Download - CFA Houston M&A
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PREPARING YOUR CLIENTS FOR THEIR EXITMatt Register
Principal
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Legal Notice
• This is not an offer to sell or a solicitation of an offer to buy securities.
• Securities are offered through Corporate Finance Securities, Inc.
• Corporate Finance Securities, Inc. is a member firm of FINRA and SIPC.
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What are their options?
Not selling0% sale Selling
100% sale
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What are their options?
Not selling0% sale Selling
100% sale
PartialSale
MinorityRecap
JointVenture ESOP
ManagementBuyout
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What is success?• Full retirement?• Continued consulting?• Continue to run the business?• Transfer to the next generation?
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Future Funding Needs
Wealth
Lifestyle
Charity Family
Future Business
Opportunities
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WHAT IS THEIR NUMBER?
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Who would buy their company?
Strategic• Usually not looking for partners• Your business solves a problem• Different math
Financial• Looking for return• Not interested in running a
business• Needs management team in
place
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WHAT DO THEY REALLY CARE ABOUT?
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Maximizing Value• Well document deal• Proven earnings• Replicable results• Growth potential / Scalability• Synergies• Minimize buyer risk
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Minimize Buyer Risk• Audited financials
• Provable• Manage for taxes, but prove earnings
• Bench strength• Redundancy • Sustainability
• Systems in place• Less reliance on personality• More systems
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Pre-transaction Planning• Legal
• Trusts• Non-profits• Gifts
• Wealth Management• Determining your number
• Strategic• Right business• Right clients
• HR• Knowledge management• Depth of leadership
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The Cost of No Plan• Value of business• Risk to buyer• Stress for family• Uncertainty for customers• Uncertainty for employees• Uncertainty for vendors• Fewer options / Less control
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Example 1
• Contract Machining• OEM Drilling equipment
• $16MM rev• Proven earnings• Management Team• Synergies with buyer
• Contract Machining• OEM Drilling equipment
• $5MM rev• Run on a “yellow legal pad”
• Customer concentration
• No plan• No team• No time
Company A Company B
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Example 1
• 5 X EBITDA • 3 X EBITDA
Company A Company B
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Example 2• $35MM in revenue• Out of favor industry• Non-standard business model• Very profitable• Limited interest from buyers
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Example 3• $35MM rev• Well run / depth / systems• Solved a buyer problem
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Example 3• 5.5 X EBITDA
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Example 4• $30MM rev• Son is victim of own success• Asset light company
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Example 4• Minority recap• Father retains some equity• Son gifted equity• Son earns equity from PEG
Company
PEG 45%
Father 25%
Son 30%
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Your Transaction Team• Investment Bank
• Run an efficient auction• Generate interest• Negotiation
• Tax Accountant• Attorney
• Reps and warrantees• Contracts
• Insurance• Legacy liability coverage
• Wealth Manager• Make money with money