ENTREPRENEURSHIP THROUGH ACQUISITION

A Reliable Alternative To Chasing Unicorns

The BizNexus Team 11/2/22 The BizNexus Team 11/2/22

Sixth straight quarterly drop anticipated in Bloomberg Survey

US mergers and acquisitions are poised to slide for the sixth straight quarter, to depths last seen at the onset of the pandemic, as a darkening outlook for deal-financing complicates an already bruising backdrop for the industry.

“Elon Musk’s proposal to buy Twitter Inc. for the original offer price gave the M&A market a jolt last month, but the deal also served to highlight the funding concerns plaguing the business now. A slowing economy and market volatility are dimming hopes for a significant rebound in new transactions in the fourth quarter, particularly for the large leveraged buyouts that fueled last year’s historic M&A boom,” according to a Bloomberg News survey of 18 event-driven/risk-arbitrage trading desks.

Deal flow may be limited given that Wall Street banks are nursing huge losses on buyout debt they can’t offload as rising interest rates and recession angst sap demand for risky assets. Cano Health Inc. topped the poll as the most likely takeover candidate in the next few months amid consolidation in health care.

The BizNexus Team 10/31/22 The BizNexus Team 10/31/22

There is No Crystal Ball: U.S. M&A Trends and Prediction

When there is unpredictability in the air, risk allocation is the name of the game when it comes to negotiating M&A transactions. While the market for M&A has been record-breaking on most accounts in recent years, geopolitical turmoil, increased inflation, the stock market turning bearish, and rising regulatory enforcement all contribute to an atmosphere of growing uncertainty. A landscape of uncertainty does not mean that buyers’ appetite for strategic acquisitions will dry up entirely, but rather that buyers will look for techniques to employ to allocate risk and increase their scrutiny of target companies.

The article published by Foley talks the current legal and deal landscape and discuss a potential shift in the market. It also analyzes potential techniques and deal terms that may become more popular as we enter an unknown future regarding mergers and acquisitions.

Legal and Economic Landscape

For dealmakers (and their attorneys) 2021 was the best year on record for global M&A, with more than 60,000 publicly disclosed deals and the aggregate deal value breaking $5 trillion for the first time. Since then, M&A activity in 2022 has slowed from its rapid pace in 2021. The value of the global M&A market fell by nearly 20% to $2 trillion in the first half of 2022 compared to the same period in 2021. The total deal market is likely to fall further as economic fallout is reflected in global markets, according to PwC’s “Global M&A Industry Trends: 2022 Mid-Year Update” report. Looking forward, M&A deals are facing the most uncertain and complex environments in recent memory.

The BizNexus Team 10/28/22 The BizNexus Team 10/28/22

Global M&A market slows in 2022 first half — but shows signs of strength

After soaring to an all-time peak in 2021, the global M&A market has hit the pause button. Early 2022 saw the value of large deals (more than $25 million) fall 24 percent from a year earlier, on a 12 percent drop in deal volume.

But the 2022 numbers match healthy, prepandemic levels and are especially notable in a time of great uncertainty. Geopolitical instability, spiking inflation, supply chain issues, skittish capital markets, regulatory changes—all these factors, and more, are fueling uncertainty.

And as Andy West, global coleader of McKinsey’s M&A Practice, says, “Uncertainty always weighs on decision making, and M&A is a big decision for deal makers. So naturally we’re seeing a bit of a slowdown.”

According to the McKinsey M&A Practice review of the global M&A market, 2022 activity has declined, but only slightly. Deal makers in the Americas have been the most active traders, delivering almost half of worldwide deal value (48 percent, versus 52 percent for all of 2021). Europe, the Middle East, and Africa’s share is up slightly (28 percent, versus 26 percent), as is Asia–Pacific’s share (24 percent, versus 22 percent).

The BizNexus Team 10/24/22 The BizNexus Team 10/24/22

How ESG Is Changing the M&A Landscape

Twitter is the most high-profile acquisition on the rocks right now. While the primary reason Musk has cited for backing away from the deal is his allegation that the social media platform is infected with bots that impact fake news and, ultimately, the company’s valuation, he has pointed to diversity concerns.

Understanding the growing importance of environmental, social and corporate governance (ESG) in the world of mergers and acquisitions requires looking no further than social media.

Countless posts on these social platforms demonstrate society’s rising concerns around sustainability standards and corporate accountability. In fact, Elon Musk’s recent attempt to acquire Twitter is the perfect example of the reach that ESG has in today’s M&A market and the broader business world.

“Musk has tweeted frequently about Twitter employing workers who are insufficiently diverse in embracing a wide variety of viewpoints and perspectives,” says Dr. Michael Kraten, an ESG expert and professor of accounting at Houston Baptist University. “Ironically, the lack of diversity that he mentions involves a lack of conservative and libertarian representation.” He suggests Musk’s concerns represent issues around the G in ESG.

The BizNexus Team 10/21/22 The BizNexus Team 10/21/22

Big tech set to shop for discounted startups

"There is a lot [of deal activity] in progress right now," said attorney Aly Simons, a partner and co-chair of the tech M&A practice at Goodwin. She said merger talks were nearly non-existent in the summer, but it all changed around Labor Day.

M&A deal advisers and investors are making moves to usher in a significant increase in acquisitions later this year and into 2023.

"There is a lot [of deal activity] in progress right now," said attorney Aly Simons, a partner and co-chair of the tech M&A practice at Goodwin.

She said merger talks were nearly non-existent in the summer, but it all changed around Labor Day. Now she's advising on what she called a "massive set" of deals between big tech and VC-backed companies. Deals in the mix are priced in the $200 million range on up to nearly $1 billion, Simons said. She declined to give specifics on deals that are in confidential talks. Last month, Google's parent company, Alphabet, acquired Israeli climate-tech startup Breezometer for an estimated $200 million."

The BizNexus Team 10/19/22 The BizNexus Team 10/19/22

All M&A Market Segments Saw Q3 Drop in Deal Volume

Last quarter’s mergers and acquisitions market results illustrate that heightened uncertainty continues to hinder M&A activity. Q3 saw a notable dip in global M&A volume compared to recent quarters, and no market segment was immune to the fall.

Q3 dip in global M&A volume isn't a surprise here:

“Last quarter’s mergers and acquisitions market results illustrate that heightened uncertainty continues to hinder M&A activity. Q3 saw a notable dip in global M&A volume compared to recent quarters, and no market segment was immune to the fall.
The degree to which Q3 2022 deal activity is down is striking. Last quarter had the second-lowest total deal volume ($504 billion) for controlling-stake transactions of any quarter from Jan. 1, 2017 to Sept. 30, 2022. Only Q2 2020—when the reality of the Covid-19 pandemic started to truly hit—had a lower quarterly deal volume ($225 billion). And Q3 2022 had the lowest total deal volume among all other Q3s since 2017”, says Bloomberg Law.

The BizNexus Team 10/14/22 The BizNexus Team 10/14/22

Private companies pivot to conserve cash to await eventual opening up of IPO market

Private equity and venture capital-backed companies are faced with conserving cash and shoring up costs in the choppy stock market of 2022, as capital from initial public offerings and syndicated debt markets dries up, investment executives at Goldman Sachs said.

Private valuations have yet to catch the knife of sharply lower public equity prices as capital sources dry up.

Private debt providers have been able to step in to provide capital in a challenging economic environment, as institutional investors ponder the cash requirements of businesses they support in the face of inflation and the prospects of an economic slowdown in 2023.

"There is an extreme focus on cash and cash runway -- cash becomes king," said Nishi Somaiya, global co-head of growth equity at Goldman Sachs Group Inc. (GS). "We're very focused on the ability to weather a more challenging environment. Growth rates will be lower, so cost bases have to be adjusted. Scenario planning is something we're focused on."

The BizNexus Team 10/12/22 The BizNexus Team 10/12/22

How to Find the Right M&A Advisor

Finding the right M&A advisor is a task worth spending time on. The right advisor can make or break your business transaction, and there are lots of options to choose from.

Finding the right M&A advisor is a task worth spending time on. The right advisor can make or break your business transaction, and there are lots of options to choose from. Here’s why it’s so important to get this right, and how to maximize your chances of connecting with the perfect M&A advisor.

Selling a business is not a one-person job. It’s a highly complex, time-consuming process with incredibly high stakes, and it requires a team of people all working together in close alignment.

One of the most important players on your sell-side team is the M&A advisor. This role is often criminally overlooked and underrated, but it’s no exaggeration to say the right M&A advisor can make or break your transaction.

In this article, we’ll look at why M&A advisors are so valuable, what they bring to the transaction process, and the steps you should take to connect with the perfect M&A advisor for your business and goals.

What does an M&A advisor do?

Your M&A advisor is your trusted guide, helping you navigate the murky and treacherous landscape of selling your business. The best M&A advisors combine experience, connections, and skill to ensure you get the best possible outcome, aligned as closely as possible with your goals.

Here are some of the key responsibilities of an M&A advisor:

Be a constant source of advice and guidance as you go through the sale. Your M&A advisor should be someone you can always get in touch with to share their wisdom and expertise at any point during the sale.
Draw on their pool of connections to bring you in contact with all the right people. This ranges from obvious connections, like potential buyers, all the way to niche specialists who can help you work through specific areas of your sale.
Understand what makes your situation unique and tailor their approach accordingly. Selling a business is not something to take lightly — it may very well be the single largest financial decision you ever make. As a result, it’s crucial for your M&A advisor to understand your specific situation, help you avoid mistakes, and be someone you can place a great deal of trust in.
Make sure your company is valued correctly. Valuation is one of the most important aspects of an M&A transaction. It involves striking a careful balance between many factors to ensure you get a fair price for your business without scaring off all potential buyers.
Help you beyond the sale. A good M&A advisor will get to know your long-term goals, including what you plan to do next after your business is sold. This allows them to give you more relevant guidance and advice, ensuring your company changes hands in a way that’s aligned with your goals and the goals of your team.

What makes a good M&A advisor?

A good M&A advisor combines a number of key skills. Here’s what you should look out for when choosing your advisor:

Relevant experience. Your M&A advisor should have a solid base of experience assisting in the sale of businesses like yours, in similar industries, with similar transaction types.

A strong track record of getting results for their clients. You should spend time researching your advisor’s past achievements before working with them, and don’t be afraid to reach out to their previous clients for testimonials.
Trust. Your M&A advisor will be guiding you through one of the biggest business transactions of your life, with an enormous amount at stake. It’s essential to have a strong rapport with your advisor and the ability to trust them with the sale of your business.

How much do M&A advisors charge?

M&A advisors all charge different amounts, and the amount your advisor will charge will depend on a number of factors like the size of your business, the value of the deal, the time involved, the experience and reputation of the M&A firm, and many others.

Usually, M&A advisors will charge a fee upfront, usually ranging from a few thousand dollars to the high five figures and beyond.

After that, fee structures are often based on a percentage of the total sale amount, for example, 5%. It’s well worth taking the time to discuss pricing with your M&A advisor early on to establish whether it’s worth it for you and to avoid any unpleasant surprises later.

What do you need to know from your M&A advisor?

There are some key questions you should ask your potential M&A advisors as soon as possible while getting to know them. Getting these questions answered allows you to work out if an M&A advisor is right for you and your needs, and avoid any future issues. Here are some questions you should ask:

“How will you find the value of my company?” — ask your potential M&A advisor about the methods they typically use to value companies and how they would approach yours.

“Is now the right time to sell my business?” — A good, trustworthy M&A advisor will give you a clear and honest answer to this question. The answer may be “no”, and they might advise you to wait for a better opportunity.

“What similar deals have you worked on?” — This question allows you to get a feel for your potential advisor’s experience and how it compares to your circumstances and specific goals.

“What does your process typically look like?” — Ask about things like time frame, marketing strategies, and typical milestones to gain an idea of how the transaction process will look and how you can prepare and set your expectations.

“How will my business operations be impacted?” — The M&A process is long and often complex, and your business operations could be affected. Ask your potential advisor how this could happen and the steps they will take to help you focus on your business.

How to find the right M&A advisor for your transaction

Finding the right M&A advisor won’t be a quick process. You should take your time here, and you’ll probably talk with a number of potential advisors before settling on the right one for you. Here are the steps to follow when seeking out your M&A advisor.

1. Start early

It’s not uncommon for business owners to start building their relationship with their M&A advisor years in advance of the sale. Even if you don’t have concrete plans to sell your business any time soon, it’s still wise to make connections with M&A advisors ahead of time and start laying the foundations for a relationship.

Starting early gives you time to get to know your advisor, and for them to get to know you and your business. This way, when the time comes to sell, they already have a firm understanding of who you are, what you do, your goals and future plans, what a successful outcome looks like for you, and much more.

2. Research, research, research

It’s impossible to understate the importance of research when it comes to choosing an M&A advisor. Spend as much time as possible learning as much as you can about a number of different M&A advisors.

There are many resources you can use to research advisors. Their own websites and social media profiles are a good place to start — browse the content they share and read about their backgrounds and past accomplishments.

Once you have narrowed down your search to a handful of promising advisors, get in touch and open a relationship with them to learn more and hone in on the best fit. Prepare questions in advance and try to learn as much as you can about their previous work and how they have helped businesses like yours.

3. Ask others in your industry for their recommendations

Your personal network is an invaluable resource for connecting with your ideal M&A advisor. Reach out to fellow business owners, attorneys, accountants, investors, and more. These people will all likely know several M&A advisors and can point you in the right direction of someone who could be a good fit.

Ideally, you know someone who successfully completed a transaction similar to yours and got results that match your goals.

Work with BizNexus

Finding the right M&A advisor is a challenging task. It’s something that often takes months or even years, and it’s a task that deserves serious time and effort. The right M&A advisor can make or break the sale of your business, so it’s well worth investing heavily in the search for one.

The BizNexus community is home to many M&A advisors, from various backgrounds and with a range of skill sets and specializations. It’s a great place to connect with advisors, grow your network, and possibly get in touch with the advisor who can make your transaction goals a reality.

The BizNexus Team 10/7/22 The BizNexus Team 10/7/22

Despite Recession Jitters, M&A Dominates a Robust Cybersecurity Market

Funding has been somewhat lower than last year, but investment remains healthy, analysts say, amid thirst for cloud security in particular.

Funding has been somewhat lower than last year, but investment remains healthy, analysts say, amid thirst for cloud security in particular.

The cybersecurity industry continues to remain largely unaffected by the uncertainty surrounding the rest of the economy.
Though funding activity this year is somewhat slower than in 2021 and market valuations of cybersecurity firms have taken a hit, mergers and acquisitions activity has remained strong through the year, as has investor interest in the sector.
So far in the third quarter, there have been multiple major transactions that, according to analysts, highlight the overall robustness of the sector amid broadening concerns of a recession.

Says Jai Vijayan from darkreading.com.

The BizNexus Team 9/30/22 The BizNexus Team 9/30/22

5 Ways CFOs Can Ensure M&A Deal Value in a Volatile Market

Selecting an M&A advisor that can execute a complete solution is one of the ways to ensure M&A Deal Value in a Volatile Market.

Amidst rising inflation and interest rates, stock market volatility and geopolitical instability, high-value investment opportunities like mergers and acquisitions may sound out of reach. In fact, the number of deals fell almost 17% year over year in February 2022, while the value of those deals dropped 30%, according to S&P Global Market Intelligence.

Even more sobering news, investments in M&A are on the chopping block, according to 41% of CEOs and CFOs asked in a June 2022 Gartner survey which cuts were likely in the face of continued economic disruption."

Selecting an M&A deal partners that can execute a complete solution is one of the ways to help overcome barriers to delivering speed to insight, speed to transform, and speed to execute pre- and post-close.

“Look for partners that can help in the short and the long term, who can turn recommendations into outcomes, data into action, and plans into completion. Look for end-to-end partners who will work with the organization to align owners, help with the delivery, build the solutions, and execute them,”

Says Stephen Mortimer from cfo.com.

The BizNexus Team 9/23/22 The BizNexus Team 9/23/22

Revenue Synergies for a Successful M&A Strategy

“Companies engage in mergers and acquisitions with the expectation that the merger or acquisition will generate more revenue than the entities would when operating separately. Simply put, they hope the whole will achieve greater results than its parts.”

“Companies engage in mergers and acquisitions with the expectation that the merger or acquisition will generate more revenue than the entities would when operating separately. Simply put, they hope the whole will achieve greater results than its parts.”

-Great article on what to expect with revenue synergies for a successful M&A strategy.

This excess revenue generated by the combined company following a merger or acquisition (M&A) is called revenue synergy and it mutually benefits both the target and acquiring companies.

While generating revenue synergies seems simple and viable in theory, synergies depend on many uncertain assumptions. These include cross-selling, market expansion, proper integration, and the introduction of new products. These factors affect how much revenue synergy the combined company can achieve.

Read the full article originally posted on Newswires here:

The BizNexus Team 9/21/22 The BizNexus Team 9/21/22

Global Fintech M&A continues two-year climb to defy broader M&A slowdown

Hampleton Partners, an international M&A advisory firm for technology companies releases a report that demonstrates M&A rise.

Global Fintech M&A rose sharply in the first half of 2022 with 591 recorded deals, defying the broader M&A slowdown, according to the latest Hampleton Partners’ Fintech M&A Report.

“Fintech is proving to be a very attractive target for financial and strategic dealmakers, defying the broader global M&A slowdown. As for the impact of any potential recession, there is one major difference between now and the previous real recession of 2008. This year, deployable private capital, including buyout, VC, growth and real estate, hit its highest level in history at $3.6 trillion - three times the figure in 2008,”

Says Miro Parizek, founder and principal partner, Hampleton Partners, an international M&A advisory firm for technology companies.

The BizNexus Team 6/7/22 The BizNexus Team 6/7/22

The Pros and Cons of LinkedIn for Connecting with Buyers and Sellers

Is LinkedIn a valuable platform for legitimate M&A deal origination? See what the community had to say.

For businesses, LinkedIn is one of the most powerful online communities out there. With over 300 million monthly active users, LinkedIn is the perfect place to connect with potential buyers and sellers, business brokers, M&A advisors, and more.

To learn more about LinkedIn and its value, we asked the BizNexus community to share their thoughts on LinkedIn and its pros and cons.

How do you feel about LinkedIn as a valuable platform for identifying potential buyers & sellers? What are the strengths & weaknesses?

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We bring together entrepreneurs, investors, and M&A experts to master the process of getting your business acquired or recapitalized, so we can learn how to set up a great deal team, financing, and exit plan from a network of industry professionals & advisors.

The BizNexus Team 6/7/22 The BizNexus Team 6/7/22

The Most Common M&A Mistakes Owners and Sellers Make

The M&A process is complex, and the exit process is often rife with challenges and potential mistakes. Before you begin the process, it helps to get familiar with some of the most common errors here so you can take steps to avoid them and learn from the mistakes of others.

To get you started, we asked the BizNexus community to share some of the most common mistakes they see owners and sellers making during the M&A journey.

What is the #1 mistake you see owners/sellers make over and over again?

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The BizNexus Team 5/25/22 The BizNexus Team 5/25/22

Strategies for minimizing taxes for exit planning strategy

How much equity should you give to key employees?

How can you get your financing lined up?

What about confidentiality? How can you flesh out your options without compromising a potential alternative exit option?

What are the best strategies currently available for minimizing taxes heading into a transaction?

We recently asked our community of M&A Advisors and related exit planning professionals about tax strategies related to the sell-side transaction and how to sell a business.

Here are some of the highlight answers from the pros:

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The BizNexus Team 5/17/22 The BizNexus Team 5/17/22

How To Sell a Business To Your Management Team

How much equity should you give to key employees?

How can you get your financing lined up?

What about confidentiality? How can you flesh out your options without compromising a potential alternative exit option?

Selling your business to your existing management team is a common choice for many owners.

There are lots of benefits to handing your business over to people you know and trust, and who understand the ins and outs of working there along with your goals, values, challenges, and vision.

At the same time, this kind of transaction comes with its own set of unique challenges. Some questions you might want to answer are:

How much equity should you give to key employees?

How can you get your financing lined up?

What about confidentiality? How can you flesh out your options without compromising a potential alternative exit option?

What about your customers? How do you transition them over to the team? How do you keep them on board with your transition plans?

We asked the BizNexus community to share their thoughts on selling your business to your management team and their key considerations. Check out their responses below.

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The BizNexus Team 5/17/22 The BizNexus Team 5/17/22

How to Finance a Management Buyout

So you want to sell your business to your management team.....

Or at least, in an ideal world, you'd love to pass along the business to the troops who have helped you along the way, and who are already trained and qualified to take your baby to the next level, over the next decade and beyond, while you move on to fine-tune that backswing.

So, you want to sell your business to your management team.

In an ideal world, you would love to pass along the business to the troops who have helped you along the way. These individuals are already trained and qualified to take your baby to the next level while you move on to fine-tune that backswing.

More often than not, the problem is capital.

Your management team most likely doesn't have cash on hand to finance your retirement goals, -to cash you out.

So what are your options?

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The BizNexus Team 5/11/22 The BizNexus Team 5/11/22

How long should you expect your engagement with a business broker to last?

It's different for every intermediary, but generally speaking, you should expect your relationship with your business broker (i.e. your contract) to last at least 12 months, as it takes a long time to sell a business properly.

Like any contract, key terms can usually be negotiated depending on the positioning of your company and the current market environment for acquisition.

What constitutes a relationship with a prospective buyer?

How will your intermediary facilitate the transaction and negotiations post-LOI?

These are all questions you should flesh out during open discussions with your intermediary prior to moving forward with a long-term engagement, so both parties can be clear on expectations and responsibilities moving forward.

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The BizNexus Team 5/11/22 The BizNexus Team 5/11/22

What are the best ways to choose your exit options?

You can't reach your goals if you don't have a clear target, and assessing your exit options as soon as possible helps you to start coordinating your operations and business efforts to align with your ideal exit option goals.

The first part of the exit process is knowing your options.

We asked our community members what they thought were the best ways to figure out exit options. Even if you’re fairly early on in the process, it’s important to get clear on this as soon as possible, as it will give you greater clarity and direction as you move forward.

Take a look at our community members’ responses here.

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The BizNexus Team 4/8/22 The BizNexus Team 4/8/22

Things to consider when choosing an intermediary

It's crazy how many entrepreneurs out there, after so many years of running their business according to plan, simply don't plan the exit process, or simply wing it when it comes to choosing the right professionals to help manage the exit process for their baby.

A good intermediary can be an invaluable component to a successful transaction, so it's important you know what to look for when choosing this type of advisor to help guide and coach you through a successful exit.

Choose wisely.