business model designWe help companies design their business model or improve upon an existing one.
|
Growth strategiesWe help companies define their optimal growth strategy and set up infrastructure to support it.
|
financialSWe help companies prepare their financial projections, budgets and report on their KPIs and financials.
|
the venturers
Who we work with
If you are building something scalable, you have a small team, and are looking for capital we may want to work with you. We primarily focus on companies in tech, media, digital or internet enabled companies.
What we can do for you
- research competitive environment, prospects and revenue streams
- prepare your pro-forma financials
- help you improve your deck
- prepare the information package or confidential information memorandum;
- advise the company as to the structure of a transaction
- help you figure out your exit strategy
Humans v Robots
While we use technology to facilitate our research and decision making process our value added is really on the human side. Part of our process is collecting real-life and real time-data points by talking to relevant individuals.
Research Sources
Selling your Company
Having the right partner to work with the company owners during the process of company sale is not only a requirement for successful deal closing but also for the emotional closure that owners need to have when turning their business over to someone else.
Valuation of companies tends to be more art than science and even more so for private businesses. Depending on the type of acquirer, economic situation, and industry structure at the time, range of values a company may fetch may be very wide. However, what ultimately matters is the perception of value from the perspective of the owner and the acquirer. If both sides consider deal terms as fair or at least acceptable, The value they agree to is the relevant benchmark. And lastly the value estimate is always more easily assessed in the hindsight. But all we have to work with is the now.
There are things that can be done to improve the valuation of the company if there is enough time for actions to be taken before the company is offered for sale. Some of the improvements may be as simple as updating the company’s website which is normally the first impression we get about the company nowadays. We can help you with simple as well as more complicated issues.
Valuation of companies tends to be more art than science and even more so for private businesses. Depending on the type of acquirer, economic situation, and industry structure at the time, range of values a company may fetch may be very wide. However, what ultimately matters is the perception of value from the perspective of the owner and the acquirer. If both sides consider deal terms as fair or at least acceptable, The value they agree to is the relevant benchmark. And lastly the value estimate is always more easily assessed in the hindsight. But all we have to work with is the now.
There are things that can be done to improve the valuation of the company if there is enough time for actions to be taken before the company is offered for sale. Some of the improvements may be as simple as updating the company’s website which is normally the first impression we get about the company nowadays. We can help you with simple as well as more complicated issues.
What we can do for you
- review the company’s financial condition, operations, competitive environment, prospects, and related matters for potential investors;
- prepare the information package or confidential information memorandum;
- solicit coordinate, and evaluate indications of interest and proposals regarding a transaction;
- advise the company as to the structure of a transaction; and
- provide such other financial advisory and investment banking services reasonably necessary to accomplish the foregoing
Owner's dilemma
Knowing when and what portion of the company to sell are the first questions the business owners need to answer. If the area business mainly operates in is heading into a recession, they may expect to receive either lower value on their companies or to be prepared to wait for the right partner for a longer time if they can afford to. Typically a controlling interest of 100% can be assumed to have greater value than a simple controlling interest, because the owner does not have to consider the interests of minority shareholders.
Exit Strategy Tips
If you are serious about selling your business entirely or a portion of it, be sure to get armed with good information or get a professional adviser to guide you through the process. Your adviser will lend you extra credibility and objective opinion in the process that might be emotional for you.
If you don't have legal council your adviser may refer someone who specializes in M&A transactions.
1. Prepare your Financials: If your business has a long history your financial reports should be a good indicator of the performance. Normally, three to five years of past financial reports are considered relevant for purpose of evaluating your business. If your statements have been audited or reviewed by an accountant, potential buyers should be able to perform their due diligence faster. In addition, presence of a good business plan is a plus as well.
2. Business With Good Growth Prospects: It is always easier to sell a business whose sales are growing than one in a downward trend or even flat. Buyers generally want to invest in a company that will provide them with a good return, so they’re willing to pay more for a business that has a positive trend and outlook. If the company's future success appears to be threatened (a competitor entering the market, technological advances outdating company products, etc.), the value of the business will be affected. The marketability of the firm may decline as well.
3. External Risk Factors: The climate in which a business operates can also affect its valuation and marketability. An overall economic downturn can result in the tightening of corporate belts and a reduction in acquisition activity. In the same manner, a decline within a specific industry or geographic region can also prompt a diminished appetite for private-company acquisitions in those areas. Additionally, a decrease in a public company’s price/earnings ratios tends to produce a corresponding "trickle down" effect for the multiples paid for private companies.
4. Using Multiples to Value your Business: There is an abundance of available data on common industry "multiples" that can be used to estimate a business's value. Over time, valuation experts and investment bankers have observed trends in the selling price of businesses. Multiples are simply a summary version of these trends. They are industry-specific and generally used for smaller businesses. However, while multiples may be useful in providing an immediate ballpark of a business's value, they do not substitute for a comprehensive valuation analysis.
5. Importance of Intangible Assets: When pricing your business for sale, intangible assets – such as people, knowledge and market position – can be even more important than tangible property. Customer awareness that underpins a prominent position within the market is a key ingredient in many companies’ success. A strong brand and a loyal customer base can be distinct assets. Other distinct intangible assets include copyrights or trademarks that let a business sell its products for a higher price or in greater quantity than its competition; proprietary mailing lists of customers or prospects; long-term contracts; and franchises with long track records and well-recognized names.
6. Get a Professional Opinion on Valuation: A professional valuation will give you a basis for gauging offers. It will give you an idea of what you can expect to net from the sale. It will also tell you your company's market position, financial situation, strengths and weaknesses (which you can address prior to putting it on the market). Valuations can be obtained from a number of sources, ranging from local accounting firms to business brokers and investment banking firms. As a rule, you should make sure the company performing your valuation has access to the most current national data regarding privately held transactions in your industry. Experience in selling firms of your type is obviously helpful as well.
7. Maximize Your Price:
8. Know Your Buyer: Financial buyers make up an enormous segment of the market. They look for businesses they can buy using debt financing for 50% to 75% of the price. They’re also looking for sufficient cash flow to service that debt. With few exceptions, they value a business by using a multiple of four to six times earnings before interest and taxes (after making adjustments for expenses that would not continue for a new owner). They deduct from the price any interest-bearing debt they will assume. There are disadvantages to selling to a financial buyer: There are no synergies such as access to a larger sales force, or complementary activities in production, engineering, or any other part of the business. Furthermore, there are pressures to increase the cash flow because of the added debt. Financial buyers are in business to make deals, so they often leave day-to-day operations unchanged. But they buy with a view to selling, which could disrupt your business life a second time.
Strategic buyers expect synergies with their other holdings. They can afford to pay a premium, but they may not need to because they know the market. Buyers offering premium prices are in short supply. The best match sometimes comes about when they seek you out after having determined that your business fits their plans. Strategic buyers may diminish your role, however, and their goals may differ from yours.
9. Management change: If you are selling your business in its entirety and are not planning to stay after the transaction closes, you should have a succession plan. Sometimes the buyer already has a person who will be taking the leading role in the company, but you may need to stay on board for some period to allow for a smooth transition. If you already prepared for transition by delegating your duties to others in the organization, your business is more likely to fetch a higher price.
10. Previous Agreements and Contracts: Many privately held companies conduct business on an informal, or "handshake," basis with customers and vendors. Informal agreements, however, can result in a discount to value – particularly when they are key to the company's success. Formal agreements can ensure the continuity of key relationships, giving a buyer peace of mind that the company's customer and supplier relationships (and therefore cash flow) are secure.
In addition, review your incorporation papers, permits, licensing agreements and leases. Make sure you have them readily available, current and in order. Make a good first impression. Insure that when prospective buyers visit, they see an orderly operation instead of one that is chaotic. And no matter what, keep your eye on the ball. Don't let your business performance decline because you're too focused on the sale. This will only give buyers additional negotiating power to lower their offers.
If you don't have legal council your adviser may refer someone who specializes in M&A transactions.
1. Prepare your Financials: If your business has a long history your financial reports should be a good indicator of the performance. Normally, three to five years of past financial reports are considered relevant for purpose of evaluating your business. If your statements have been audited or reviewed by an accountant, potential buyers should be able to perform their due diligence faster. In addition, presence of a good business plan is a plus as well.
2. Business With Good Growth Prospects: It is always easier to sell a business whose sales are growing than one in a downward trend or even flat. Buyers generally want to invest in a company that will provide them with a good return, so they’re willing to pay more for a business that has a positive trend and outlook. If the company's future success appears to be threatened (a competitor entering the market, technological advances outdating company products, etc.), the value of the business will be affected. The marketability of the firm may decline as well.
3. External Risk Factors: The climate in which a business operates can also affect its valuation and marketability. An overall economic downturn can result in the tightening of corporate belts and a reduction in acquisition activity. In the same manner, a decline within a specific industry or geographic region can also prompt a diminished appetite for private-company acquisitions in those areas. Additionally, a decrease in a public company’s price/earnings ratios tends to produce a corresponding "trickle down" effect for the multiples paid for private companies.
4. Using Multiples to Value your Business: There is an abundance of available data on common industry "multiples" that can be used to estimate a business's value. Over time, valuation experts and investment bankers have observed trends in the selling price of businesses. Multiples are simply a summary version of these trends. They are industry-specific and generally used for smaller businesses. However, while multiples may be useful in providing an immediate ballpark of a business's value, they do not substitute for a comprehensive valuation analysis.
5. Importance of Intangible Assets: When pricing your business for sale, intangible assets – such as people, knowledge and market position – can be even more important than tangible property. Customer awareness that underpins a prominent position within the market is a key ingredient in many companies’ success. A strong brand and a loyal customer base can be distinct assets. Other distinct intangible assets include copyrights or trademarks that let a business sell its products for a higher price or in greater quantity than its competition; proprietary mailing lists of customers or prospects; long-term contracts; and franchises with long track records and well-recognized names.
6. Get a Professional Opinion on Valuation: A professional valuation will give you a basis for gauging offers. It will give you an idea of what you can expect to net from the sale. It will also tell you your company's market position, financial situation, strengths and weaknesses (which you can address prior to putting it on the market). Valuations can be obtained from a number of sources, ranging from local accounting firms to business brokers and investment banking firms. As a rule, you should make sure the company performing your valuation has access to the most current national data regarding privately held transactions in your industry. Experience in selling firms of your type is obviously helpful as well.
7. Maximize Your Price:
- Concentrate on Core Competency: A company with a strong focus around a core business generally tends to be more appealing to a buyer than a company going many different directions. Make sure that the focus of all members of the management team is aligned in this direction and that your firm’s products and services add to the value of your core business.
- Reduce Customer Concentration: Many small businesses can't help but have a handful of customers who generate a large percentage of the company's revenues. In general, a buyer will carefully review any client relationship that comprises more than 10% of revenues. Any efforts to reduce the level of customer concentration prior to a sale will be helpful in increasing the reliability of the firm's future revenue stream and will help to augment the firm's value.
- Industry Concentration: Specialization can give a company a competitive advantage in winning contracts through industry expertise; it can also force companies to take on risk due to lack of diversity. If an industry suffers a cyclical downturn, a company that has the preponderance of its customer base within that industry may be affected as well. There are exceptions, but industry concentration is usually viewed as undesirable.
8. Know Your Buyer: Financial buyers make up an enormous segment of the market. They look for businesses they can buy using debt financing for 50% to 75% of the price. They’re also looking for sufficient cash flow to service that debt. With few exceptions, they value a business by using a multiple of four to six times earnings before interest and taxes (after making adjustments for expenses that would not continue for a new owner). They deduct from the price any interest-bearing debt they will assume. There are disadvantages to selling to a financial buyer: There are no synergies such as access to a larger sales force, or complementary activities in production, engineering, or any other part of the business. Furthermore, there are pressures to increase the cash flow because of the added debt. Financial buyers are in business to make deals, so they often leave day-to-day operations unchanged. But they buy with a view to selling, which could disrupt your business life a second time.
Strategic buyers expect synergies with their other holdings. They can afford to pay a premium, but they may not need to because they know the market. Buyers offering premium prices are in short supply. The best match sometimes comes about when they seek you out after having determined that your business fits their plans. Strategic buyers may diminish your role, however, and their goals may differ from yours.
9. Management change: If you are selling your business in its entirety and are not planning to stay after the transaction closes, you should have a succession plan. Sometimes the buyer already has a person who will be taking the leading role in the company, but you may need to stay on board for some period to allow for a smooth transition. If you already prepared for transition by delegating your duties to others in the organization, your business is more likely to fetch a higher price.
10. Previous Agreements and Contracts: Many privately held companies conduct business on an informal, or "handshake," basis with customers and vendors. Informal agreements, however, can result in a discount to value – particularly when they are key to the company's success. Formal agreements can ensure the continuity of key relationships, giving a buyer peace of mind that the company's customer and supplier relationships (and therefore cash flow) are secure.
In addition, review your incorporation papers, permits, licensing agreements and leases. Make sure you have them readily available, current and in order. Make a good first impression. Insure that when prospective buyers visit, they see an orderly operation instead of one that is chaotic. And no matter what, keep your eye on the ball. Don't let your business performance decline because you're too focused on the sale. This will only give buyers additional negotiating power to lower their offers.
Some of Our Clients
