Cash-Free, Debt-Free in M&A
Owners of a company are exploring a sale. They have hired an investment bank to market the company and are at the point in the process where offers are due. They know that the offers are going to provide a proposed value of the business, likely based on a multiple of the Company’s EBITDA. When the offers […]
What is Adjusted EBITDA?
Most business owners have either heard of or are familiar with EBITDA (if you are unfamiliar, you can learn more about EBITDA here). EBITDA is commonly used as a proxy for free cash flow and therefore most often serves as the valuation basis in a transaction. If you’ve ever heard someone say, “I received ‘eight […]
The Evolution of Sell-Side M&A
Our firm has decades of experience advising middle market M&A transactions, and while the basic process of executing a deal has remained the same, there have been changes in the market that have dramatically changed how we execute. Following several years of heightened deal activity, it’s worth reflecting on how the M&A world – specifically […]
How To Advise Clients on Unsolicited Offers
M&A volume and valuations have moved closer to reality in recent months, but the capital available to execute M&A transactions remains elevated. This is simply a function of private equity funds needing to deploy capital and the strategic buyers’, with cash on their balance sheets, pursuit of growth and market share. With increased competition, more […]
How EBITDA Affects Valuation
When it comes to M&A, company valuations are commonly derived by a buyer assigning a multiple of EBITDA that they are willing to pay for that company. A quick example: Let’s say a buyer offers a seller five times (“5x”) the company’s last twelve months (“LTM”) EBITDA. If a selling company’s LTM EBITDA is $2 […]
What is an Earnout in M&A
Buyers and sellers can deploy a myriad of creative methods in a deal structure to help finalize negotiations and get a deal across the finish line. Buyers can utilize mechanisms that alter the amount of cash the seller receives at the time of closing in exchange for something like a seller note, “rolled” equity, stock […]
Quality of Earnings Overview
Numerous complexities arise throughout the M&A process. Assessing the quality of an acquisition target’s earnings is one such complexity. As financial results are a significant driver of a company’s valuation, determining the quality of the results is an important step in the M&A process. Earnings quality is evaluated by a financial professional through a quality of […]
Positioning a Company for an Exit Transaction in an Inflationary Environment
We have heard for several months now about how inflation has caused a general uneasy feeling and required businesses to pass higher prices on to consumers, ultimately impacting consumer spending. We are aware of situations of business owners in the middle of a sell-side transaction, only to have things quickly unravel due to profitability declines […]
Stock vs. Asset Deals
An M&A transaction is typically structured one of two ways: the sale and purchase of the company’s assets, or the sale and purchase of the company’s stock. What’s the Difference? Asset Sale / Purchase The seller agrees to sell specific assets and liabilities, typically the current assets and liabilities, excluding cash and debt. This means the buyer […]
Types of M&A Buyers: Strategic, Financial and Hybrid
A vast, motivated and diverse buyer universe is what helps set the stage for a highly competitive M&A process. And in the M&A arena, increased competition almost always brings increased value. So, who comprises this competitive universe? There are pros and cons to each buyer type and depending on the objectives of a potential sale, […]