M&A Deal Activity Slowed Down In First Half of 2023
North American merger and acquisition (M&A) deal volumes slowed down in first quarter 2022 after a record-setting 2021. Year-over-year deal volume decreased 11.5% over first quarter 2021. Deal activity, nevertheless, was still in line with that of the last five years. With strong corporate balance sheets and record private equity (PE) dry powder
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10 Ways to Position Your Business for a Successful Sale
While you may be confident in the unique advantages and future prospects of your company, most potential buyers will need to be convinced beyond a doubt. Strength testing your business before approaching buyers is critical. When your company’s information and outlook are transparent, buyers will compete to buy it, driving price and favorable deal terms for your business.
For most private business owners, the sale of their company is the most important financial transaction in their life and can be transformational.
If you’re considering a sale this year or in 2024, now is the time to get prepared. Start by checking these critical deal success factors:
1. Obtain a realistic value range. You should have an understanding of the value range for your business and ways you can increase such value. In addition, you should confirm that this value will meet your financial objectives.
2. Accurate historical financial statements. Income statements and supporting detail need to be accurate and readily available. In addition, your company’s balance sheet should be checked to ensure all assets and liabilities are captured and fairly stated. Accrual basis financial statements will be required.
3. Projections for 1-3 years out should be bold but achievable. Work with your M&A advisor to develop financial projections that will be foremost in buyers’ minds when making offers. Plan to surprise only on the upside!
4. Build an experienced M&A deal team. An M&A advisor with a strong track record of selling companies in your value range and who can reach the right buyers domestically and internationally is key. You’ll also need a tax advisor and a corporate attorney focused on M&A.
5. Select managers for an internal deal team. All operating shareholders should be involved in the sale process, and it’s also advisable to enlist the support of one or two senior financial or key employees. With guidance from your M&A advisor, this can be done skillfully at the right time in the process.
6. Clarify and implement your growth story. Realistic, well-formulated growth opportunities increase the likelihood of attracting premium value offers. Are you ready to present buyers with concrete expansion opportunities that could be achieved with additional growth capital?
7. Identify and address potential risks. Objectively review any present or future risks associated with your business and devise strategies for mitigating them. These could include customer or vendor concentration, nexus issues, regulatory changes, employee retention, supply chain challenges, technology disruption and many others. Buyers will challenge everything; be prepared so your deal does not get delayed or lose value.
8. Know your Key Performance Indicators (KPIs). Demonstrate how efficiently you run your company by setting up and monitoring a dashboard of metrics appropriate to your industry that buyers will expect to be available.
9. Double down on documents. Every contract, registration, benefit and insurance plans, tax filings (last 3-5 years are typical) and other documents related to your company will need to be gathered into a virtual data room before a deal can close. Early in the process, your M&A advisor will supply you with a list of required documents.
10. Fire on all cylinders as you run the business. You and your management team must stay focused on the business, driving growth and profitability throughout the sale process. The importance of meeting or, if possible, exceeding projections while your company is in market cannot be overstated.
Contact Us
If you’re thinking of selling your business in the near future, contact us for a preliminary conversation as to your company’s readiness for market or for a Complimentary Value Assessment.
Robert Murphy
Senior Managing Director
PKF Investment Banking rmurphy@pkfib.com | 561.337.5324 or 201.788.6844
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Get the Right Value – Don’t Do It Alone with One Buyer
Financial buyers deploy significant resources to contact private companies to purchase a company below its true market value. Before agreeing to sell, here are some important Do’s and Don’ts for sellers to consider.
As a Seller: Questions You Might Ask Yourself
- Why would any buyer pay the high end of their value range or offer their best terms if there’s no competition and/or no knowledgeable M&A advisor negotiating on behalf of the seller? The fact is: no unchallenged buyer would pay top dollar.
- Should you directly negotiate the value and major deal points in the sale of your company? No, this is not your expertise and selling your business is probably the most important financial transaction of your life. You need an advocate with decades of M&A experience.
- Should you sell your company to a buyer who has approached you and this is the only offer you have? Maybe, but is there certainty to close? Is it the best fit available? Can value and terms be improved, or will another buyer pay more or be a better fit for you and your company?
- Should you pay a full M&A advisory fee on a deal where you are already talking to a qualified buyer? No, you shouldn’t. In this situation, our firm may negotiate only with the existing buyer and would adjust our fee accordingly. However, if we contact other buyers, and a deal is done with one of them, then yes, a full fee is warranted.
Call a Specialist
Despite ongoing macroeconomic uncertainties, 2023 is expected to offer strong demand from buyers for companies in the lower middle market (under $200 million in annual sales). Various types of buyers, especially private equity firms, will no doubt be contacting you to express interest in acquiring your business.
Before you respond to these inquiries, check with us. PKF Investment Banking can help drive up value, improve terms and evaluate fit and certainty to close. We do this by being your advocate, knowing the market and, when appropriate, quickly and confidentially contacting a select group of additional buyers.
With a high-quality M&A advisor in the picture, the “one-buyer” is presented with the possibility that we will run a full marketing process if he or she is not willing to agree to the deal that is right for you.
Reaching a Better Deal
Here are two examples of “one-buyer” deals we negotiated:
- The deal already on the table with a qualified buyer was improved by 20% and then closed within
60 days. - The deal already on the table had a value that we deemed was too low. After an efficient
marketing process, the original buyer improved their offer, yet ultimately lost out to another buyer
who was not only a better fit but paid a higher value by several million dollars.
Team Up with Pros
Our investment banking team is comprised of senior-level professionals with decades of M&A experience across a range of industries. We’re not cookie-cutters − our approach is tailored to each engagement. Our commitment is to be your trusted advocate.
Without competition or proper M&A advisory representation, selling to a buyer on your own can result in money left on the table and/or deal terms that fall short of what you should be receiving. We can help to ensure you obtain the best value and terms.
Contact Us
Robert Murphy
Senior Managing Director
rmurphy@pkfib.com
561.337.5324 | 201.788.6844
About PKF Investment Banking
PKF Investment Banking is the investment banking affiliate of PKF O’Connor Davies. Whether a business owner is ready to sell the company or seeking growth through acquisition, our investment banking team is committed and credentialed to help owners achieve their objectives. Our investment bankers provide guidance through every step of the process and bring the expertise to enhance certainty to close – while always staying focused on maximizing the value derived from the transaction. The PKFIB team has closed over 200 successful M&A transactions across many industry verticals.
Securities-related transactions are processed through an unaffiliated broker dealer, Burch & Company, Inc.
PKF O’Connor Davies, LLP is a full-service certified public accounting and advisory firm with a long history of serving clients both domestically and internationally. With roots tracing to 1891, the Firm has 19 offices in the United States and abroad with more than 1400 professionals who provide a complete range of accounting, auditing, tax and management advisory services.
Our Firm provides the information in this e-newsletter for general guidance only, and it does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting of any kind.
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Obtaining Premium Value for Your Company
North American merger and acquisition (M&A) deal volumes slowed down in first quarter 2022 after a record-setting 2021. Year-over-year deal volume decreased 11.5% over first quarter 2021. Deal activity, nevertheless, was still in line with that of the last five years. With strong corporate balance sheets and record private equity (PE) dry powder
Read More
Expect M&A Deal Volume in 2022 to Be at Pre-Covid Levels
North American merger and acquisition (M&A) deal volumes slowed down in first quarter 2022 after a record-setting 2021. Year-over-year deal volume decreased 11.5% over first quarter 2021. Deal activity, nevertheless, was still in line with that of the last five years. With strong corporate balance sheets and record private equity (PE) dry powder
Read More