acquisitions and exits

BUILD SIGNIFICANT VALUEACQUISITIONS

Learning Objectives

1. Understand the acquisitions process2. Find out how to acquire another business

using none of your own money3. How to use acquisitions as a growth

accelerant for your business

3 STRATEGIES FOR GROWING

NEW Product

NEW Market

Existing Product

NEW Market

NEW Product

Existing Market

Existing Product

Existing Market

TRADITIONAL VALUATIONYour Current BIZ:

Revenue: $500,000COG: $200,000GP: $300,000OP Exp: $250,000Profit $50,000

Acquisition:

Revenue: $200,000COG: $100,000GP: $100,000OP Exp: $100,000Profit $0

Your NEW BIZ:Revenue: $700,000 Adding $200k from acquisitionCOG: $280,000 lower COG due to buying powerGP: $420,000 Higher Gross ProfitOP Exp: $300,000 Slightly lower due to cost synergiesNew Profit $120,000 over 100% increase in Profit

+

SELLING YOUR BUSINESS

Your Current BIZ:Revenue: $500,000COG: $200,000GP: $300,000OP Exp: $250,000Profit $50,000

Your NEW BIZ:Revenue: $700,000COG: $280,000GP: $420,000OP Exp: $300,000Profit $120,000

Sell Business for x 5 Profit Multiple= $250,000

Sell Business for x 5 Profit Multiple= $600,000 That’s $350k in extra cash in your pocket!

ACQUISITION SELECTION

• Cultural fit

• Strategic fit

• Financing strategy

• Stakeholder retention strategy

HOW TO FUND AN ACQUISITIONFunding Option

•Option 1: Cash•Option 2: Cash + Cash Debt•Option 3: Cash + Vendor Finance•Option 4: Cash Debt + Vendor Finance•Option 5: Cash + Investor $•Option 6: Investor $ + Vendor Finance•Option 7: Cash + Investor $ + Vendor Finance

When to Use

•You have enough $$ for deal•You can borrow enough $$ for deal•You can negotiate with seller•You can borrow + negotiate enough $$•You want Smart $$ / need more $$•You can negotiate + need/want Smart $$•You’ll use your $$ + Negotiate + Smart $$

BUILD SIGNIFICANT VALUEEXITS

1. What is your ideal path to Exit? Build for cash-flow or build for

asset value? Build to run vs Build to sell?

2. Identify potential strategic buyers

3. Identify strategic advantages in your business

4. Prepare your business for sale

LEARNING OBJECTIVES

1. Do you have a valuation/sales price in mind for your business?2. Do you have personal/financial goals that your business sale needs to

fund or make time for?3. When do you want to leave the business?4. Are you happy to stage your exit over several years?5. Do you want a lump sum to retire with, or could you work with several payments over

time?6. Do you want to retain any ownership in the business?7. Do you want to transition the business to a family member?8. Do you have any key members of staff that would be keen to take on the business?9. Do you have a potential/interested buyer in mind?

10. Do you have a view of what the business will look like after you retire? -Are you interested in leaving a legacy?

STEP 1: GOALS AND OBJECTIVES

1. Who do you know already that can make more money from your business than you

can?

2. What other businesses similar to this can you also find?

3. How can you put your business on their radar?

STEP 2: IDENTIFY POTENTIAL BUYERS

What parts of your business are most valuable to these buyers? How can you further build out this value over time to maximise your sale value?

Activity: Pairs/External perspective. Partner up with your neighbor who’s not in your business and brainstorm strategic advantages in each other’s businesses with the advantage of a fresh set of eyes - an external perspective.

STEP 3: IDENTIFY STRATEGIC ADVANTAGES IN YOUR BUSINESS

1. Identify potential strategic buyers and sow the seed early

2. Prepare your business for sale - perform DD on yourself

3. Finalise all strategic build out ready for sale

4. Notify buyers

5. Create competitive tension - Scarcity/Fear

STEP 4: EXIT PROCESS