Quarter Four Middle Market M&A Report 2019

Quarter Four Middle Market M&A Report 2019

 

LUTZ BUSINESS INSIGHTS

 

quarter four middle market m&a report 2019

2019 Proves To Be Another Strong Year For Sellers

US deal volume trended upwards during the fourth quarter 2019, with volume rising 1.8% compared to the third quarter 2019. Overall, M&A volume neared its highest point in the last 10 quarters, second only to Q1-19. Average and median transaction values rebounded from the last quarter, increasing 14.3% and 12.4% from Q3-19, respectively. Activity and valuations remain strong despite a decline in the RSM U.S. Middle Market Business Index following two quarters of increases. Softened economic expectations, high capital expenditures, and labor constraints continue to be at the top of the list of concerns for middle market executives.

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OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Selling Your Business? The Financial Information Buyers Want to See

Selling Your Business? The Financial Information Buyers Want to See

 

LUTZ BUSINESS INSIGHTS

 

selling your business? the financial information buyers want to see

bill kenedy, LUTZ consulting and m&a shareholder

 

All buyers and bankers require accurate and timely financial information when working on an acquisition. This is obvious. However, many times the target businesses do not produce the required financial information that is needed on a timely basis. This begs the question, what exactly are buyers and bankers looking for when asking for a business’s financial details? This blog highlights the essential documents business owners need to have at the ready when preparing for a sale.

 

What Financial Documents Do Buyers Need?

During the due diligence phase of a business sale, buyers and bankers request a significant amount of financial information about the company. This list will include not only the Company’s year-end tax returns or financial statements, but also financial reports by customer, vendor, salesperson, company location, customer location and division, to name a few. Here is a full list of documents a business owner should have at the ready for potential buyers:

  • Year-end income tax returns, sales/use tax returns, personal property tax returns
  • Profit & loss statements and balance sheets (monthly)
  • Insurance policy information, including workers comp claim details if applicable
  • Copy of lease agreements
  • Fixed asset details
  • Executive summary/overview of business
  • Sales reports by product/service and customer
  • Purchases by vendor/product
  • Inventory reports by product including analysis of slow moving products
  • Details of any recent litigation involving the business

Most buyers require this information to ensure that the business they are buying is in good standing. However, before any critical information is provided to a buyer, it is imperative that all parties involved in the transaction sign a Non-Disclosure Agreement (NDA). This contract helps protect yourself and your business from any leak of sensitive information.

Having CPA prepared year-end financial statements isn’t necessarily a requirement for a business transaction; however most buyers find it helpful. Maintaining accurate information will help you estimate a fair asking price and will help you fix any issues that could jeopardize a sale.   If you are feeling overwhelmed or are still unsure what financial information you will need to provide, consider seeking help from a professional.

In summary, the selling company should be able to produce accurate financial statements (annual and monthly) and other management reports used to monitor company performance. These documents help potential buyers better understand your company as a whole and can help improve your chances of locking in a deal. If you have any questions, please contact Lutz M&A for assistance.

 

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ABOUT THE AUTHOR

bill kenedy

402.492.2132

bkenedy@lutz.us

BILL KENEDY + LUTZ CONSULTING AND M&A SHAREHOLDER

Bill Kenedy is a Lutz Consulting and M&A Shareholder at Lutz. He specializes in business valuation, litigation support, and merger and acquisition advisory services.

AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
  • American Institute of Certified Public Accountants, Member
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
  • Accredited in Business Valuation
  • Certified in Financial Forensic
  • Certified Exit Planning Advisor
EDUCATIONAL BACKGROUND
  • BSBA in Accounting, St. John’s University, Collegeville, MN
COMMUNITY SERVICE
  • Construction Financial Management Association, Past Treasurer, Board Member
  • A Time to Heal (non-profit focused on cancer patients), Past Board Member

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Can My Business Run Without Me?

Can My Business Run Without Me?

 

LUTZ BUSINESS INSIGHTS

 

can my business run without me?

bill kenedy, LUTZ consulting and m&a shareholder

 

One of the main issues that we see in a business sale transaction is a lack of management depth. Meaning, without the business owner, the company couldn’t run properly. This is a big red flag for buyers. This blog will show you the warning signs that you, as the business owner, are too involved in the daily operations, and will teach you how to ultimately transition out of that role.

 

Problem #1: Business Owners Are Overly Involved in Daily Operations

Oftentimes buyers will become less interested if the selling owner(s) is overly involved in the day to day operations, or if they have too much influence over customer/vendor relationships.

Example: Think about it this way. Say you were looking to purchase the best professional sporting team. However, the purchase agreement means that the coach will retire, leaving you with a team of star players, but no leader. With no back-up to take the retired coach’s place, your team ultimately becomes less effective. As the buyer, you can see how this deal wouldn’t sound very appealing.

 

Solution

Sometimes in this situation, the buyer will make a portion of the sale price contingent on the owner staying in the business for a period of time. This helps them keep things operating as normal, while they work on transitioning the owner out of the business over time.

Ideally, having a transition plan in place is something all business owners should work on before considering a business sale. With the right help, you can find and train the replacement you feel will best fit your company moving forward. Having these critical steps already accomplished when deciding to sell your company will not only give you peace of mind, but will prove to be a more attractive deal to potential buyers.

 

Problem #2: Management Team Replacements Have Not Been Trained/Hired

Another related issue we often see happens when the existing management team members are close to retirement, and replacements have not been trained or hired.

Most Private Equity and Family Office buyers are looking for companies that have solid management teams and are not reliant on the business owner looking to retire.  These buyers are focused on that issue as much as they are the financial performance of the company.  If you go to sell your company without building a solid management team, the buyer pool will be limited as most of the Private Equity and Family Office buyers will pass on the opportunity and you may be left with only being able to sell your company to a competitor that has their own management team in place.

 

Solution

It’s important to make sure everyone is on the same page. Addressing this issue with the management team well in advance of a sale can be very important to a successful transaction. Place a priority on getting the right replacements, in the right chairs, at the right time. Once you have the right people, set up a system to have your experienced professionals train these new members on everything they will need to know in order to be successful.

You can never be too prepared. Hiring a qualified M&A professional, like Lutz M&A, can help you organize and set up your leadership team in a way that will appeal to buyers and get you to that successful deal closing. If you have any questions or would like to learn more about our merger and acquisition services, please contact us.

 

New call-to-action

ABOUT THE AUTHOR

bill kenedy

402.492.2132

bkenedy@lutz.us

BILL KENEDY + LUTZ CONSULTING AND M&A SHAREHOLDER

Bill Kenedy is a Lutz Consulting and M&A Shareholder at Lutz. He specializes in business valuation, litigation support, and merger and acquisition advisory services.

AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
  • American Institute of Certified Public Accountants, Member
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
  • Accredited in Business Valuation
  • Certified in Financial Forensic
  • Certified Exit Planning Advisor
EDUCATIONAL BACKGROUND
  • BSBA in Accounting, St. John’s University, Collegeville, MN
COMMUNITY SERVICE
  • Construction Financial Management Association, Past Treasurer, Board Member
  • A Time to Heal (non-profit focused on cancer patients), Past Board Member

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

2019 Nebraska State of Owner Readiness Report

2019 Nebraska State of Owner Readiness Report

 

LUTZ BUSINESS INSIGHTS

 

nebraska state of owner readiness report

76% of business owners plan to transition their business over the next 10 years (representing 4.5 million businesses and over $10 trillion in wealth). Unfortunately, 49% of them have no transition plan.

Selling your business will be one of the biggest financial decisions you ever make. Did you know that more than 70% of businesses that are put on the market do not sell? In addition, only 30% of family-owned businesses transition to the second generation, and only 12% survive the third.

Lutz, in collaboration with the Exit Planning Institute and other local firms, recently conducted a survey to help determine how prepared business owners are to transition their business in the state of Nebraska. The Nebraska State of Owner Readiness Report details the survey findings, as well as describes the business transition options that are available to business owners.

RECENT POSTS

CARES Act Overview

CARES Act Overview

Congress has officially passed the Coronavirus Aid, Relief, and Economic Security Act, otherwise known as the CARES Act…

read more

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Finding the True Value of Your Business

Finding the True Value of Your Business

 

LUTZ BUSINESS INSIGHTS

 

finding the true value of your business

bill kenedy, LUTZ consulting and m&A shareholder

 

In a recent survey of business owners, 56% of those surveyed thought they knew what their business was worth, yet only 18% had a valuation analysis prepared. We have found that often, business owners have a perceived value of their business based simply off conversations they’ve had with a peer or confidant.

Oftentimes, this method of valuation will not give you the accurate numbers you need. Since every business is different, there is a lot more than just numbers that help in determining a business’s true value. In this blog, we will explain the process some business owners go through when valuing their business vs. how a proper business valuation should be completed.

 

How Some Business Owners Value Their Business

Usually, the business owner has heard that a similar business sold for a multiple of “X.” They then apply that multiple to what they think their own “X” is and BINGO! – They know the value of their company. Unfortunately, it is rarely that simple. 

Each business has its own value drivers, and the ‘X’ the owner thinks they should be applying the multiple to is usually not correct. We’ve asked business owners what they think their business is worth and heard answers that are 100%+ too high. We’ve also had a few instances where the business owner was undervaluing the business. Can you imagine selling your business for less than what it’s worth?! 

A little education and the assistance of a valuation expert can help you avoid under or over-valuing your business, which in the end, will help you sell your business at the best price possible.

 

How a Proper Business Valuation Should Work

We recommend that business owners hire a valuation expert to assist them in determining a reasonable range of value for their business based on the characteristics inherent in their company. Hiring a valuation expert will give you the most accurate data on the true value of your business. These experts will not only take a deep dive into your financial data, but also market trends, company specific strengths and weaknesses, and buyer interest.

We are not saying “hire a valuation person to prepare a 100-page, expensive report.” The valuation analysis required for this purpose does not need to result in a written report and is not a significant expense. 

The type and scope of the valuation is dependent upon the purpose for the analysis.  If you are looking for a value of your business if you were to sell it to a 3rd party, this can be handled with a consulting project or calculation of value as opposed to a formal valuation opinion report.

Getting the best value for your business is a top priority for all business owners who are selling their company. Make sure you are getting the best value by enlisting the help of a valuation expert. If you would like to learn more about our M&A services and how we can help you, please contact us.

 

New call-to-action

ABOUT THE AUTHOR

bill kenedy

402.492.2132

bkenedy@lutz.us

BILL KENEDY + LUTZ CONSULTING AND M&A SHAREHOLDER

Bill Kenedy is a Lutz Consulting and M&A Shareholder at Lutz. He specializes in business valuation, litigation support, and merger and acquisition advisory services.

AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
  • American Institute of Certified Public Accountants, Member
  • Nebraska Society of Certified Public Accountants, Member
  • Certified Public Accountant
  • Accredited in Business Valuation
  • Certified in Financial Forensic
  • Certified Exit Planning Advisor
EDUCATIONAL BACKGROUND
  • BSBA in Accounting, St. John’s University, Collegeville, MN
COMMUNITY SERVICE
  • Construction Financial Management Association, Past Treasurer, Board Member
  • A Time to Heal (non-profit focused on cancer patients), Past Board Member

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850

Quarter Three Middle Market M&A Report 2019

Quarter Three Middle Market M&A Report 2019

 

LUTZ BUSINESS INSIGHTS

 

quarter three middle market m&a update 2019

“MIDDLE MARKET VOLUME INCREASES DESPITE GLOBAL BUYER CONCERNS”

U.S. deal volume was strong during the third quarter 2019, with volume rising 1.6% compared to the second quarter 2019. Overall, M&A volume is up year-to-date from both 2018 and 2017. Sustaining these levels of activity may be difficult in an economy that some are expecting to slow down.

Average and median transaction values decreased 16.0% and 4.3% from Q2-19, respectively, as a result of fewer megadeals and an uptick in transaction volume. In terms of what is next for deals, consolidation and divestitures are likely to remain in the mix. Geopolitical uncertainty could impact cross-border M&A and the interest among foreign investors for U.S. companies.

RECENT POSTS

CARES Act Overview

CARES Act Overview

Congress has officially passed the Coronavirus Aid, Relief, and Economic Security Act, otherwise known as the CARES Act…

read more

SIGN UP FOR OUR NEWSLETTERS!

We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.

Toll-Free: 866.577.0780  |  Privacy Policy

All content © Lutz & Company, PC

OMAHA

13616 California Street, Suite 300

Omaha, NE 68154

P: 402.496.8800

HASTINGS

747 N Burlington Avenue, Suite 401

Hastings, NE 68901

P: 402.462.4154

LINCOLN 

115 Canopy Street, Suite 200

Lincoln, NE 68508

P: 531.500.2000

GRAND ISLAND

3320 James Road, Suite 100

Grand Island, NE 68803

P: 308.382.7850