We all know the thrill of finding an item vastly on sale. “It was a steal!”, we exclaim to our friends. In the world of M&A, buyers are always cautioned about the dangers of overpaying. In the classic Harvard Business Review article “Are You Paying Too Much for that Acquisition?”, Robert Eccles et al warn, […]
Managing Risk in an M&A Transaction For all their potential benefits to both buyers and sellers, acquisitions are risky. Broadly, the risk associated with any M&A transaction falls into three categories: Financial. A buyer may not understand the true financial picture and prospects of a business. Value may change materially during or shortly after the […]
In the previous article we examined the popular EBITDA Multiple approach to estimating a company’s value. Discussing its benefits and limitations, we concluded that while the EBITDA Multiple worked as a starting point, serious buyers and sellers needed a more nuanced valuation technique like Discounted Cash Flow (DCF). Both methods determine the value of a […]
Last month we took a high-level look at different approaches to valuing a company. We noted that, because of their ability to reflect the future economic benefits of an ongoing business, cash flow methodologies are most commonly used in business valuation. These include applying a multiple to an income or cash flow number, capitalizing cash […]
Correctly valuing a business is central to any successful M&A transaction. As much art as science, valuation strives to quantify the financial benefits of owning the business today and in the future. Here we kick off a series of articles examining different valuation approaches, limitations, and best practices. This piece introduces the core principles of […]
Last month, we discussed how acquirers can select and work most productively with an M&A advisor. Here we conclude this buy-side article series with a look at acquisition integration. Though we typically end our formal engagement at deal closing, we always emphasize acquisition integration for two reasons: 1. Regardless of how rigorous your selection, due diligence […]
Last year’s articles have walked through the process of purchasing a company, viewed from the acquirer’s perspective. Before moving on to acquisition integration, let’s pause and look at how to work with your M&A advisor. Role M&A advisors can provide a wide range of services. Understanding the possibilities, and identifying which services are of […]
Implicit in our previous article’s discussion of the M&A pipeline is the need to move from a pool of initial candidates, often numbering 100 or more, to perhaps 1-2 good acquisitions. After high-level screens have weeded out the less attractive possibilities, and detailed analysis of publicly available information has further distilled the list, we may […]
The last article looked at sources of target company value, and their importance based on the purpose of your acquisition. Continuing in the Search and Assessment stage of our framework, let’s now turn to the mechanics of building a strong pipeline. Figure 1. Stillwater Capital Acquisition Framework What is a pipeline? Your pipeline is a […]
Having established the importance of corporate strategy as the starting point for any deal and introduced possible acquisition types, let’s shift attention from the Strategy stage of our framework to Search and Assessment (Figure 1). What value does a potential target bring, and where do we find good quality targets? Let’s start with value […]
The last article shared a framework we use to guide clients through their acquisition decisions in a disciplined way, and explored the four questions every acquirer must be able to answer. Here we dig deeper into the first step in the framework, and the question of purpose, looking at the alignment of acquisitions with corporate […]
“You don’t have to be a genius or a visionary or even a college graduate to be successful. You just need a framework and a dream.” Michael Dell (Founder, Dell Computers) Over two decades in the business, we have worked with several hundred midmarket acquirers. Their most common struggle is understanding the complex, interconnected decisions […]
For many clients, the time between first thinking about selling their business and walking in our door is several years. This interval can be important in maximizing your selling price, if you know how to use it well. The first thing we need to understand when trying to value our own company is that the […]
In today’s M&A environment, an EBITDA multiple is by far the most common methodology employed to value a privately owned business.
Raising money in difficult markets is a current problem. We’ve read in the press about how banks are tightening credit facilities, and there is a cautiousness in the capital markets. A number of companies are now facing the challenge of how to grow their businesses or raise money in the face of this uncertain market.
When valuing a business, most company owners are worried about the income statement. But experienced valuators and investment bankers always consider the balance sheet. The balance sheet sets out critical information about the financial strength and weakness of the company.
The success or failure of an acquisition depends on how the target is integrated. Successful integration requires a clear understanding of what is being purchased.
The most fundamental question to ask yourself in deciding whether you should sell your business is why?