fall tune up. It helps drive the sales of other products.

The ideal company buyer is a larger company that provides products in the same category and sells to the same retailers. They could plug this product into their existing distribution channel and immediately drive additional sales. They would strengthen their position within their accounts by offering an additional product, a unique product, an eco friendly product, and a product that would promote companion product sales. It would also provide a unique door opener to other major accounts that would want this unique product.

With the input from our clients we located a handful of companies that fit this profile. We were pretty excited at the prospects of our potential buyers recognizing all of these value drivers and making purchase offers that were not based on historical financial performance. The book, memorandum, confidential business review, executive summary, or whatever your business broker or merger and acquisition advisor calls it, will certainly point out all of the strategic value that this company can provide the company that is lucky enough to buy it.

As part of the buying process we usually distribute the book and then get a round of additional questions from the buyer. We submit those to our client and then provide the answers to the buyer with a request for a conference call. We had moved the process to this point with two buyers that we thought were similar companies. The two conference calls were totally different.
The first one included the Merger and Acquisition guy and the three top people responsible for the product category.

Their questions really indicated that they were used to being leveraged as a commodity provider by the big box retailers. Why were co-op advertising costs so high? Were they required to do that again in order to stay on the shelves? Were they on the plan-o-gram? Was Wal*Mart demanding that they be at a lower price than Lowes? What about shipping expenses? Why were profits so low? We had a very bad vibe from these guys. They were refusing to recognize that this was a high gross margin product growing in sales by over 200% year over year and had a higher level of promotional expense than a mature commodity product line. We couldn't determine if they just didn't get it or were they being dumb like a fox to dampen our value expectations.

The second call from the other company included the Merger and Acquisition guy and the EVP. The whole tone of the questioning was different. The questions focused on growth in sales, pricing power, new client potential, growth strategy, their status at the major accounts, remaining life on the patent and what their strategy was for new categories and markets.

Well we got the initial offers and they could not have been more different. The first company could not get beyond evaluating the acquisition as if it were a mature, commodity type product with paper thin margins. Their offer was an EBITDA multiple bid without taking into consideration that the product sales had grown at over 200% year over year and the marketing and promotional expenses were heavily front end loaded.

The second company understood the strategic value and they reflected it in the offer. It was not an apples to apples comparison, because the second offer was cash at close plus a significant earn out component while the first offer was all cash at close. However, the conservative mid-point of the combined cash and earn out offer was 300% higher than the offer from the first buyer. This was the biggest disparity between offers I have ever experienced, but it was quite instructive of the necessity to get multiple opinions by the market of potential buyers.

There are some companies that no matter how hard we try will not be perceived as a strategic acquisition by any buyer and they are going to sell at a financial multiple. Those companies are often main street type companies like gas stations, convenience stores and dry cleaners that are acquired by individual buyers. If you are a B2B company, have a competitive niche, and are not selling into a commodity type pricing structure, it is important to get multiple buyers involved and to get at least one of those buyers to acknowledge the strategic value.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more information about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist

noreply@blogger.com (Dave Kauppi) — Thu, 16 Jun 2011 22:29:00 +0000

My thoughts on monthly fees and the Business Broker profession Blog post http://ping.fm/hezxs

noreply@blogger.com (Dave Kauppi) — Mon, 02 May 2011 14:32:00 +0000

Blog Post on the difficulty of business valuation for software companies. http://ping.fm/LDQhl

noreply@blogger.com (Dave Kauppi) — Thu, 07 Apr 2011 12:24:00 +0000

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more articles about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist

noreply@blogger.com (Dave Kauppi) — Fri, 01 Apr 2011 20:46:00 +0000

Just published article - Ten Keys to a Successful Business Exit http://ping.fm/kT1Jk

Ten Keys To a Successful Business Exit

noreply@blogger.com (Dave Kauppi) — Fri, 01 Apr 2011 20:24:00 +0000

The purpose of this post is to discuss the ten key factors that a business owner should consider in their once in a lifetime opportunity to maximize the rewards from their life's work with the sale of their business.

You started your company 20 years ago "in your garage", worked many 80 hour weeks, bootstrapped your growth, view your company with the pride of an entrepreneur, and are now considering your exit. The decision to sell is all too often a reactive one rather than a proactive one -- the primary reasons are a serious health issue, owner burnout, the death of a principal, general industry decline or the loss of a major customer. Often times very capable business people approach the sale of their business with less formality than in the sale of a home. Advance planning can ensure that you exit your business from a position of strength, not from weakness due to necessity.

1. Do not wait too long. Have you ever heard, "I sold my business to early?" Compare that with the number of times you've heard somebody say, "I should have sold my business two years ago." Unfortunately, waiting too long is probably the single biggest factor in reducing the proceeds from the sale of a privately held business. The erosion in business value typically is most pronounced in that last year before exiting. The decision to sell is often times a reactive decision rather than a proactive decision. An individual who spends 20 years running their business and controlling their outcomes often behaves differently in the exit from his business. The primary reasons for selling are events such as a serious health issue, owner burnout, the death of a principal, general industry decline, or the loss of a major customer.

Exit your business from a position of strength, not from the necessity of weakness. Don't let that next big deal delay your sale. You can reward yourself for that transaction you project to close with an intelligently written sale agreement containing contingent payments in the future if that event occurs.

2. Prepare yourself for life after business. We all create business plans both formally and informally. We all plan for vacations. We plan our parties. We need to plan for the most important financial event of our lives, the sale of our business. Typically a privately held business represents greater than 80% of the owner's net worth. Start out with your plans of how you want to enjoy the rewards of your labor. Where do you want to travel? What hobbies have you been meaning to start? What volunteer work have you meant to do? Where do you want to live? What job would you do if money were not in issue? You need to mentally establish an identity for yourself outside of your business.

3. Spruce up your business to create the maximum value in a sale. Now that you are all excited about the fun things you'll do once you exit your business, it's now time to focus on the things that you can do to maximize the value of your business upon sale. This topic is enough content for an entire article, however, we will briefly touch upon a couple of important points. First, engage a professional CPA firm to do your books. Buyers fear risk. Audited or reviewed financial statements from a reputable accounting firm reduced the perception of risk. Do not expect the buyer to give you credit for something that does not appear in your books. If you find that a large percentage of your business comes from a very few customers, embark on a program immediately to reduced customer concentration. Buyers fear that when the owner exits the major customers are at risk of leaving as well. Start to delegate management activities immediately and identify successors internally.

If you have no one that fits that description and you have enough time, seek out, hire and train that individual that would stay on for the transition and beyond. Buyers want to keep key people that can continue the momentum of the business. Analyze and identify the growth opportunities that are available to your business. What new products could I introduced to our existing customer base? What new markets could utilize our products? What strategic alliances would help grow my business? Capture that in a document and identify the resources required to pursue this plan. Buyers will have their own plans, but you'll increase their perception of the value of your business through your grasp of the growth opportunities.

4. Keep your eye on the ball. A major mistake business owners make in exiting their business is to focus their time and attention on selling the business as opposed to running the business. This occurs in large publicly traded companies with deep management teams as well as in private companies where management is largely in the hands of a single individual. Many large companies that are in the throws of being acquired are guilty of losing focus on the day-to-day operations. In case after case these businesses suffer a significant competitive downturn. If the acquisition does not materialize, their business has suffered significant erosion in value. There simply is not enough time for the owner to wear the many hats of operating his business while embarking on a full-time job of selling his business.

The owner wants the impending sale to be totally confidential until the very last minute. If the owner attempts to sell the business himself, by default he has identified that his business is for sale. Competitors would love to have this information. Bankers get nervous. Employees get nervous. Customers get nervous. Suppliers get nervous. The owner has inadvertently created risk, a potential drop in business and a corresponding drop in the sale price of his business.

5. Be sure to get multiple buyers involved in your business sale. The "typical" business sale transaction for a privately held business begins with either an unsolicited approach by a competitor or with a decision on the part of the owner to exit. If a competitor initiates the process, he typically isn't interested in over paying for your business. In fact, just the opposite is true. He is trying to buy your business at a discount. Outside of yourself there is no one in a better position to understand the value of your business more than a major competitor. He will try to keep the sales process limited to a negotiation of one. In our mergers and acquisitions practice the owner often approaches us after an unsolicited offer.

What we have found is generally that unsolicited buyer is not the ultimate purchaser, or if he is, the final purchase price is, on average 20% higher than the original offer. If the owner decides to exit and initiates the process, it usually begins with a communication with a trusted advisor - accountant, lawyer, banker, or financial advisor. Let's say that the owner is considering selling his business and he tells his banker. The well- meaning banker says, "One of my other customers is also in your industry. Why don't I provide you an introduction?" If the introduction results in a negotiation of one, it is unlikely that you will get the highest and best the market has to offer.

6. Hire a Mergers and Acquisitions firm to sell my business. You improve your odds of maximizing your proceeds while reducing the risk of business erosion by hiring a firm that specializes in selling businesses. A large public company would not even consider an M&A transaction without representation from a Merrill Lynch, Goldman Sachs, Solomon Brothers or other high profile investment banking firm. Why? With so much at stake, they know they will do better by paying the experts. Companies in the $3 Million to $50 Million range fall below their radar, but there are mid market M&A firms that can provide similar services and process. Generally when you sell your business, it is the one time in your life that you go through that experience. The buyer of the last company we represented for sale had previously purchased 25 companies.

The sellers were good business people, knew their stuff, but this was their first and probably last business sale. Who had the advantage in this transaction? By engaging a professional M&A firm they helped balance the M&A experience scales.

7. Engage other professionals that have experience in business sale transactions. You may have a great outside accountant that has done your books for years. If he has not been involved in multiple business sales transactions, you should consider engaging a CPA firm that has the experience to advise you on important tax and accounting issues that can literally result in swings of hundreds of thousands of dollars. What are the tax implications of a stock purchase versus an asset purchase? A lower offer on a stock purchase may be far superior to a higher offer on an asset purchase after the impact of taxes on your realized proceeds. Is the accountant that does your books qualified to advise you on that issue?

Would your accountant know the best way to allocate the purchase price on an asset sale between hard assets, good will, employment agreements and non-compete agreements? A deal attorney is very different from the attorney you engage for every day business law issues. Remember, each element of deal structure that is favorable to the seller for tax or risk purposes is generally correspondingly unfavorable to the buyer, and vice versa. Therefore the experienced team for the buyer is under instructions to make an offer with the most favorable tax and reps and warranties consequences for their client. You need a professional team that can match the buyer's team's level of experience with deal structure, legal, and tax issues.

8. Be reasonable in your expectations on sales price and terms. The days of irrational exuberance are over. Strategic buyers, private equity groups, corporate buyers, and other buyers are either very smart or do not last very long as buyers. I hate rules of thumb, but generally there is a range of sales prices for similar businesses with similar growth profiles and similar financial performance. That being said, however, there is still a range of selling prices. So, for example, let's say that the sales price for a business in the XYZ industry is a multiple of between 4 and 5.5 times EBITDA. Your objective and the objective of a good M&A advisor is to sell your business at the top end of the range under favorable terms.

In order for you to sell your business outside of that range you must have a very compelling competitive advantage, collection of intellectual property, unusual growth prospects, or significant barriers to entry that would justify a premium purchase price. If you think about the process of detailing your car before you offer it for sale, a good M&A advisor will assist you in that process for your business. Let's say, for example, that 4 to 5.5 multiple from above was the metric in your industry and you had an EBITDA for the last fiscal year of $2.5 million. Your gross transaction proceeds could range from $10 million to $13.75 million. A skilled M&A firm with a proven process can move you to the top of your industry's range. The impact of hitting the top of the sales price range vs. the bottom more than justifies the success fee you pay to your M&A professionals.

9. In the business selling process, disclose, disclose, disclose, and do it early. A seemingly insignificant minor negative revealed early in the process is an inconvenience, a hurdle, or a point to negotiate around. That same negative revealed during negotiations, or worse yet, during due diligence, becomes, at best, a catalyst for reexamining the validity of every piece of data to, at worse, a deal breaker. No contract in the world can cover every eventuality if there is not a fundamental meeting of the minds and a trust between the two parties. Unless you are lucky enough to get an all cash offer without any reps and warranties, you are going to be partnered with your buyer for some period in the future.

Buyers try to keep you on the hook with reps and warranties that last for a few years, employment contracts, or non-competes that last, escrow funds, seller notes, etc. These all serve a dual role to reduce the risk of future surprises. If future material surprises occur, buyers tend to be punitive in their resolution with the seller. Volunteer to reveal your company's warts early in the process. That will build trust and credibility and will ensure you get to keep all of the proceeds from your sale.

10. Be flexible and open to creative deal structure. Everything is a negotiation. You may have in mind that you want a gross purchase price of $13 million and all cash at close. Maybe the market does not support both targets. You may be able to get creative in order to reach that purchase price target by agreeing to carry a seller note. If the sale process produces multiple bids and the best one is $11.3 million cash at close. You may counter with a 7-year seller balloon note at 8% for $3 million with $10 million cash at close. If the buyer is a solid company, that may be a superior outcome than your original target because the best interest return you can currently get on your investments is 4%. Be flexible, be creative, and use your team to negotiate the hard parts and preserve your relationship with the buyer.

You may have spent your life's work building your business to provide you the income, wealth creation, and legacy that you had planned and hoped for. You prepared and were competitive and tireless in your approach. You have one final act in your business. Make that your final business success. Exit on purpose and do it from a position of strength and receive the highest and best deal the market has to offer.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more information about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist

noreply@blogger.com (Dave Kauppi) — Sun, 20 Mar 2011 15:38:00 +0000

Just published new blog post Selling Your Software Company - How Important is the Sale Process http://ping.fm/7bYTq

noreply@blogger.com (Dave Kauppi) — Wed, 16 Feb 2011 16:59:00 +0000

Just published new article - Creating Company Value With Strategic Acquisitions http://ping.fm/BCpRF

CORPORATE GROWTH THROUGH STRATEGIC ACQUISITION – CREATING SHAREHOLDER VALUE

noreply@blogger.com (Dave Kauppi) — Wed, 16 Feb 2011 16:53:00 +0000

Successful growing companies usually grow through a combination of organic growthand strategic acquisitions. For purposes of this article, a strategic acquisition is defined as an acquisition where the result of the combination is far greater than the sum of the parts. For example, if Company A with revenues of $50 million Acquires Company SA with revenues of $10 million, the Newco mathematically would have revenues of $60 million. The anticipated performance of a well thought out strategic purchase might result in a combined revenue for Newco of $100 million within a 1 to 2 year period. A second category of strategic acquisition would focus on an improvement of the profit margins of Newco.

Let’s use two companies that are recognized as among the best at making successful acquisitions, General Electric and Cisco Systems. As their stockholders will happily tell you, these companies have been star performers in growing shareholder value. General Electric is a giant conglomerate with business lines such as GE Capital, GE Plastics, GE Power Systems, GE Medical, and several others. Cisco Systems could be categorized as a high tech growth company primarily focusing on voice and data communications hardware, software, and services.

The first rule of strategic acquisition we learn from these two prolific and successful companies is that they do it on purpose. They have a well thought out defined approach. To quote GE, “We are allocating capital to businesses that can increase growth with higher returns, businesses requiring human capital as opposed to physical capital. We are disciplined and integrators and we grow the businesses we acquire. Over the past 10 years Cisco Systems has acquired 81 companies. If you track their stock price over the same period, it is up a remarkable 1300% over that same period. GE, starting with a much larger base, still outperformed the S&P 500 index over the same period 3 to 1.

If you study the acquisitions of these two companies as well as good middle market growth through acquisition companies, you find some common strategic themes. The core principal that runs through almost every example is INTEGRATION. With the exception of establishing the original platform, GE expanding from their original roots and establishing a presence in plastics, for example, all of these acquisitions focus on integration.

An example that I use to summarize strategic acquisitions for Cisco Systems is not a real acquisition, but a hypothetical company that should demonstrate a point. I have been a very happy stockholder for over a decade. It seems like every year they would announce an acquisition that looked like this – Today Cisco announced the acquisition of Optical Solutions Company for $30 million in stock. Optical Solutions Company manufactures the OptiFast Switch, the fastest optical networking switch on the market today. The Company was started two years ago by two Stanford Electrical Engineering Professors. Current sales are $1.5 million and last year they lost $700,000. My initial reaction was, “What the heck are they doing?” What they were really looking at was what this technology could become as it was integrated into the Cisco family. First, Cisco has 5,000 sales reps, 12,000 value added resellers and systems integrators that sell their solutions, and 600,000 customers that think Cisco walks on water. Cisco knows their market, their customers, and the first mover advantage in their market. With this backdrop, the OptiFast Switch achieves sales of $130 million in its second year of Cisco sales. That’s what the heck they were doing – a classic strategic acquisition.

There are several categories of strategic acquisition that can produce some outstanding results with effective integration. Many acquisitions actually have elements from several categories.

1. ACQUIRE CUSTOMERS – this is almost always a factor in strategic acquisitions. Some companies buy another that is in the same business in a different geography. They get to integrate market presence, brand awareness, and market momentum. Another approach is to acquire a company that can establish a presence for you in a different market segment. For example, let's say that that Company A made fasteners for the automotive industry and felt that their expertise could be applied to the aerospace industry. A company that produced fasteners for the target industry could help jump-start this strategic initiative.

2. OPERATING LEVERAGE – the major focus in this type of acquisition is to improve profit margins through higher utilization rates for plant and equipment. A manufacturer of cardboard containers that is operating at 65% of capacity buys a smaller similar manufacturer. The acquired company’s plant is sold, all but two machines are sold, the G&A staff are let go and the new customers are served more cost effectively. Adding new customers without increasing fixed expenses results in higher profit margins.

3. VALUATION MULTIPLE EXPANSION – this is a subtle mathematical approach that the private equity groups understand very well and regularly capitalize upon. They establish a platform company, usually in the $30 million to $250 million in revenue range and then they go on a mission to acquire several "tuck in acquisitions". They buy several other companies that can add to the value of the platform company based on expanding the customer base, improving on their technology, broadening their product line, or other strategic point covered in this article. They also recognize that a small company will sell at a smaller valuation multiple than their larger platform company.

Below is an example of how that might work for a company looking to grow through acquisitions. Let's say that the acquiring company is $30 million in revenue and is looking to acquire a $10 million in revenue target. The $30 million company with $7.5 million in EBITDA has a valuation multiple of 6.5 X EBITDA while the $10 million company with $2.5 million in EBITDA has a multiple of 5.25 X EBITDA. Pre acquisition that would mean that the value of the acquirer was $48.75 million and the target was $13.125 million. Theoretically, if you combined the two companies, the new value should be $48.75 plus $13.125 or $61.875 million. However, post acquisition, the combined company takes on the EBITDA multiple of the acquiring company resulting in a valuation of ($2.5 + $7.5 million in EBITDA) or $10 million X 6.5 or $65 million. Wall Street refers to this phenomenon as an accretive acquisition

4. CAPITALIZE ON A COMPANY STRENGTH – this is why Cisco and GE have been so successful with their acquisitions. They are so strong in so many areas, that the acquired company gets the benefit of some, if not all of those strengths. A very powerful business accelerator is to acquire a company that has a complementary product that is used by your installed customer base. It is ten times easier to sell an add-on product to an installed account than to sell a product to a new account. Management depth and skill, production efficiency/capacity, large base of installed accounts, developed sales and distribution channels, and brand recognition are examples of strengths that can power post acquisition performance.

5. COVER A WEAKNESS – This requires a good deal of objectivity from the acquiring company in recognizing and chinks in the corporate armor. Let me help you with some suggestions – 1. Customer concentration: too much of your business is concentrated on a small group of customers 2. Product concentration: too much of your business is the result of one or two products 3. Weak product pipeline – in a business environment that is becoming more innovation focused, having a thin product pipeline could be fatal. Many of the acquisitions in the pharmaceutical industry are aimed at covering this weakness. 4. Management depth or technical expertise and 5. Great technology and products – poor sales and marketing.

6. BUY A LOW COST SUPPLIER – this integration strategy is typically aimed at improving profit margins rather than growing revenues. If your product is comprised of several manufactured components, one way to improve corporate profitability is to acquire one of those suppliers. You achieve greater control of overall costs, availability of supply, and greater value-add to your end product. Another variation of this theme some refer to as horizontal integration is to acquire a company supplying you distribution.

7. IMPROVING OR COMPLETING A PRODUCT LINE – this approach has several elements from other acquisition strategies. Successfully adding new products to a line improves profitability and revenue growth. Giving a sales force more “arrows in their quiver” is a powerful growth strategy. You take advantage of your existing sales and distribution channel (strength). You may be able to improve your competitive position by simplifying the buying process - providing your customers one stop shopping. You have already established momentum and credibility with your installed accounts and it is far easier and cost effective to sell them additional products than it is to win new customers.

8. TECHNOLOGY – BUILD OR BUY? This is a quandary for most companies, but is especially acute for technology companies. Acquiring technology through the acquisition of another company can be an excellent growth strategy for several reasons. First, the R&D costs are generally lower for these smaller, agile, more narrowly focused companies than their larger, higher overhead acquirers. Secondly, time to market, window of opportunity, first mover advantage can have a huge impact on the ultimate success of a product. It has been said that Alexander Graham Bell arrived four hours before another inventor at the patent office for essentially the same invention. If there is a good idea or a market opportunity, most likely it is being pursued independently and simultaneously on several fronts. First one to establish their product as the “standard” is the big winner. I sure would not want to try to displace Microsoft Windows as the operating system for PC’s.

9. ACQUISITION TO PROVIDE SCALE AND ACCESS TO CAPITAL MARKETS – In this area, bigger is better. Larger companies can generally weather a storm better than smaller companies and are considered safer investments. Larger companies command larger valuation multiples. Some companies make acquisitions in order to get big enough to attract public capital in the form of an IPO or investments from Private Equity Groups. Many smart business owners have consolidated several smaller companies at lower multiples to create a larger company that the investment community valued at higher multiples. This can be a very effective grow to exit strategy.

10. PROTECT AND EXPAND MATURE PRODUCT LINES - I recently came across an outstanding example of the execution of this strategy. Johnson & Johnson, the multi-billion dollar pharmaceutical company in 2000 acquired Alza Corporation, the maker of drug delivery systems and devices for what appeared to be an unbelievably steep price of $13.7 billion, or 23 times year 2000 revenues. They are the inventors of the transdermal patch used in products such as NicoDerm CQ. They have developed time released pills that can, for example, deliver Ritalin, the drug for attention deficit disorder in children, at prescribed times with one dose. They have developed an injectable titanium stint to deliver cancer medication over the course of a year. Why would J&J pay so much for this company? Here is the strategy. The latest price tag for getting a major new drug through the FDA and to market is a whopping $800 million. These delivery technologies can turn J&J’s old drugs into new best sellers that are re-patentable at a far lower price than new drug development. An added benefit is that they can do the same for off patent drugs from other competitors.

11. PROTECT CUSTOMER BASE FROM COMPETITION – The telephone companies have done studies that show that with each additional product or service that a customer uses, the likelihood of the customer defecting to a competitor drops exponentially. In other words, get your customers to use local, long distance, cellular, cable, broadband, etc and you will not lose them. Multiple products and services provided to the same customer dramatically improve retention rates. At the risk of repeating myself, it costs ten times more to get a new customer than it does to keep one.

12. ACQUISITION TO REMOVE BARRIERS TO ENTRY – An example of execution of this strategy is a large commercial information technology consulting firm acquiring a technology consulting firm that specializes in the Federal Government. The larger IT Consulting firm had valuable expertise and best practices that were easily transferable to government business if they could only break the code of the vendor approval process. After many fits and starts to do it themselves, they simply acquired a firm that had an established presence. They were able to then bring their full capabilities from the commercial side to effectively increase their newly acquired government business.

13. OPPORTUNISTIC ACQUISITION FOR WHEN THE MARKET TURNS – as they taught me in business school: buy low and sell high. Well-run businesses often will buy competitors that bring many of the benefits from above at very favorable prices when times are tough. They buy customers, new geographies, technology, management talent, etc. at less than strategic prices because they have the staying power to last through a market downturn. Buying a company that doesn’t fit at a bargain is ultimately not a bargain if you are unable to integrate to make your core business more powerful.

Larger firms with lots of resources have established business development offices to execute corporate growth strategies through acquisition. These experienced buyers search for companies that fit their well-defined acquisition criteria. In most cases they are attempting to buy companies that are not actively for sale. If a strategic company is for sale and is being represented by an M&A firm, the M&A firm’s job is to sell that strategic value to the marketplace. If properly done, the buyers are competing with several other buyers that recognize the strategic value and the price tends to be bid way up. The win for the successful corporate acquirer is to target several candidates that have many of the characteristics from above, buy them at financial valuation multiples (traditional valuation techniques like discounted cash flow or EBITDA multiples), integrate to strength and achieve strategic performance.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more information about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist

noreply@blogger.com (Dave Kauppi) — Wed, 08 Dec 2010 16:41:00 +0000

Just published a new article - Selecting a Merger and Acquisition Advisor for the Sale of Your Business - The Request for Proposal
http://ping.fm/yXjGo

Selecting a Merger and Acquisition Advisor for the Sale of Your Business - The Request for Proposal

noreply@blogger.com (Dave Kauppi) — Wed, 08 Dec 2010 16:18:00 +0000

In my prior business experience in the information technology industry, it was a very common practice for potential buyers to submit a Request for Proposal in order to make a purchase decision. After several years as a Merger and Acquisition advisor, I finally got an RFP. A light bulb went off. This is the most important "purchase decision" a business owner will ever make, and yet the process of selecting an advisor in a multi million dollar transaction is generally less diligent than the purchase of a $200,000 software product.

I gave this a great deal of thought and came to a conclusion. These business owners are very smart and accomplished people, but they generally will only sell one business in their lifetime. They knew how to evaluate every other product or service relating to their business because they had made those purchase decisions multiple times over the years. It occurred to me that they did not have the experience to know the right questions to ask in order to objectively evaluate one M&A firm against another. Their instincts are generally pretty good, so in the selection process we normally go through, they bring in the 3 or 4 firms for presentations, check a few references and make a decision on a gut reaction.

The purpose of this article is to provide those business sellers that possess great instincts an additional tool to objectively compare Merger and Acquisition advisors by asking the right questions. Below is a sample RFP that should be helpful in your selection process:

Request For Proposal for the Merger and Acquisition Advisor
Sell Side Engagement for XYZ COMPANY, INC.

COMPANY DESCRIPTION

XYZ is an IT Services firm consisting of 3 divisions. The first provides contract maintenance and break fix maintenance for mid range systems and network components. The second division is an IBM Business Partner for mid-sized systems combined with consulting and professional services. Division 3 is a used equipment brokerage service. The company has been in business since 1995 and does about $25 million in revenue.

Approximate 2005 Revenues - $25 Million

Responding Company Name

Brief Company Description

Years in Business

Primary Contact Name for this Engagement

Phone Number
Email address
Company Address
Company Web Site

1. In the past 24 months what transactions have you completed?
Company Name Nature of Engagement Industry Description of Client
Example
XYZ Company Sell Side Engagement Healthcare information technology

2. How many Investment Bankers work for your Firm?

3. Who would be working as the lead on my engagement? Please include Bio.
a. Include any professional designations i.e. Series 7, CBI
b. Include any industry associations i.e. IBBA, local business broker chapter M&A Source, etc.

4. Is your firm known for a particular industry niche? Transaction niche? Please describe.

5. What steps do you take to insure the confidentiality of the sale process?

6. Please Send a sample of your deliverables:
a. Blind Profile
b. Confidentiality Agreement or NDA
c. The Book, Memorandum or Executive Summary
d. If you do a mailing - typical contents

7. Describe your process of marketing your sell side engagement with a typical timeline from start to finish: i.e. day 1 sign engagement agreement, 1 Week submit first target database for approval, Week 2 submit draft of Profile/NDA for approval.............Confidentiality Agreements Signed, Executive Summary is completed, etc.

8. Describe the Marketing Process - is it posted on Internet Sites, emails, mailing campaign, direct telephone calls, etc

9. What is the profile of the "A Target" buyers for my company? Briefly describe.

10. If you have any client reference letters from the past 24 months, please include 2 or 3 in your package.

11. As one of our final selection criteria, will we be able to speak to references?

12. Detail your fees.
a. Up-front payments
b. Monthly fees
c. Minimum Cash at Close
d. Expenses
e. Other
f. In lieu of this, please submit your agreement with the fees as they would be set for this sell side engagement.

13. What is your philosophy on putting a price tag on my company?

14. Describe your process of keeping your client informed on the progress of the sale.
g. What reports do you submit to the client? Include samples please.
h. How often are reports submitted?

15. How will I know that I am getting the best price and terms if your firm represents my company for sale?

16. Does your contract call for exclusivity?

17. If I don't think you are doing a good job, what options do I have?

18. What about a "tail" on the agreement? If your firm is fired, what prospects carry a tail for fees to your firm? How long is the tail?

19. Please explain why your firm is the best fit for our sale engagement.

20. What are your thoughts about valuations for our company/industry.

21. What would your firm do in to advise us on improving on our transaction value?

The RFP responses are due by May 24. If you have any questions please email them to billsmith@xyz.com. Please note that this is highly confidential and my employees are not to be made aware that we are considering the sale of our company.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more information about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist

noreply@blogger.com (Dave Kauppi) — Mon, 06 Dec 2010 15:26:00 +0000

Just published a new article - How Accurate are Software Company Valuations? http://ping.fm/T3mYJ

noreply@blogger.com (Dave Kauppi) — Thu, 18 Nov 2010 15:19:00 +0000

Just posted Information Technology and Software Companies for Sale by MidMarket Capital http://ping.fm/ItPsJ

noreply@blogger.com (Dave Kauppi) — Thu, 28 Oct 2010 20:04:00 +0000

Just published a new article - BUSINESS SELLERS AVOID THESE 10 MISTAKES http://ping.fm/dNwVi

BUSINESS SELLERS AVOID THESE 10 MISTAKES

noreply@blogger.com (Dave Kauppi) — Thu, 28 Oct 2010 19:53:00 +0000

Selling your business is the most important business transaction you will ever make. Mistakes in this process can greatly erode your transaction proceeds. Do not spend twenty years of your toil and skill building your business like a pro only to exit like an amateur. Below are ten common mistakes to avoid:

1. Selling because of an unsolicited offer to buy - One of the most common reasons owners tell us they sold their business was they got an offer from a competitor. If they previously were not considering this business sale, the owner has probably not taken some important personal and business steps to exit on his terms. The business may have some easily correctable issues that could detract from its value. The owner may not have prepared for an identity and lifestyle to replace the void caused by his separation from his company. If you are prepared, you are more likely to exit on your own terms.

2. Poor books and records - Business owners wear many hats. Sometimes they become so focused on running the business that they are lax in financial record keeping. A buyer is going to do a comprehensive look into your financial records. If they are done poorly, the buyer loses confidence in what he is buying and his perception of risk increases. If he finds some negative surprises late in the process, the purchase price adjustments can be harsh. The transaction value is often attacked well beyond the economic impact of the surprise. Get a good accountant to do your books.

3. Going it alone - The business owner may be the foremost expert in his business, but it is likely that his business sale will be a once in a lifetime occurrence. Mistakes at this juncture have a huge impact. Do you understand the difference in after tax proceeds between an asset sale and a stock sale? Your everyday bookkeeper may not, but a tax accountant surely does. Is your business attorney familiar with business sales legal work? Would he advise you properly on Reps and Warranties that will be in the purchase agreement? Your buyer's team will have this experience. Your team should match that experience or it will cost you way more than their fees.

4. Skeletons in the closet - If your company has any, the due diligence process will surely reveal them. Before your firm is turned inside out and the buyer spends thousands in this process and before the other interested buyers are put on hold - reveal that problem up-front. We sold a company that had an outstanding CFO. In the first meeting with us, he told us of his company's under funded pension liability. We were able to bring the appropriate legal and actuarial resources to the table and give the buyer and his advisors plenty of notice to get their arms around the issue. If this had come up late in the process, the buyer might have blown up the deal or attacked transaction value for an amount far in excess of the potential liability.

5. Letting the word out - Confidentiality in the business sale process is crucial. If your competitors find out, they can cause a lot of damage to your customers and prospects. It can be a big drain on employee morale and productivity. Your suppliers and bankers get nervous. Nothing good happens when the word gets out that your company is for sale.

6. Poor Contracts - Here we mean the day-to-day contracts that are in place with employees, customers, contractors, and suppliers. Do your employees have non-competes, for example? If your company has intellectual property, do you have very clear ownership rights defined in your employee and contractor agreements. If not, you could be looking at meaningful escrow holdbacks post closing. Are your customer agreements assignable without consent? If they are not, customers could cancel post transaction. Your buyer will make you pay for this one way or another.

7. Bad employee behavior - You need to make sure you have agreements in place so that employees cannot hold you hostage on a pending transaction. Key employees are key to transaction value. If you suspect there are issues, you may want to implement stay on bonuses. If you have a bad actor, firing him or her during a transaction could cause issues. You may want to be pre-emptive with your buyer and minimize any damage your employee might cause.

8. No understanding of your company's value - Business valuations are complex. A good business broker or M & A advisor that has experience in your industry is your best bet. Business valuation firms are great for business valuations for gift and estate tax situations, divorce, etc. They tend to be very conservative and their results could vary significantly from your results from three strategic buyers in a battle to acquire your firm. When it comes to selling your company, let the competitive market provide a value.

9. Getting into an auction of one - This is a silly visual, but imagine a big auction hall at Sotheby's occupied by an auctioneer and one guy with an auction paddle. "Do I hear $5 million? Anybody $5.5 million?' The guy is sitting on his paddle. Pretty silly, right? And yet we hear countless stories about a competitor coming in with an unsolicited offer and after a little light negotiating the owner sells. Another common story is the owner tells his banker, lawyer, or accountant that he is considering selling. His well-meaning professional says, "I have another client that is in your business. I will introduce you." The next thing you know the business is sold. Believe me, these folks are buying your business at a big discount. That's not silly at all!

10. Giving away value in negotiations and due diligence - When selling your business, your objective is to get the best terms and conditions. I know this is a shocker, but the buyer is trying to pay as little as possible and he is trying to get contractual terms favorable to him. These goals are not compatible with yours. The buyer is going to fight hard on issues like total price, cash at close, earn outs, seller notes, reps and warranties, escrow and holdbacks, post closing adjustments, etc. If you get into a meet in the middle compromise negotiation, before you know it, your Big Mac is a Junior Cheeseburger. Due diligence has a dual purpose. The first is obviously to insure that the buyer knows exactly what he is paying for. The second is to attack transaction value with adjustments. Of course this happens after their LOI has sent the other bidders away for 30 to 60 days of exclusivity. If you don't have a good team of advisors, this can get expensive

As my dad used to say, there is no replacement for experience. Another saying is that when a man with money and no experience meets a man with experience, the man with the experience walks away with the money and the man with the money walks away with some experience. Keep this in mind when contemplating the sale of your business. It will likely be your first and only experience. Avoid these mistakes and make that experience a profitable one.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more information about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist

noreply@blogger.com (Dave Kauppi) — Mon, 19 Jul 2010 13:44:00 +0000

Financial Advisors - It's Time for Some Difficult Discussions with Your Business Owner Clients http://ping.fm/NtBPs

noreply@blogger.com (Dave Kauppi) — Thu, 24 Jun 2010 16:30:00 +0000

New Blog post - Business Buyers are Valuation Experts. http://ping.fm/mNw6J

Business Buyers are Valuation Experts

noreply@blogger.com (Dave Kauppi) — Thu, 24 Jun 2010 16:17:00 +0000

Business buyers do not ofter reveal their hands about why they feel a business is an attractive acquisition prospect for fear of driving up the price. They do, however, reveal those features that detract from a business' value in order to try to drive down the price during negotiations. This post discusses the value drivers and value detractors in a business sale transaction.

As it turns out, buyers are astute business valuation analysts. They look for certain features when they assess the desirability of a business acquisition. Private equity groups are particularly rigorous in this process. Without exaggeration, we receive at least five contacts per week from private equity groups describing their buying criteria. The most surprising statement contained in a majority of these solicitations is the statement, “We are pretty much industry agnostic.”

They may add in a couple qualifiers like we avoid information technology firms, start-ups and turn- arounds. Below is a typical description:
Example Capital Group seeks to acquire established businesses that have stable, positive cash flows and EBITDA between $2mm and $7mm. We will consider investments that satisfy a majority of the following characteristics:

Financial

Revenues between $10mm and $50 mm
EBITDA between $2mm and $7mm
Operating margins greater than 15%

Management

Owners or senior management willing to transition out of daily operations
Experienced second tier management team willing to remain with the company

Business

Long term growth potential
Large and fragmented market
Recurring revenue business model
History of profitability and cash flow
Medium to low technology

I chuckle when I get these. You and 5,000 other private equity firms are looking for the same thing. It is like saying I am looking for a college quarterback that looks like Peyton Manning. Pretty good chance that he will be successful in his transition to the pros. That is exactly what the buyer is looking for - pretty good chance that this acquisition will be successful once we buy it. Just give me a business that looks like the one above and even I would look good running it.

On the other hand, more often than not we are representing seller clients that do not look nearly this good. Getting buyer feedback on why our client is not an attractive acquisition candidate is often a painful process, but can be quite instructive. Unfortunately it is usually too late to make the needed changes during the current M&A process. Many businesses are great lifestyle businesses for the owners, but do not translate into an attractive acquisition for the potential buyer because the business model is not easily transferable and scalable.

In these businesses the value the owner can extract is greater by just holding on and running it a few more years than he can realize in an outright sale. What are these characteristics that reduce the salability of a business or diminish its value in the eyes of a potential buyer? Below are our top 5 value destroyers:

1. The business is too transactional in nature. What this means is that too much of the company's revenues are dependent on new sales as opposed to long term contracts. Contractually recurring revenue is much more valuable than what might be called historically recurring revenue.

2. Too much of the business is concentrated within the owners. Account relationships, intellectual property, supplier relationships and the business identity are all at risk when the business changes hands and the owners cash out and walk out the door.

3. Too much of the business is concentrated in too few customers. Customer concentration poses a high risk for a new owner because the loss of one or two accounts could turn the buyer's investment sour in a big hurry. The buyer fears that all accounts are vulnerable with the change in ownership.

4. Little competitive differentiation. Buyers are just not attracted to businesses with no identifiable competitive advantage. A commodity product or service is too difficult to defend and margins and profits will continually be challenged by the market.

5. The market segment is too narrow, has too little potential, or is shrinking. If your market place is so narrow that even if your company had 100% market penetration and you sales were capped at $20 million, a larger company would not get very excited about an acquisition because you could not move their needle.

A business owner that is contemplating the sale of his business could greatly benefit from this rigorous buyer feedback two of three years prior to actually beginning the business sale process. A valuable exercise to take business owners through is a simulated buyer review. During this process we help identify those areas that could detract from the business selling price or the amount of cash he receives at closing.

This process is certainly less painful than when we were negotiating a letter of intent with a buyer from Dallas and he said to our client, “Brother, your overhead expenses are 20% too high for this sales level.” Another buyer in another client negotiation said, “I can't pay you a lot in cash at closing when your assets walk out the door every night. It will have to be mostly future earn out payments.”

As a business owner you can both identify and fix your company's value detractors prior to your sale or you can let the new owner correct them and keep all that value himself. Viewing your business as a buyer would well in advance of your business sale and then correcting those weaknesses will result in a higher sales price and a greater percentage of your transaction value in cash at closing.

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more information about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist

noreply@blogger.com (Dave Kauppi) — Mon, 21 Jun 2010 22:12:00 +0000

New Article Entitled Bridging the Valuation Gap between Business Seller and Business Buyer http://ping.fm/8L2Qz

Bridging the Valuation Gap between Business Seller and Business Buyer

noreply@blogger.com (Dave Kauppi) — Mon, 21 Jun 2010 21:50:00 +0000

Statistics show that a surprisingly low percentage of businesses for sale actually sell during their first attempt. The major reason for that is the valuation gap between the buyers and the seller. This post discusses how that gap can be breached resulting in completed business sale transactions.

In an earlier article we discussed a survey that we did with the Business Broker and the Merger and Acquisition profession. 68.9% of respondents felt that their top challenge was dealing with their seller client's valuation expectations. This is the number one reason that, as one national Investment Banking firm estimates only 10% of businesses that are for sale will actually close within 3 years of going to market. That is a 90% failure rate.

As we look to improve the performance of our practice, we looked for ways to judge the valuation expectations and reasonableness of our potential client. An M&A firm that fails to complete the sale of a client, even if they charged an up-front or monthly fees, suffers a financial loss along with their client. Those fees are not enough to cover the amount of work devoted to these projects. We determined that having clients with reasonable value expectations was a key success factor.

We explored a number of options including preparing a mock letter of intent to present to the client after analyzing his business. This mock LOI included not only transaction value, but also the amount of cash at closing, earn outs, seller notes and any other factors we felt would be components of a market buyer offer. If you can believe it, that mock LOI was generally not well received. For example, one client was a service business and had no recurring revenue contracts in place. In other words, their next year's revenues had to be sold and delivered next year. Their assets were their people and their people walked out the door every night.

Our mock LOI included a deal structure that proposed 70% of transaction value would be based on a percentage of the next four years of revenue performance as an earn out payment. Our client was adamant that this structure would be a non-starter. Fast forward 9 months and 30 buyers that had signed Confidentiality Agreements and reviewed the Memorandum withdrew from the buying process. It was only after that level of market feedback was he willing to consider the message of the market.

We decided to eliminate this approach because the effect was to put us sideways with our client early in the M&A process. The clients viewed our attempted dose of reality as not being on their side. No one likes to hear that you have an ugly baby. We found the reaction from our clients almost that pronounced.

We tried probing into our clients' rationale for their valuation expectations and we would hear such comments as, "This is how much we need in order to retire and maintain our lifestyle," or, "I heard that Acme Consulting sold for 1 X revenues," or, "We invested $3 million in developing this product, so we should get at least $4.5 million."

My unspoken reaction to these comments is that the market doesn't care what you need to retire. It doesn't care how much you invested in the product. The market does care about valuation multiples, but timing, company characteristics and circumstances are all unique and different, when our client brings us an example of IBM bought XYZ Software Company for 2 X revenues so we should get 2X revenues.

It is simply not appropriate to draw a conclusion about your value when compared to an IBM acquired company. You have revenues of $6 million and they had $300 million in revenue, were in business for 28 years, had 2,000 installed customers, were cash flowing $85 million annually and are a recognized brand name. Larger companies carry a valuation premium compared to small companies.

When I say my unspoken reaction, please refer to my success with the mock LOI discussed earlier. So now we are on to Plan C in how to deal with this valuation gap between our seller clients and the buyers that we present. Plan C turned out to be a bust also. Our clients did not respond very favorable when in response to their statement of value expectations we asked, "Are you kidding me?" or "What are you smoking?"

This issue becomes even more difficult when the business is heavily based on intellectual property such as a software or information technology firm. There is much broader interpretation by the market than for more traditional bricks and mortar firms. With the asset based businesses we can present comparables that provide us and our clients a range of possibilities. If a business is to sell outside of the usual parameters, there must be some compelling value creator like a coveted customer list, proprietary intellectual property, unusual profitability, rapid growth, significant barriers to entry, or something that is not easily duplicated.

For an information technology, computer technology, or healthcare company, comparables are helpful and are appropriate for gift and estate valuations, key man insurance, and for a starting point for a company sale. However, because the market often values these kinds of companies very generously in a competitive bid process, we recommend just that when trying to determine value in a company sale. The value is significantly impacted by the professional M&A process. In these companies where there can be broad interpretation of its value by the market it is essential to conduct the right process to unlock all of the value.

So you might be thinking, how do we handle value expectations in these technology based company situations? Now we are on to Plan D and I must admit it is a big improvement over Plan C (are you kidding)? The good news is that Plan D has the highest success rate. The bad news is that Plan D is the most difficult. We have determined that we as M&A professionals are not the right authority on our client's value, the market is.

After years of what are some of the most emotionally charged events in a business owner's life, we have determined that we must earn our credibility to fully gain his trust. If the client feels like his broker or investment banker is just trying to get him to accept the first deal so that the representative can earn his success fee, there will be no trust and probably no deal.

If the client sees his representatives bring multiple, qualified buyers to the table, present the opportunity intelligently and strategically, fight for value creation, and provide buyer feedback, that process creates credibility and trust. The client may not be totally satisfied with the value the market is communicating, but he should be totally satisfied that we have brought him the market. If we can get to that point, the likelihood of a completed transaction increases dramatically.

The client is now faced with a very difficult decision and a test of reasonableness. Can he interpret the market feedback, balance that against the potential disappointment resulting from his preconceived value expectations and complete a transaction?

Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, providing business broker and investment banking services to owners in the sale of lower middle market companies. For more information about exit planning and selling a business, click to subscribe to our free newsletter The Exit Strategist