Get Ready for a Transaction

Advisory Team Integration Strategies | Part 2

XPXboston

Thursday,  June 23, 2016 | 7:15 AM – 9:00 AM

Babson College, Olin Hall,  Wellesley, MA

A 5-Step Integration Plan to Get Ready For a Transaction | Register Now!

Facilitated by Rudi Scheiber-Kurtz, Next Stage Solutions, Inc.

In the first part of this process, we discussed how to best engage our clients in the conversation of always thinking ahead and why that is vital for their future success. Participants are raving about the first event that took place in May, so don’t miss out on our second.  This unique format let’s you participate and share your expertise in the integration process as well as learn from others’ sitting at the table.

For the second part, we will focus on the integration piece to readiness. How can your client avoid pitfalls and roadblocks costing both time and money and more often lead to losing the deal? Having your ducks all lined up will pay off when your client begins the process of succession or selling. We will consider the 5-step integration plan and how to prepare best our clients.

Bring your ideas and suggestions and join us in this roundtable discussion among advisors highlighting collaboration, enhanced value and client leverage. Each advisor will hear other advisor’s perspectives on the whole business transition/transaction process, and be able to present their own. The goal is to help educate all of us and open our thinking on collaboration and the benefits it brings to us individually and to our clients.

Register Now!

Agenda
7:15 – 8:00 AM Full Breakfast & Networking
8:00 – 9:00 AM Program

XPX Summit 28 April

“When you Fail to Plan, you’re Planning to Fail”

This classic John Wooden quote isn’t the tagline of XPX Boston… but it could be!  XPX sets the national standard for leadership in the critical area of assisting business owners to prepare for what is usually the most significant financial transaction of their lives.

XPX Summit

Annually, XPX hosts the Summit, a full day of learning from thought leaders in many disciplines that deliver world-class content. For this year’s event – the theme is “From the Outside In – the Buyer’s Perspective on Business Value”

Our very own Rudi Scheiber-Kurtz, CEO & Founder of Next Stage Solutions, Inc., a business and finance advisory firm to midmarket businesses, will be moderating a break-out session called:

When You Get to a Fork in the Road, Take It!

The only way you can follow Yogi Berra’s advice is to build value for your business today to achieve multiple options for your next stage. You will hear from the 4 CEOs how they built value for their organization over time and why it is important to start early.
Jim Bourdon, CEO, Accounting Management Solutions
Emily Green, Former CEO, Smart Lunches, Inc.
Gary Harnum, Former Founder, CFO & CAO, i-parcel, LLC
Hilary Potts, CEO, The HAP Group

Exceptional keynote speakers include Chris Oddleifson, the CEO of Rockland Trust who will be speaking about his experiences after completing six successful acquisitions in the last nine years; Dr. Daniel Korschun, the author of “We Are Market Basket will share firsthand accounts of what he and co-author Grant Welker learned from the streets and executive suites as they studied and documented the unprecedented Market Basket story while it erupted and unfolded during the summer of 2014.

A number of great breakout sessions focused on how business owners can increase the value of their businesses in a myriad of ways that help ensure a successful sale.

XPX generally sells out this event – last year there were nearly 180 attendees. If you’d like to attend you should consider registering soon!  Early Bird ends April 14th!

Sign up

 

Why Lose Money with a PMI?

No Need to Lose Money with an Acquisition!

By Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc.

We know that Post Merger Integrations (PMI) never grab big headlines, yet the PMI phase is a critical element to the overall success of any acquisition and therefore needs to be on Management’s agenda long before consummating the merger.

Merger & Acquisition activities will continue to be strong and move at a rapid pace. In 2014, there were over 40,000 deals announced in the US and this year will most likely match it as well. Many of these deals also bring challenges and high risk to the acquirer. What can we learn from past failures and how can we get a clear understanding of which factors can impact an integration negatively?

According to a Deloitte Integration Report in 2015, a survey with over 800 executives sharing their post-merger success stories, almost 30% responded that their integration fell short.

Empirical data and predictable risk factors are often ignored by executives in developing an acquisition strategy. Successful companies have a clear understanding of which factors can impact the merged organization, assess the likely causes for potential failure, and focus intensely on their elimination throughout the process. By identifying them before completing the deal, you can realize the Maximum VALUE of the Merger.

Based on our experience, the three most overlooked areas and those which executives say they would approach differently in the next M&A event, are as follows:

  1. Under budgeting the integration process

Properly plan for the PMI from the beginning. Clearly outline the phases, properly budget the event, and thoroughly review the process at the outset. Ideally, an Integration Champion or Team should be appointed to oversee the entire process from the beginning of negotiations through the end. Additionally, it would be most beneficial to have Integration Managers who work closely with the Integration team in implementing all elements.

  1. Lack of Communications

No one likes uncertainty. The key is to strike a balance between budget, time, team size, and level of expertise. Appoint a Communications Champion responsible to Management who can lead the entire process. In a PMI, employees will either lose their jobs or their functions will change. It is essential the Champion and Management communicate the Integration Process to all employees of both organizations. It is generally agreed that town hall meetings are more effective than emails.

  1. Lack of Back Office Support

The back office offers large amount of value capture if planned and executed properly. It is also the backbone of a successful integration. IT, Finance and HR are consistently undervalued in planning a transaction of this magnitude.

The interdependency of these back office support systems is critical to the overall success of the deal. Frequently cost synergies of a transaction come from eliminating duplicate functions making back office support the number one source of cost savings. Therefore it is important to understand that reliance on staff that will be made redundant at the end of the process, is a risk that needs to be mitigated at the beginning of the process. Financial rewards for successful completion of the integration can often overcome a reluctance to assist.

IT in particular is not a priority to most Executives, when in fact; adopting a one-system integration (ERP and CRM) will be a crucial outcome in how you bring transparency to the new entity. Real- Time Information flow to all decision makers is the true measure of a successful merger. Evaluate what systems are available to each business unit and choose the best and most optimal way to support the business. Estimate the resources you will need to successfully integrate the systems, including training and educating of staff. It is all about execution and achieving desired results.

Financial rigor with strong financial reports and KPIs are extremely important in order to measure and validate the true value of the merger. Track all activities over a specified timeline. Poor financials are often blamed for the failure of merger activities, rather than poor planning and execution of the integration process. Assure that you have both in place.

HR is the other back office support that often gets ignored. Have strong HR capabilities that can manage the talent retention of critical assets, and assist in developing plans to address staff redundancies. This process has to begin very early on to ensure that you retain key talent. Especially when operating in new markets, states or countries, retention of local intellectual capital is imperative.

By focusing on these three Most Overlooked Aspects of a Merger, you can avoid losing money at the point of integration. Plan and budget accordingly; in doing so, you will have a better success rate than the average merger. So go and change the statistics!

Need help along the way? NSS has participated in numerous PMIs combining finance, operations and IT to assure seamless integrations for our clients.

We have a short RudiTuesday Video with more information. Take a look!

Successful M&A Integrations

Corporations continuously Underestimate Post-Merger Integration (PMI) Costs, yet when an effort is made to balance time, budget and team with the appropriate planning, PMIs can be a success!

Based on our experience, the three most overlooked areas and those which executives say they would approach differently in the next M&A event, are:

1. Under budgeting the Integration Process

2. Lack of Communications

3. Lack of back office focus

Listen to our short video for this month’s RudiTuesday for steps to take and how to properly plan your next acquisition.

The case below shows that by identifying the predictable risks at the beginning stage of a deal, you can realize the maximum VALUE of the merger.

Case Study: Addison Wesley Longman – HarperCollins – 1996

submitted by Derek Smith, Managing Director of Next Stage Solutions, Inc

In early 1996, Addison Wesley Longman, a subsidiary of Pearson Plc and $650 million publisher of text books and related materials for the K-12 and college markets purchased HarperCollins’ business which had annual revenues of approximately $300 million. In announcing the acquisition Pearson Plc advised the financial markets that it would complete the integration of the two companies by January 1, 1997. Having disappointed its shareholders and analysts with a previous foray into electronic publishing, Pearson and Addison Wesley Longman were therefore under extreme pressure to complete the integration successfully and on time. Below are the steps they took to complete the task on time despite a three week cessation while the parties re-negotiated a post-closing adjustment.

1. Formation of Task Forces Prior to Closing of the Transaction and Identification of Integration Leader

Addison Wesley Longman and HarperCollins created 4 task forces prior to closing of the transaction to discuss (1) publishing properties that would survive the acquisition; (2) salary and benefit plans after the acquisition; (3) location of distribution facilities; and (4) the back office systems to support the combined entities. Each group understood that they could discuss their goals but could not reach any decisions until after closing of the transaction. Each group created a project plan to serve as the road map during the process. The CEO of Addison Wesley Longman was named Integration Leader and each task force had an AWL leader too.

2. Publication of an Integration Newsletter

The two companies published an Integration newsletter beginning the day after the closing of the transaction and throughout the integration period. It kept employees informed of the process and the decisions being made by the task forces. In all cases, the publication of decisions was made after advising those impacted of them (employee terminations, employees and their benefit plans, cancellation of author contracts, closing of facilities, etc.).

3. Regular Internal Updates on Completion of Tasks

Each of the four task forces met at least bi-weekly to review the status of their project plans. The back office systems group met weekly and AWL engaged an integration specialist from Deloitte & Touche to monitor the process and provide assistance when items slipped. Peer pressure played a significant role in completing the workplans as no one wanted to be identified as the culprit for failure.

4. Regular External Updates on Completion of Tasks

In addition to the regular internal updates, the AWL executives met with Pearson Plc executives to update them on the status of the integration and to identify any looming challenges that would impact completion of the projects by January 1, 1997.

5. Open Dialogue

During the fall of 1996 AWL identified that a significant post-closing adjustment was required. Before approaching HarperCollins, the AWL and Pearson executives discussed the implication of introducing a challenge to the valuation on the integration schedule. Ultimately the executives agreed that the materiality of the adjustment exceeded the value of completing the integration on time. Two executives at Pearson Plc and AWL had a longstanding relationship with a senior executive at News Corp, the corporate parent of HarperCollins, and they were charged with quickly resolving the dispute. They met with their colleague, identified the issue, and together determined a fair solution for both parties. During this three week period, there were no integration conversations between the two companies.

Outcome

On January 2, 1997 the integration was completed.

Next Stage Solution’s managing directors have been involved in acquisition integration projects. Let us help you with your integration plan and make it a SUCCESS!  Call us today at 617-449-7728

Are You Maximizing Your Business Value before Selling?

Are you Maximizing your Business Value before Selling?

By Rudi Scheiber-Kurtz, CEO of Next Stage Solutions, Inc

If you ask any professional business or M&A advisor “What is the optimal time to maximize the value for my business before selling?” The most common answer is – 24 MONTHS.

In reality, it turns out to be more like 24 WEEKS as the owner is tired, anxious, and ready to make the change.  One of my investment banker friends recently told me that never before has it taken so long to close a deal – up to 16 MONTHS with issues from both the sell and buy side.  There is now more cash available than ever before and the time may be ideal for you. However, maximizing the value of your business requires proper planning and sound execution.

Are business owners willing to leave money on the table?  Hiring an internal advisor to increase your value by $2-5Million seems to be a no brainer.  The only caveat is that value creation does have a time factor.  This investment will be well worth your time and money.  Let me list a few things to consider:

  • Streamline and document your business processes and systems so your employees have a guide and perform better
  • Increase your utilization rate from 50-75% to optimally use your current ERP system
  • Eliminate manual input into information systems wherever possible
  • Understand your margins by product and services.  It is the only way to eliminate waste and non-profitable areas that drain your resources
  • Have a 2 year customer satisfaction and retention strategy plan to address issues with any problematic customers
  • Re-organize your executive team for optimal advantage to a buyer
  • Start with  a Benchmark Assessment that compares your business to Best Practices to minimize your intrinsic risks
  • The GAP Analyses from your assessment will indicate where to make immediate improvements and where improvements should be made over the next 24 months

It is certainly a daunting task to prepare a business for sale; yet not properly preparing for it would be a shame after all the years you spent building a successful Company. Every one of the above steps will add value to your business, and these are only a sample. The upside of being prepared is that you have more negotiating power with a potential buyer and the power to walk away from the deal.

Start value building today. Consider a benchmark assessment that will give you a baseline and leads you towards transformation initiatives. We call them EBITDA (earnings before tax, depreciation, and amortization) Transformations.  In a relatively short time you can improve both top and bottom line for your business.

Take care of your risks and areas of weakness today rather than have a buyer use them to decrease your business value or walk away from the deal.

Consider:

  • Develop a Roadmap using a GPS
  • Build it for 24 months addressing and fixing all the potholes
  • Have a faster drive to selling your business

Excellent resources are available in guiding your through this process.  However, the best investment you will make is hiring the right advisors to support you through this process.  Joe Marrow of Morse, Barnes-Brown Pendelton lists four key points to consider in his article “Planning for a Liquidity Event — Choosing the Correct Exit Strategy”:

  1. Focus on Execution
  2. Be Bought, Not Sold
  3. Surround Yourself with Excellent Advisors
  4. Choose the Correct Exit Strategy

What is a potential buyer looking for?

  • EBITDA compared to annual sales
  • Customer base and profitability within products/segments
  • Processes and policies in place
  • Systems integration and optimization
  • Inter-departmental emphasis in problem solving
  • Focus on Customer acquisition and value add
  • Growth opportunity in the future market place

Is it the right time?  Is it a sellers or buyers market?  According to Jeff Mortimer’s investment statistics, it is a good time to sell and buyJeff Mortimer, Director of Investment Strategy with BNY Mellon, has collected impressive data including market confidence factors, common market assumptions and the seasonality and cyclical nature of the market in any given economy over the past twenty years.

Timing is favorable also in terms of cost of capital given the low interest rates.  Quantitative Easing will be most likely eliminated and we will start to see an uptick in interest rates.

The window is NOW if you are contemplating selling your business. Start today and give yourself the time you need to eliminate your weaknesses and risks.

And one more thing!  Doing it alone is not a good option, so finding the right advisor will be one of the most important investments you will make.

NSS has participated in over 50 M&A activities, many on the buy side. Our advisors work with you inside the business, we walk the floors and roll up our sleeves.  We use our own comprehensive benchmark assessment tool to give you a baseline and gap analysis, then start building value and minimize your risks. Our GPS comes free!!

What Business Owners want to know about the RBC Ruling

What should Business Owners learn from the Ruling against RBC Capital Markets?

by Laura Kevghas, Partner at Mirus Capital Advisors LLC |  kevghas@merger.com

Background:  RBC Capital Markets LLC, the investment banking arm of Royal Bank of Canada, was representing Rural/Metro Corp. in the sale of their business.  Another team at the bank was trying to get the financing work from one of the buyers, Warburg Pincus LLC, a private equity firm.  According to a recent article in the Wall St. Journal, a senior banker at RBC was in touch with both teams, and didn’t tell Rural/Metro that the bank was trying to get that business from Warburg.  Essentially, RBC was trying to get paid from both sides of the deal.  The former shareholders of Rural/Metro took RBC to court, claiming that they didn’t receive fair value for their shares.  On Friday, March 9th, Vice Chancellor J. Travis Laster ruled in their favor.

So what can you learn from this?

First, pay attention to valuation metrics.  In late 2010, when RBC was pushing to grow their investment banking business, and they initially pitched the company to serve as their advisor, they “relied on two recent deals, signed at 9.5 times and 9.4 times the targets’ earnings before interest, taxes, depreciation and amortization (“EBITDA”), to show what Rural/Metro might be worth.”  But on the final weekend before the deal was to close, the RBC team presented a revised valuation range to the company’s Board of $8.19 and $16.71, which made Warburg’s offer of $17.25 per share look like a great offer.  But the new valuation was lower than the valuation RBC used to pitch the deal, because now it included a deal from 2004 that was at struck at a much lower multiple – about 6.3 times EBITDA.

When an investment banker is pitching you to get your sell-side M&A business, pay careful attention to how they calculated the valuation range they present to you.  Are the transactions relevant? Are they recent?  Which transactions did they exclude from their analysis and why?  RBC is not the first investment bank to pitch a company using only the most favorable valuation metrics.  It’s critical that as the business owner, you be aware that valuation is an art, not a science, and that your results may be different.  Don’t select an investment bank just because their anticipated valuation is the highest.  Getting the highest price for your company is the result of a competitive process, not dependent on historical multiples.

Second, look for conflicts of interest.  In this situation, the judge determined that RBC “failed to disclose the relevant information to further its own opportunity to close a deal, get paid its contingent fee, and receive additional and far greater fees for buy-side financing work.”   In this situation, lawsuits were filed against three parties:  RBC for failing to disclose its conflict of interest adequately; Moelis & Co., a second advisor to Rural/Metro to settle allegations related to its fairness opinion; and Rural/Metro’s Board, which was accused of selling the company for too low a price.

A question for the readers:  do you believe that an investment banker can be free of a conflict of interest if they are getting fees from both sides of transaction?  What if they’re helping both sides get the deal financed and closed, but only get fees from one side?  Share your opinion in the comments.

Laura Kevghas, Partner at Mirus Capital Advisors, has over 25 years of experience in mergers and acquisitions, including both investment banking and corporate development. Laura was a founding employee at Mirus and spent nine years working on new business development, as well as creating offering memoranda and negotiating transactions for clients. She was directly involved in the successful sale of more than a dozen client companies in the software, food and beverage and technology sectors. Laura rejoined Mirus Capital Advisors in 2006, and became a Partner in 2010. She focuses her practice on M&A for companies in the business services and technology sectors, and also enjoys working with industrial companies.


3 Stages and 14 Steps towards a Successful Acquisition

3 Stages and 14 Steps towards a Successful Acquisition

by Derek Smith, Managing Director at Next Stage Solutions, Inc | smith@nextstagesolutions.com

A properly executed acquisition does not happen overnight!  Rather it is process that may take months and even years to accomplish.  It begins with management and board agreement to make an acquisition and ends with review of actual results compared with acquisition assumptions.  Whether you have acquisitions experience and are planning to acquire additional businesses, or are contemplating a first acquisition for your business, NSS has outlined below 14 steps in three stages you must consider to successfully achieve your goals:

Stage One:  The Courting

Acquiring a new business or a business unit can be an effective means to achieve your company’s growth goals.  Carefully and thoroughly discuss WHY an acquisitions is the best growth scenario for your business will be time well spent.  In fact, 2014 may be an opportune time as there is an uptick predicted on the sell side. The courting game starts here:

1.         Agreement of senior management and the board of directors to make an acquisition.  Corporate strategic plans will identify that an acquisition is the preferred route for growth rather than investment in organic growth (new products and/or markets).  The plan will enumerate the time frame for completing a transaction.

2.         Identification of potential acquisition targets.  Usually senior management will complete this task.

3.         Confirmation that a potential acquiree is willing to discuss being part of a larger organization.  Senior management can also undertake  this task or they can delegate the responsibility to external advisors if confidentiality is important.

4.         Conversations with senior management and the board of directors of the target organization to determine symmetry (products, markets, and personnel), opportunities for synergies, and enterprise value expectations.

5.         Development of an Acquisition Paper for approval by the board of directors that identifies (i) reason for acquisition; (ii) valuation of acquiree and expected upside including synergies; (iii) source of funding for the transaction; (iv) management team responsible for all steps of the acquisition process; and (v) risks and distractions arising from acquisition.

Stage Two: The Marriage

Adopting an Acquisition Strategy as outlined above will be very beneficial as you enter the second stage with proper planning, valuation and execution. Most important in this stage is that you have the RIGHT people (internal and external) and use them at the right time.  Negotiations between the parties are a critical component of this stage. What happens if the parties cannot agree on Price (regardless of valuations), or other key terms of an agreement. How, who, what, and during which step(s) are these issues resolved by the parties? If you cannot make it happen, always be ready and willing to say “NO” and move on to the next target. Remember, you want to keep risks at a minimum and maximize the value for your business.  Here are the Stage Two steps:

6.         Execution of a Letter of Intent with target.

7.         Accounting and legal due diligence to confirm understandings developed during Step 4.  Third party financing of the transaction will require receipt of the due diligence reports before closing on funding.

8.         Negotiation of closing documentation including escrow, earn-out, financing and employment agreements if applicable.  This is a very challenging stage as it often requires senior management of both organizations to re-negotiate sacred items in order for the transaction to proceed.  All parties to this phase need to focus on the business purpose of their tasks.

9.         Revisit and verification of the financial model to update for changes arising from the Purchase and Sale Agreement and covenants from financing.

10.       Development and approval of post-acquisition plan (integration or stand-alone) including identification of team personnel from both organizations involved in go forward activities.

11.       Board of Director approval of closing of the transaction.

12.       Closing of purchase.

Stage Three:  The Reality Check

The percentage of failed acquisitions is indeed high. We believe that with midmarket companies there is greater flexibility to make change and hence achieve synergies.  Critical to your success is that you have developed an integration strategy coupled with identification of the appropriate resources so you are ready for Day 1 after closing.  Do not loosen your expectations here and do take the time to take a reality check and learn from the mistakes.   The final two steps are:

13.       Implementation of post-acquisition plan.

14.       1 Year, 3 Year and 5 Year comparison of actual results against projected results and analysis of variances.  Lessons learned are important in ensuring success of future acquisitions.

A successful acquisition requires significant investment of time and energy of CEOs and senior management.  Whether you have an Executive Team that is strong and can run the business as you the CEO goes out and hunts for deals (assume 40-60% of your time) or you decide that you MUST run the business and hire external Advisors for assistance, particularly in completing the first or second stages, make that decision very early on.  An acquisition can quickly take on a life of its own, drain all your resources, and jeopardize the core business.

Next Stage Solution’s managing directors have been involved in 58 transactions ranging from $1 million to $2.8 billion.  They have supported CEOs and other members of management to complete the three stages or any of the 14 steps.  Let us help you with your acquisition and make it a SUCCESS!

Call us at 617-449-7728

Join us at MDG – NSS will be Speaking

MDG January 2014 Forum:

The 4 Cs: CEO, Culture, Communications & Collaboration

 

 

 

Featured Speakers:

Moderator:

Who Should Attend:

  • CEOs, Business Owners, and Executive-level Leaders

Program Summary

In today’s highly competitive marketplace, organizations must remain agile, efficient, and responsive to the ever changing needs of their customers. Information must be accurately and effectively communicated across the entire organization so that important challenges/opportunities can be promptly addressed by Company resources.

Within successful companies, the CEO’s leadership assures that business units are closely aligned by the Company’s core values, mission, and strategic goals. As a result, shorter term objectives are clearly identified, while defining interdependencies and encouraging collaboration across the entire organization. Teamwork is endemic to a system in which everyone has a set of common goals and work together towards achieving those goals. Effective teams are characterized by trust, respect, and with a high degree of communication and collaboration.

Fostering a culture of collaboration may pose numerous hurdles for the CEO to overcome: additional time; perceived loss of autonomy; resistance to change; lack of confidence or trust in the decisions of others; conflicting perceptions; territorialism; and the diversity of skills and experience of team members.

However, these hurdles can be successfully overcome when the organization is properly aligned. With the leadership of the CEO, this alignment within the right culture will connect individual and team objectives to the higher level goals of the Company, and show everyone how their efforts contribute to the overall success of the organization.

Join us for an interactive panel discussion of CEOs and executives who will share lessons learned in how to apply the 4 C’s towards achieving an agile, effective and responsive organization to successfully compete in today’s marketplace.

About MDG

The Medical Development Group (MDG) is a community of individuals professionally committed to the Medical Device and other Medical Technology Industry segments united by the belief that innovation and advances in technology lead to substantial improvements in health care. MDG pursues this mission through the organization of educational programs and forums: the facilitation of cross-disciplinary dialogue and collaboration; the creation of venues for networking and information sharing for current and aspiring professionals, clinicians, and entrepreneurs; and the development of alliances with complementary organizations.

EBITDA: An Outsider Look

EBITDA: An Outsider Look

by Laura Kevghas, Partner at Mirus Capital Advisors, Inc.

As a business owner, you’re probably used to measuring your financial results based on revenue, gross margin and net income.  But when a potential acquirer looks at your business, they are frequently interested in EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization.  It is generally calculated like this:

Operating Income
+ Depreciation
+ Amortization

=

Earnings Before Interest, Taxes, Depreciation & Amortization

In privately held businesses, operating expenses are sometimes artificially high because of expenses that the business owner runs through the business, which would not be incurred by a third-party buyer. This could include leases on your and your spouse’s high end Mercedes, payments to children who aren’t actually working in the business, travel & entertainment expenses for that trip to Paris that included a one day business meeting followed by six days of fun, payments on the yacht docked in Boston Harbor, etc.  You can also add back excess compensation (wages) paid to you as the owner, but be careful with this add-back, because the buyer will expect that you will be willing to work for them at that rate post-closing during the transition period.  When presenting your financial results to a potential buyer, you’ll want to add back these expenses and present “adjusted EBITDA” numbers. (During due diligence, you’ll need to be prepared to show evidence that these add-backs are reasonable and the amounts are accurate.)

When an investment banker talks about your business being sold at a certain “multiple”, that multiple is typically applied to your adjusted EBITDA.  However, EBITDA is a proxy for free cash flow, so if the amount you need to spend each year on capital expenditures is significantly different from your depreciation and amortization expenses, then it may not be a good proxy, and you’ll see multiples applied to your free cash flow instead.

However, if you want to make competitors jealous when you chat at industry events or impress your friends on the golf course, divide the purchase price you received by your net income, and tell them that’s the multiple you got paid.  They’ll be impressed at the great deal you made!

Laura Kevghas is a partner at Mirus Capital Advisors, Inc.  Mirus is a middle-market investment banking firm serving the mergers and acquisitions and valuation needs of New England companies with revenues between $10 and $150 million.  Laura has completed more than fifty transactions over her 25 year career, and works primarily with companies in the staffing, training and technology sectors.


CEOs Secret Weapon:Identify & Mitigate Risk for Successful Decision-Making

CEO Workshop Co-Sponsored by Next Stage Solutions and Adaptive Planning


 

 

Wednesday, October 9, 2013 | 10:30am – 12:30pm

Host: Morse, Barnes-Brown & Pendleton, P.C. at CityPoint 230 Third Avenue, 4th Floor Waltham, MA 02451

Register Today!

With the proper approach and correct decision tools, CRITICAL business decisions can be clearly defined, analyzed, and successfully executed by the leadership of any organization.  CRITICAL DECISIONS include:

  • Acquisition or Merger
  • New Product Launch
  • Key Technology Purchase
  • Strategic Alliance/Partnerships
  • New R&D Project
  • Major Capital Investment
  • Sales Force Expansion/Re-Alignment

Overall Approach:

  • Identification of Business Assumptions/Rationale
  • Key Business Drivers
  • Comprehensive Analysis
  • Sensitivity Testing (What-if Scenarios)
  • Executive Summation
  • Post-Decision Follow-up & Outcome Comparison

The NSS value proposition as growth advisors provides the structured approach and oversight for critical decision, making, while Adaptive Planning provides the tools and methodology of effective decision support.

Adaptive Planning is the worldwide leader in cloud-based business analytics solutions for companies of all sizes. The company’s software-as-a-service (SaaS) platform enables finance and executive team collaboration in planning, monitoring, reporting, and analyzing financial and operational performance.