Why Now is the Right Time to Sell Your Company

www.allcapcorp.com 

Are you considering selling your business? Don’t let the kick-yourself moment turn to regret.

The current political climate and pressure to balance the federal budget are driving tax increases that will have a dramatic impact on middle-market business owners. Capital gains taxes are expected to increase at the end of 2012 from 15% to 20%, and owners will be keeping less of a company’s sale price beginning as early as 2013. The cost basis for privately held businesses is typically very low, and the resulting tax burden means that a business owner selling their company for $50 million will pay an additional $2.5 million in taxes alone.

Distressed Mid-Market Private Companies Looking for Investment Bankers Advice

In difficult economic times, companies may face many challenges. Many mid-market companies may be interested in business consulting or even simply buying and selling a business.

·         Declining sales

·         Shrinking profit margins

·         Stretched-out receivables

·         Inventory build up

·         Insufficient capital

·         Sub-optimal financial structure

Any of these situations can lead to cash flow problems. What's more, an unmanageable debt burden may affect the company's ability to survive, let alone prosper.

Buying and Selling Businesses: Acquiring Companies

Allegiance Capital Corporation assists clients in identifying, structuring, negotiating and closing strategic acquisitions and buyouts of companies, corporate divisions and product lines. Our clients include companies located in the U.S. and around the world. Allegiance Capital is uniquely positioned to assist clients located in the U.S., Mexico and Latin America and Western Europe. Our goal is to help our clients achieve growth, enhance their market position, realize operating synergies and enter new markets through targeted mergers and acquisitions  that we identify.

Knowing When to Sell Your Business

Article Written by Jeff Gross

When should an entrepreneur sell his business?  Most entrepreneurs think it is never a good time; most M&A advisors think it is always a good time.  Unfortunately, this question is never given the consideration it deserves at the appropriate time.  I have come up with a simple test of when you should seriously consider selling your business.

If a business’ market share is not growing, an entrepreneur should consider selling the company.  This test is based on finance theory (portfolio and efficient market theory), good business principles, and years of observation.  In 8 out of 10 cases, a company that is not gaining market share should be sold.  When faced with that situation, a good business person should analyze a sale with his professional service providers and board as part of a strategic planning process.

Let’s be clear about market share…it is not the same as revenue growth.  Market share is all about growing faster than your industry average.  If you are not growing faster than your average competitor, you are maintaining or losing market share.

There are a number of reasons to sell, but the reason I am focused on is that it is in the entrepreneur’s financial interest.  Entrepreneurs forget that they have the most valuable human skill, the ability to start and grow a company.  If the company is not growing, the entrepreneur is not using his most valuable skill and not maximizing the value he or she can create.  Conversely, approximately 15-20% of the entrepreneurs I have worked with have lost everything late in their careers because they hung on to their business too long.

Let’s consider a few examples:

·         Growing industry, declining market share – When the industry stops growing, a better-run, better-capitalized company who was growing market share, is going to turn its attention to taking your business.  Better to partner with that company on the way up than hold on to your company too long.  Typically, sellers in growing industries receive out-sized premiums regardless of performance.  After the market has matured, the market leader is more likely to compete for the business than pay for.

·         Stable industry, declining market share – It takes different personalities and skills to succeed in a zero real growth (no more than inflation) industry, than it does to start and build a company.  Entrepreneurs generally are better off to sell, diversify the proceeds, and start another company.  It will increase income and reduce the risk of losing everything.

·         Declining industry, declining market share – Declining industries lead to industry consolidation where market leaders emerge with the recovery of the industry or economy.  Those market leaders can create significant value for a failing company in a distressed environment.

Declining market share and the sale of a business are not perfectly correlated, that is why I recommend considering a sale.  An honest financial professional can help you make the right determination for your business.  This is a great time to also look internally at personal factors (please refer to Is It Time to Move Your Own Cheese?).  However, do not use the imperfection correlation as an excuse to do nothing.  As an entrepreneur, you will be wrong greater than 80% of the time and you will pay the price for it financially.

Allegiance Capital Corporation own Private Investment banks in Dallas and M&A advisory's in Chicago that help business owners buy and sell their business. This article is also visible on  titled Knowing Whend to Sell Your Business and direct link to www.allegiancecapital.com/blog

Buying and Selling a Business: Getting a Premium Price for Your Company

Allegiance Capital operates very differently from other investment banking firms. We invest considerable dollars into developing buyer research to identify better-quality acquirers for the companies we sell. However, our research findings must go beyond finding a quality acquirer – we endeavor to lay out why the target acquirers are ideally suited to buy the selling company that Allegiance Capital represents.

Here’s an example:
Allegiance Capital took on the sale of a chemical company that was in financial trouble and was being pressured by its bank. Our client owed its bank $14 million in principal and $3 million in interest. The bank valued the business $23-26 million. It was easy for Allegiance Capital to uncover several good acquirers who would offer from $18-23 million for the business. However, through the exhaustive research, we identified a Western European acquirer that was a unique match for the client. Due to the rising value of the Euro, cost of manufacturing certain chemicals was considerably more expensive in Western Europe than in the U.S.  Freight rates had tripled, and the European firm had lost its competitive pricing edge because the cost of shipping its chemical products to the U.S. had soared. It needed to produce products in the U.S. By acquiring our client’s company, the European buyer obtained a manufacturing facility that was immediately available. The acquirer maximized this under-utilized facility, and also picked up additional product lines in the transaction. The European acquirer paid $33.5 million for the business.

Somewhere, an acquiring company that will pay premium price for your company is waiting to be discovered. Allegiance Capital will find them for you. When we do, the groundwork is laid for an exceptionally successful transaction where everyone wins.

To learn more about Allegiance Capital Corporation, Private Investment Banks in Dallas, or Business Advisory Firms in Chicago,  please visit www.allcapcorp.com 

Selling A Company Successfully

Every successful business began in the imagination of an entrepreneur. Out of vision, determination, and a relentless pursuit of customers, a business was born and it grew to become an enriching life's work.

Most entrepreneurs get only one opportunity to sell a company, and they deserve to maximize their return.

When business owners are ready to quantify their body of work through a sale, they need an investment banking partner who will protect their interests, very confidentially present their company to the right buyers, and craft the likelihood of a premium sales price.

Allegiance Capital Corporation has a proven methodology, exceptional marketing expertise, and the financial acumen to help get business owners what they deserve. Allegiance Capital has numerous locations and offices for example we have a Private Investment Bank in Dallas, TX as well as Financial Advisory Firms in Chicago, Illinois.