Mergers & Acquisitions

What is my business worth?

• The primary element to all M&A deals is the challenge of agreeing on value
• However valuation is not simple, it requires careful identification of all the internal and external variables that build the value equation, and equally as critical are quality data
• The objective in valuation is to identify all the variables that will impact the business’ ability to generate future cash flow—but how can we be certain?
• The right buyer is the one that envisions the strongest future for the selling business, understands the full value of the business and desires to pay that value

Understanding the value drivers specific to your business will enable you to better determine the true value of your business.

A sample of value drivers we look for in our client companies include:

• Financial strength: historical growth in revenue and profit with earnings visibility
• Strong growth opportunities with clear strategy to obtain
• Industry growth: solid historical and projected
• Proprietary, high value-added products or service offerings (patents, expertise, etc.) resulting in above average profit margins
• Diversified product base, not subject to obsolescence
• Notable competitive advantages
• Efficient operations
• Quality financial reporting
• Economies of scale and scope
• Diversified customer base with limited concentration
• Multiple alternative suppliers
• Niche market leadership, with demonstrated development skill
• Solid brand recognition and/or market reputation
• Demonstrated management success and depth
• Highly skilled, efficient and stable work force
• Critical mass—size of revenues and profits
• High barriers to entry

The process of establishing an achievable valuation involves (i) company and (ii) market specific factors, relative to each other, including:

• Normalizing and analyzing historical financial statements
• Discuss business history and growth prospects
• Identify and assess intangible assets
• Analyze comparable public companies’ trading multiples
• Analyze comparable transactions

How does timing affect the sale of my business?

This too is a question we are often asked. Because every business and reason to sell is unique, there’s no simple formula for determining when to sell.

All business owners will exit at one time, whether via selling, transitioning out or a succession plan. Most often a sale is the optimal way to maximize value.

The decision to sell is reached after thoughtful consideration of personal goals, M&A market conditions and the company’s value.

Planning an exit takes time, requires focused attention to the seller’s objectives and requires careful execution to reach the right buyers with the right opportunity at the right time—all while maintaining strict confidentiality and minimizing disruption to the day to day business.

The importance of the right advice, sound business judgment, thorough diligence and creativity in effecting successful financial projects is a cornerstone philosophy at ALIGNMT.

Our professionals provide clients with informed, senior-level advice in a manner that empowers us to develop creative and effective solutions.

Knowledge and experience make a difference not only in developing the right advice, but also in providing guidance and support for companies facing difficult decisions in new, unfamiliar circumstances.

We enter only those deals where we will add significant value and where our contributions can help assure a successful transaction.

Clients hire us with several goals in mind: to maximize shareholder value, ensure buyer viability and achieve the best possible terms with confidentiality, speed and minimal burden on ownership and management.

Maximize Shareholder Value

Our rigorous analysis, professional marketing materials and superior negotiation abilities help to ensure the best possible deal for our clients.  Each step of the marketing process is tailored to our client’s particular situation and designed to exploit competition among potential buyers.

Negotiate the Best Possible Terms

During the negotiation process our clients are shielded from the often emotionally tense discussions with the buyer.  Our experience negotiating transactions enables us to extract better pricing and terms than a business owner would otherwise be able to accomplish, particularly one  who has not previously been involved in a business sale.  Our professionals are experienced and comfortable negotiating for the best possible outcome, but know when to compromise in order to ensure the deal happens.  Meanwhile the relationship between our client and the buyer is unaffected, which is particularly important during the transition period.

Ensure Buyer Viability

When buyers stretch from a pricing perspective, problems related to financial performance and projections, accounting, customer concentration, employment agreements, non-compete agreements, industry downturns, etc. are all magnified.  Our track record of dealing with such issues to keep them from becoming deal breakers is attributable to our team of experienced professionals.

Help Ensure Confidentiality

Confidentiality is interwoven with every step of our sale process to  avoid disruption of management and employees and to maintain positive relationships with customers and suppliers.  Everyone requesting confidential information is required to sign a confidentiality agreement.  For competitors included in the process, we tailor our approach and marketing materials in order to ensure that sensitive information is not placed in the wrong hands.

Speed Up the Deal Process

In deal making time is the enemy.  Hazards including economic changes or developments within our clients’ businesses or markets can befall a deal with the passage of time.  Therefore the quicker the transaction and the greater the momentum we can foster, the lower the risk of failure to close.

Minimize Burden on the Owner

During the marketing process it is essential that our clients continue to achieve the aggressive strategic and financial goals set by management and communicated to potential buyers.  Accordingly, our collaborative role is one that emphasizes minimal burden on the owner (and those members of the staff aware of the sale) in order that he or she may continue to run the business.

Evaluating the Deal and Maximizing Value:

• Define what you are valuing and understand the Buyer
• Consider the current market conditions
• Buyer/seller motivations & negotiating position – what do they think they are buying? What do they think has value?
• Recognize differences in valuation techniques
• Beware of “rules of thumb” and non-financial metrics
• Consider premiums/discounts depending on the methodology
• Understand the components of value – do a sanity check
• Consider the terms and the structuring
• Arm yourself with good information to make an informed decision