 |
 |
|
|
| |
| |
| |
|
|
|
| Business Broker Chicago |
| Dave Kauppi is the editor of The Exit Strategist Newsletter, a Merger and Acquisition Advisor and President of MidMarket Capital representing owners in the sale of privately held businesses. We provide Wall Street style investment banking services to lower mid market companies at a size appropriate fee structure. |
| Language: English |
| RSS Feeds for this Blog |
|
Statistics |
| Unique Visitors: 0 |
| Total Unique Visitors: 0 |
| Visitors Out: 184 |
| Total Visitors Out: 184 |
|
|
|
| |
|
|
| |
|
| Tax Consequences of Selling a Business |
| 2008-07-04 11:16:18 |
If you are thinking about selling your business, the first thing you should do is to consult your tax accountant to understand the tax consequences of various transaction structures and the resulting after tax proceeds from a stock sale versus an asset sale.The purpose of this post is to demonstrate the importance of the tax impact in the sale of your business. As an M&A intermediary and member of the IBBA, International Business Brokers Association, we recognize our responsibility to recommend that you consult your attorneys and tax accountants for specific advice on your business sale transaction.As a general rule, buyers of businesses have already completed several transactions. They have a process and are surrounded by a team of experienced merge...
|
| |
|
| Baby Boomer Business Sellers - The Rush to the Exits Could Erode Company Valuations |
| 2008-06-28 12:47:41 |
The Baby Boomers are retiring in large numbers over the next ten years and the impact on the economic landscape of America will be dramatic. This post will examine those trends and the likely impact on business valuations over the next several years.
The Baby Boomers are retiring in large numbers over the next ten years and the impact on the economic landscape of America will be dramatic. This article will examine those trends and the likely impact on business valuations over the next several years. From a 40,000 foot view the number of businesses that change hands will mirror the number of baby boomers that are retiring.
According to Federal Reserve's Survey of Consumer Finances, in 2001, 50,000 businesses changed hands. That number rose to 350,000 in 2005 and is projected to increase to 750,000 by 2009. Price Waterhouse reported in a Trendsetter Barometer Survey of Business Owners that 51% were planning on selling their company to another company compared with 18% anticipating pass...
|
| |
|
| Reduce Capital Gains Tax in the Sale of a Business |
| 2008-06-28 11:32:27 |
The sale of your business will be the largest financial transaction in your life. As a business owner, you have benefited from the growth in the value of your business tax free. Unfortunately when you sell your business, it is time to pay up with capital gains taxes. This post discusses an approach that allows you to again defer your capital gains taxes, maximizing the returns from your business sale.
Hopefully, before selling a business, you meet with a CPA or tax accountant and get an estimate on how much of your proceeds will be going directly to Uncle Sam if you pay them in a lump sum at time of sale. You don't want to save this surprise for after all is said and done, because not only will it most likely be a shock, but you will have given up your chance to do anything about it.
Planning is everything. For this article I will assume you are not doing a 1031 business exchange, that is selling your business and buying another similar business taking into consideration all the IRS g...
|
| |
|
| Private Equity May Be Your Best Business Exit Strategy |
| 2008-05-01 13:59:41 |
I must admit that I have had a bias against my clients selling their businesses to private equity firms until I discovered that there are some situations where it might be the best exit strategy. Our firm represents business sellers primarily in the information technology and healthcare industries. Because the valuation multiples in these industries can get a little rich, they do not normally fit the more conservative EBITDA models of the private equity industry.We normally achieve a better initial valuation from industry strategic buyers that build other synergy factors into their purchase valuation models. In this article we will present some situations where the private equity model is a superior solution for the bu...
|
| |
|
| The Owner's New Role After the Business Sale |
| 2008-03-21 12:10:49 |
When economic times are uncertain, business buyers become very cautious about a potential merger acquisition transaction. They attempt to negotiate for a lower price, but they also try to negotiate for the seller to have a significant interest in the post acquisition performance. This results in less cash at close and more of the transaction value tied to an earn out based on future sales of the acquired new division or business unit.The buyers, especially experienced buyers, know that one of the key mistakes is to underestimate the amount of time and effort it is to institutionalize this new business. It takes a good deal of time to transfer the intellectual capital from the target company to the buying company. Converting customer loyalty to the new en...
|
| |
|
| How Business Buyers Value Your Business - Ten Key Factors |
| 2008-02-03 11:09:14 |
If you are considering selling your business this article will help you evaluate your company as a strategic acquirer might. From that perspective it pays to focus on ten critical areas of value creation. The better your performance in these areas, the greater the selling price of your business. Below is our list of STRATEGIC VALUE DRIVERS:1. Customer Diversity If too much business is concentrated in too few of your customers, it is a negative in the acquisition market. If none of your customers accounts for more than 5% of total sales, that is a real plus. If you find yourself with a customer concentration issue, start focusing on a program to diversify.2. Management Depth An acquirer will look at the quality of the mana...
|
| |
|
| C-Corp Asset vs. Stock Sale Dilemma |
| 2008-02-03 11:01:49 |
cyhShareholders of C-Corps often experience significant anxiety when it is time to exit their business. If they are fortunate, they will exit by way of a stock sale. In these cases, their Corporate Tax is $0 and then when the proceeds are distributed to the shareholders, the capital gains taxes will be approximately 20%.To minimize future taxes and third party liabilities, the majority of buyers prefer to purchase selected assets of the seller rather than its stock. The total taxes associated with the asset sale of a C-Corp is typically more than 50% of the corporate gain (i.e. approximately 40% of the gain over the basis is taxed at the corporation's income tax rate. The gain often drives that corporate rate to the highest l...
|
| |
|
| To Sell a Business or Not Sell a Business A Crossroads Decision |
| 2008-01-12 14:45:32 |
Thinking of taking your company to the next level with a major capital investment or hiring additional sales resources? These are decisions that can impact your company's future. It might be time to consider the alternative of selling your business.We are often approached by business owners at a crossroads of taking the company to the next level. The decision in most cases is whether they should bring on the one or two hot shot sales people or channel development people necessary to bring the company sales to a level that will allow the company to reach critical mass. For a smaller company with sales below $5 million this can be a critical decision.For frame of reference, prior to emba...
|
| |
|
| Sell a Company - How is the Selling Price Determined? |
| 2008-01-12 13:02:33 |
Bussiness valuations are a valuable tool to set a range of prices when you sell a business. The only true way to determine value, however, is to present the business to the universe of buyers in a true open market bidding process.How much are you expecting when you sell your business? I always ask this question of our clients. The answers are as different as the businesses. "We need $5 million to give us the type of retirement we want. We have invested $2 million in the product. Our investors have put in $3 million so far. It should sell for $5 million. I heard that XYZ Company got $30 million for their company." Well, my response to my clients doesn't necessarily endear me to them, but it is the truth. The market doesn't c...
|
| |
|
| Business Owner Exit Strategy: Avoid the Boomer Retirement Wave |
| 2007-12-22 15:06:34 |
Business owners considering retirement should finalize their exit planning in 2008 because business sale prospects will be negatively impacted by coming demographic and economic changes, according to Chicago-based investment banker David Kauppi, managing director of MidMarket Capital.Chicago (PRWEB) December 14, 2007 -- Business owners considering retirement should finalize their exit planning in 2008 because business sale prospects will be negatively impacted by coming demographic and economic changes, according to Chicago-based investment banker David Kauppi, managing director of MidMarket Capital."In 2008 we will see the beginning of 'the rush to the exits,' as the first wave of bab...
|
| |
|
| Capturing That Elusive Strategic Value in a Business Sale |
| 2007-11-10 13:30:45 |
In a business sale two different buyers can view the value of the target company far differently in terms of value. One buyer may look at paying a rule of thumb financial multiple while another recognizes meaningful growth potential and is willing to pay way beyond an EBITDA multiple.Wow did I get a real world demonstration of the saying, "Beauty is in the eyes of the beholder." If I could rephrase that to the business sale situation it could be, Strategic Value is in the eyes of the particular buyer." We are representing a small company that has a patented and somewhat unique product. They have gotten distribution in several hardware store chains, Lowes, and are going into Wal*Mart next spring.The owners are at a cross-r...
|
| |
|
| A Major Concern for Business Sellers - What Happens to My Employees |
| 2007-10-27 10:23:09 |
One of the biggest concerns of business sellers is what will happen to their loyal employees when the new owner takes over. There is a common misperception that the new owner will come in and slash and burn in order to hit their profit targets. The reality for the family business could not be farther from the truth.For family business owners, the employees, if they are not actually family, they are like family. Many have been there through the bad times and the good. They may have not gotten an expected raise because of tough times. They have been to each other's children's weddings. The boss has helped the employee family with an unexpected healthcare expense. The bonds are very strong. An admirable trait that we see from almost every business owner we ...
|
| |
|
| Democrats in the White House - Watch out Business Sellers |
| 2007-10-23 14:53:43 |
TheFederal Reserve’s Survey of Consumer Finances estimates that business-related wealth transfers will total $4.63 trillion over the next 10 years in the United States. I was talking to a Tax Attorney the other day and discussing our upcoming Seminar - Exit Strategies for Baby Boomer Business Owners. He reminded me that we should stress that if the democrats end up in control of the House">White House that business sellers would potentially suffer a big increase in their capital gains resulting from the sale of their business and business owners should consider selling sooner rather than later.That will be just one of the many issues we plan on coverin...
|
| |
|
| Raising Venture Capital – Let's Be Realistic |
| 2007-10-15 09:09:38 |
I do not mean to discourage you entrepreneurs in your quest to launch the next Big Thing. Many of you look at your path as write a compelling business plan, make a few presentations to the well-known venture firms, get $3 million for 5% of your company pre revenue, and launch. Product development progresses without a hitch, you hit all of your milestones, you get a second round at an even more favorable valuation, and you land the big high-profile account. Two years later, you do an IPO with a market cap of $350 million. Fast forward another two years and you are the subject of a bidding war between Microsoft, Google, and Interactive Corp. You finally agree to a buy-out at $3 billion. Life is good.Wow, that was easy. Unfortunately that is one in 10 million. I was listening to CNBC this mor...
|
| |
|
| Selling Your Business - Should It Be a Do It Yourself Job? |
| 2007-09-17 08:54:08 |
Making the decision to sell your business is hard enough, but having a buyer tell the owner it is not worth as much as he thought can really be a blow. The emotional attachment that most owners have to their business is very deep. They remember the long hours, the financial hardships, the wearing of all the hats responsibility, the worry and the pride of success. They believe that they ran their business the right way and that the new owners should stick with their system. With this backdrop, the actual selling and negotiating process can be a bucket of ice water over the head awakening - not at all pleasant.Buyers and Sellers are at cross-purposes when it comes to the terms and conditions of a sale. What is positive for the buyer is negative for the sel...
|
| |
|
| The Offer to Buy a Business Depends on the Many Characteristics |
| 2007-08-02 08:30:24 |
In our Merger and Acquisition practice we try to prepare our business sellers for the multitude of different deal structures that they should expect from various buyers. We go through elements like cash at close, seller notes, earn outs, non-competes, escrow accounts, etc. More often than not our first time seller will actually put out his or her hand in a stop gesture and reply, "I only want the full price in cash at close." This article will discuss some of the selling company characteristics that directly effect both the selling price and the terms.Selling Company Revenue Composition - This is a very important factor in determining how much a buyer will pay for your business and how much will be in cash at closing. If 80% of your annual revenue is a r...
|
| |
|
| FAQ's From Business Buyers |
| 2007-08-02 06:40:03 |
An area of great concern to our business selling clients as we help prepare them for a buyer visit is what questions the buyer is likely to ask. Below are a representative set of questions that we have encountered. This article will not provide you with the answers because they will vary with each business seller. However, we will provide a buyer motivation framework so that you can answer the questions with this common framework in mind.Buyers want to eliminate as much risk as possible because an acquisition, by its very nature is a risky business decision. A buyer does not want to discover or be confronted with a bunch of Gotcha's after the check has cleared. As a seller, you must never convey the attitude of this plac...
|
| |
|
| Selling Your Business – Groom or Hire Your Successor |
| 2007-07-13 11:47:22 |
One of the exciting aspects of being involved in Mergers and Acquisitions is that we are constantly learning. One of our most productive classrooms is the buyer visit. In those visits the buyer's motivations, priorities, concerns, and value drivers and value detractors are often revealed.This was the case in one recent buyer visit with our client. Her Firm is representative of many early baby boomer led firms that "started the business in their garage" (actually it was started in her living room) 25 years ago and built a successful business with an excellent brand and customer loyalty. She is now looking to exit her business and reap the rewards from her hard work in the form of a generous buy out offer.The potential buyer is a business owner that starte...
|
| |
|
| Tax Tips on a C Corp Asset Sale |
| 2007-05-22 08:45:03 |
First, unless you are planning on going public or have hundreds of stockholders do not form a C Corp to begin with. Use an S Corp or an LLC. If you currently are a C Corp ask your attorney or tax advisor about converting to an S Corp. If you sell your company within a 10 year period of converting to an S Corp the sale can be taxed as if you were still a C Corp.Here is what happens when there is an asset sale of a C Corp. The assets that are sold are compared to their depreciated basis and the difference is treated as ordinary income to the C Corp. Any good will is a 100% gain and again is treated as ordinary income. This new found income drives up your corporate tax rate, often to the maximum rate of around 34%. You are not done yet. The corporation pays th...
|
| |
|
| The Pricing Dynamics of Selling a Business |
| 2007-05-22 08:42:15 |
How much is my business worth? That depends. Of course it depends on profits, sales, EBITDA, and other traditional valuation metrics. A surprisingly important factor, however, is how you choose to sell it. If I could share with you how you could realize at least 20% more for your business would you read the rest of this article?The way to achieve the most value from the sale of your company is to get several strategic buyers all competing in a soft auction process. That is the holy grail of company valuation. There are several exit or value options. Let's examine each one starting with the lowest which is liquidation value.Liquidation Value - This is basically the sale of the hard assets of the business as it ceases to be a going concern. No value is giv...
|
| |
|
| Selling A Business - The Eleventh Hour Contract Change |
| 2007-05-22 08:41:04 |
The next line could be, "Will it Derail Your Sale?" We have seen it go both ways, unfortunately. If a deal does blow up, everybody looses. The seller has spent six months of divided focus and many of the normal business development activities have been put on the back burner. His or her business will simply not be as strong if the business sale process is not completed.Normally a buyer that has made it to this point is the one that recognizes the most strategic value and has indicated their willingness to pay for that value. The second, third, and fourth place buyers, if they even have been uncovered, are generally far short of the winning bidder. We have had some very specialized companies that were great fits for only one buyer and the next best bid wa...
|
| |
|
| Do Your Company's Sales Match the Excellence of Your Product or Service? |
| 2007-05-22 08:39:37 |
For many entrepreneurs, technology based companies or healthcare companies, the answer to that question is a resounding, NO! There is an exception to this with the rapid rise of the new economy, new media, highly scaleable companies like Google, U-Tube, Ebay, PayPal, and MySpace. In their case, their prospective customers highly value their newness, their breaking the mold, their non-establishment approach. They are viewed as doing what they do far better than the technology establishment stalwarts. The notable exception to this is Apple who has been able to transcend old establishment and be accepted as both old and new economy.But I digress. Back to topic. Most companies that sell to other companies, or B2B companies are evaluated by their potential customers in a traditional risk reward...
|
| |
|
| Selling Your Business - The Buyer Visit |
| 2007-05-22 08:37:58 |
In our mergers and acquisitions practice a very important event prior to receiving letters of intent is the buyer visit. Don't be fooled into thinking that this is a simple headquarters tour. Experienced buyers know just the right questions to ask to uncover risks and to discover opportunities. We try to coach our sellers on how to present and how to answer these carefully scripted questions.Unfortunately, a man or a woman that has called their own shots for the last 25 years is not always receptive to coaching. If we get a feeling that our advice is falling on deaf ears, we schedule the first visit with a buyer that is not the top candidate. Once our seller has made a few tactical errors in this dry run, they are then open to some coaching.This is what we ...
|
| |
|
| Business Sellers – Don't Allow the Process to Derail the Deal |
| 2007-05-22 08:36:18 |
Most business owners sell only one business in their lifetime. It is complex, emotional and pressure packed. Given this backdrop, the odds of a great outcome are, well, not that great.As Merger and Acquisition advisors, one of our most important functions is to prepare our client for the bumpy road ahead. The worst outcome is to go through the exhaustive process of marketing the business, corporate visits, and due diligence, only to have the deal crater in month eight because of some ruffled feathers or perceived bad faith dealings.First we try to make the seller understand that as the process unfolds and as the buyer tries to memorialize the parties' understanding in documents, new elements are added. For example, taking a discussion between buyer and s...
|
| |
|
| Selling Your Business - Business Broker or Merger and Acquisition Advisor |
| 2007-05-22 08:33:59 |
Number of Clients Represented - Business Brokers want to represent as many business for sale as they can. When contacting their vast network of individual buyers it is a real benefit to have a vast inventory of companies. Because on this, their approach is more of a mass mailing, mass email, post the business on a business for sale Web site, type of approach and their attention is spread over 25 or more simultaneous clients. Merger & Acquisition Advisors usually limit their number of engagements to 3 or 4 per professional at a time. Their approach is very hands on and labor intensive. Merger & Acquisition Advisors usually rely on a direct selling approach of calling the buyers a...
|
| |
|
| The First Himss Venture Fair –2007 |
| 2007-03-29 22:21:36 |
I attended the new Venture Fair at the Himss Conference (The major Healthcare Information Technology Association) and applaud the organizers for launching this new event. In spite of its maiden voyage, it was very well organized, well attended and very effective. In fact, the biggest difficulty was the weather not co-operating and the morning session had a majority of entrepreneurial presenters compared with qualified investors. By Mid Afternoon, with late arrivals, however, the ratio of investor to presenter was approximately one-to-one.I am looking forward to attending this event at next year's conference and anticipate that the word will get out and attendance will triple.If there were a disappointment, it was that only Eclipsys had a representative attending and all of the other major ...
|
| |
|
| Venture Capital Alternative for the Technology Entrepreneur |
| 2007-03-28 07:46:22 |
If you are an entrepreneur with a small technology based company looking to take it to the next level, this article should be of particular interest to you. Your natural inclination may be to seek venture capital or private equity to fund your growth. According to Jim Casparie, founder and CEO of the Venture Alliance, the odds of getting Venture funding remain below 3%. Given those odds, the six to nine month process, the heavy, often punishing valuations, the expense of the process, this might not be the best path for you to take. We have created a hybrid M&A model designed to bring the appropriate capital resources to you entrepreneurs. It allows the entrepreneur to bring in s...
|
| |
|
| Business Brokers - Bad Practices from the Big Boys |
| 2007-03-10 11:21:39 |
I sit on the board of directors of the Midwest Business Brokers and Intermediaries (MBBI). An attorney from a small Chicago law firm was recently elected to the board. In his first meeting he introduced himself and said he was on the board at a Chicago attorney association. He stood up in front of our board and said, "You guys don't have a very good reputation in the legal community.That certainly got our attention and he went on to explain the reasons why. As I listened to him, it occurred to me that what he was describing was the behaviors of a few of the big national Middle market M&A firms that put on the Business Seller Seminars. Because these firms have so much marketing muscle, they effectively become the face of our profession. No wonder the lega...
|
| |
|
| Venture Capital - Is it Right for You? |
| 2007-02-20 19:03:42 |
I tried and I gave up. When we started out high-tech Merger and Acquisition Practice, I thought it a natural fit to also offer finder services for Entrepreneurs seeking Venture Capital Funding. That service is no longer available. Why not you ask? We failed miserably. Our firm has successfully completed several small high tech M&A deals at great multiples, but finding venture capital turned out to be a very frustrating and unproductive experience.Unfortunately many high tech entrepreneurs have eventually landed on our doorstep totally drained from their experience of trying to raise venture funding themselves. Quite frankly, the process has caused several of these businesses to fail. According to venture industry statistics only 2% -3% of firms seekin...
|
| |
|
| |
 |
|
| |
| |
|
 |
