Business owners considering a sale of their business often ask us, “When is the best time to sell my company?” It is a fundamental and age-old question.

Sellers always want to “time” the sale of their businesses to maximize their return, either through a higher price, lower taxes, or, hopefully as we have seen in the last eight years, a combination of both.

Since President Bush lowered the Federal tax on long-term capital gains to 15%, there has never been a better time to sell a business, at least in terms of tax implications. Combine low tax rates with a very strong economy, and you know why M&A deals were so predominant from 2004 through the first part of 2007.

Will taxes go up in 2009? Mr. Obama and Mrs. Clinton have both promised, if elected, to raise taxes on long-term capital gains to 28% or 25%, respectively. However, this is a promise, not a guarantee. Read more »

Popularity: 30% [?]

Many entrepreneurs start businesses because they either:

1. Tired of working for the corporate world
2. Were outsourced, out placed or downsized from the corporate world
3. Learned a skill and knew that they could do it better.
4. Got angry at their boss and left their employer
5. Made the decision to work for themselves.
6. etc., etc. , etc.

Entrepreneurs were successful sellers, manufacturers, or creative/design/engineers who loved the enjoyment of doing it better than everyone else. Most started on a shoestring. They “bootstrapped the business” by borrowing from family, friends, credits cards, etc. They rapidly learned that building a business is a “stair step process”… i.e. at $1mm revenue, hire an office clerk/receptionist/order processor… at $2mm, hire a controller, move to a new location… at $5mm, hire a general manager and a salesman… and on and on. The more successful the business is… the more the founder will drift away from his first love… that which motivated him first to start the business. Instead of being able to spend his time calling on customers, now he’s reviewing insurance plans, studying risk management, trying to understand new OSHA regulations. As he realizes that it is time to begin building an exit strategy, not only does he want to “take some chips off the table”, he really doesn’t want to retire, he wants to do what he enjoys and move into the next stage of his life. Read more »

Popularity: 24% [?]

Case Study

Situation: Portland, Maine is home to several colleges, yet most feature limited housing. Rockport, Maine based developer Joseph M. Cloutier saw a need for a high-end apartment complex aimed specifically at the city’s 15,000 college student population. He asked CFA to arrange financing for the 100 suite complex designed to house 400 students. Bayside Village will meet the needs of students’ busy schedules, with amenities like sheltered parking, wireless internet, a fitness room, and bicycle storage.

Solution: Corporate Finance Associates designed a multi-layered capital structure including development stage funding, construction financing, term debt, and municipal tax increment financing totaling $26mm through a combination of short term investors, private equity, and bank financing timed to meet the projects funding milestones.

Popularity: 17% [?]

(These aggressive buyers are shopping now)

Strategic Buyers

With financial buyers hobbled by tight credit, access to acquisition targets is easier, making this an ideal time to acquire selected technologies, proprietary relationships, facilities, management talent, geographic coverage, product lines and joint venture partners.

Well-funded Consolidators

For well-funded, financially-motivated buyers who have the strength to over-fund deals with equity today and recapitalize once bank lenders find their checkbooks again, the field is wide open.

International Buyers

The US dollar is trading at a record low relative to most leading currencies, and America remains the largest single marketplace in the world in almost every category of product and service, so the timing is better now Read more »

Popularity: 20% [?]

Most owners of privately-held businesses are the epitome of entrepreneurship. Most entrepreneurs are successful because of their “can-do” attitudes as well as their willingness to do whatever is necessary to make their businesses successful.

When it comes time to sell their businesses, their “hands-on” attitude leads many business owners to the belief they are the best salesman for their companies. “Who knows my company better than I,” many business owners say to us, “How can you do a better job describing my company than I,” they ask.

We, as M&A professionals, never purport to know more about our clients’ businesses than our clients. Neither would anyone at CFA espouse to know each and every buyer who could ever be interested in our clients’ businesses. Read more »

Popularity: 19% [?]

Case Study

Founded in 1964, M&M Pump & Supply is a leading distributor of comprehensive systems and components used in oil and gas drilling and production to gas producers and industrial customers located primarily in the Illinois Basin. The Company also provides oil field services such as hydrostatic pipe and tank testing and cleaning, delivery, and equipment rentals. M&M Pump & Supply retained the services of Corporate Finance Associates to identify and negotiate a deal with a strategic acquirer.

M&M Pump & Supply was acquired by DN Partners, a Chicago-based private equity firm with investments in lower middle-market companies generally based in the Midwest. (www.dnpartners.com). The Company specializes in partnering with management teams to facilitate corporate spin-offs, family succession transactions, recapitalizations, buy and build strategies, and management buyouts. DN Partners’ other business interests include manufacturing, packaging, printing, and communications.

Popularity: 15% [?]

Case Study

Vayden Anderson decided at 78, it was time to sell his business and retire. With no heirs interested in acquiring Overland Sand & Gravel, on the recommendation of his attorney, Anderson turned to CFA. He retained CFA to sell his business, the fourth largest ready mix concrete producer in Nebraska, to a buyer he pre-approved, a buyer who would retain all of Overland’s employees and operations. CFA quickly identified the right prospects and received several offers. Ultimately, CFA negotiated a transaction favorable for both parties (and significantly exceeding the seller’s value expectations). The transaction closed in less than 6 months from when CFA was hired and helped and achieved all of the seller’s goals.

Popularity: 15% [?]

Business owners interested in selling their business can readily see the benefits of hiring an investment banker to identify qualified buyers. However, the issue which routinely arises in negotiations between the business owner and the investment banker is whether or not the owner will pay an initial retainer and/or monthly work fee.

Owners often maintain that they only want to pay for the result of an actual sale, and, therefore, are willing to pay success fees upon closing, but they are not willing to pay any up-front fees. However, this view assumes that the risks of not closing a transaction depend solely on the investment banker’s performance, whereas, in fact, closings also depend upon the owner’s determination that he is receiving the highest price, the best terms or the business is being sold to the “right buyer.” Read more »

Popularity: 56% [?]

Case Study

After trying unsuccessfully to complete a management buyout by the President and 25% owner, CFA was hired to make a Transaction happen. Working with both owners, CFA was able to bring the right balance of debt and Private Equity to the table to do a transaction favorable to all parties. The resulting value was 60% above what the owners had originally anticipated. They were able to select from four competing prospects. Taylor is a $160 Million company using 300 semi’s to transport crude oil from wells to Taylor’s pipeline injection points, so the structure had to allow the Cap X of adding new trucks as they grow.

Popularity: 14% [?]