Timing is Everything-Capitalize on Opportunies
Timing and value are both important
An old proverb comes to mind this time of year. “Make hay while the sun shines.” Take advantage of clear weather. Capitalize on opportunities. Avoid the rain.
The same can be said for business. Take action while times are good. If a sale is in the near future, best not to wait for any clouds to gather. A key first step is a valuation, and there are several available.
Business valuations are typically based on three main methods:
- Market approach
- Income approach
- Asset approach
With a market approach, we place more weight on recent sales involving comparable entities. This tends to provide the best insight on how the market views deals at this time. We also keep a pulse on the market in general to understand trends and buyer sentiment. The result is a valuation more in line with market realities.
With the income approach, valuation professionals often use the discounted cash flow formula which includes estimated future growth trends. These forecasts are subjective. They depend on what the company sees over the horizon.
In an asset approach, the fundamentals of a business are valued. The focus is on hard assets such as the facility and the equipment. This can be very helpful if financing is the goal. But assets alone don’t necessarily translate into income for an acquisition.
Each approach has its place, depending on the purpose, the industry, and certain business characteristics. Give us a call and we can discuss what makes the most sense for your situation.
If you are considering a sale, as an M&A advisor, we encourage you to take advantage of what remains a seller’s market. In general, we are seeing strong values and eager buyers especially for highly profitable entities.
BTS News
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Manufacturer Sold and New Owner Expands It
BTS served as advisor in the sale of PlasTech Machining Fabrication, Inc. to DelCam Holdings in 2020...the company has grown substantially, doubling employment and adding capacity to boost future prod
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How M&A Will Respond to Next Recession
The takeaway for business owners: Get back to basics. Don’t worry about hyper growth. De-risk your company as much as possible.
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Perception vs Reality with Small Businesses
Sometimes the economic picture on the news seems inconsistent with what is happening for many business owners. Nearly every owner we speak to is out straight.
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NH-Based Techinical Manufacturing Company Sold
Hampshire Controls has a bright future with new ownership. The company was recently sold by Diane Rush, owner and president, to Pillar Imaging and its leader Dr. Michael Pilon.
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Be Ready When You Are Ready
When a business owner says it’s time to sell, I ask, “How fast do you want to be out?” The answer I hear most is, “Yesterday.” But sellers underestimate how long the process takes.
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Looking at a Sale Through the Right Lens
Sometimes our vision about the future is blurry because we aren’t considering the whole picture but only parts of it.
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5 Deal Points from the Trenches
Today I work with clients of Business Transition Strategies who are implementing Growth Through Acquisition strategies. Here are a few observations from working on a wide variety of projects.
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Tax Changes Could Hurt Net Proceeds
Changes proposed to the capital gains tax suggest they may need to get 30% more in a transaction in the future just to net the same value they would get today.
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Good Ideas From Shark Tank Deal
One of my colleagues in Cornerstone Alliance was front and center in a recent Shark Tank exercise. A business that had been sold was put in front of four potential buyer groups.
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Buyer Trends in Lower Mid-Market
Other businesses are a significant market for companies being sold within the lower mid-market.
Case Studies
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Precision Machining Company
Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.
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Green Product Company
Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.
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Water Purification Company and Young Buyers
Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?
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Magnetics Company with High Profile Customers
(T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.