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.

Texas ACG Capital Connection Blog Expands M&A Conference Reach

Dallas – February 10, 2011 – Dallas-based investment bank Allegiance Capital is assembling a team of merger and acquisition industry experts, economists and lawmakers to discuss the economic outlook, a burgeoning M&A market, and what Texas business can expect in 2011. These M&A thought-leaders will present their information in a live blog on the Allegiance Capital website in conjunction with the Texas ACG Capital Connection conference on March 2, 2011. Subscribe online to the Texas ACG Capital Connection blog, called “Beyond the Podium”, at www.allcapcorp.com/acgtx.

Highlights of the Beyond the Podium blog include interviews with Texas ACG Capital Connection keynote speakers Bill Lively, President and CEO of the North Texas Super Bowl XLV Host Committee, and Ben Stein, Actor, Writer, Lawyer and Commentator on Economic and Political Issues. Additionally, the Allegiance Capital team of experts, in tandem with the Texas Capital Connection conference, will provide business owners with valuable insight into current market trends.

Chad Watt, Dallas-based reporter for Mergermarket will be a featured blogger for the event. Mergermarket is a proprietary M&A intelligence service and part of the Financial Times Group. Mergermarket data indicates that 2010 M&A activity in Texas increased by more than one-third over 2009. The number of Texas deals reported in 2010 was the highest since 2007. Chad specializes in reporting on energy companies and financial services businesses. Most recently, he broke the news that Sterling Bancshares, Inc. had put itself up for sale.

Using video and written components Allegiance Capital will share portions of the conference with online viewers and open the floor for additional discussion. Also, stay tuned to the Texas ACG Capital Connection blog and Allegiance Capital’s YouTube channel http://www.youtube.com/allegiancecapital for valuable information leading up to the conference.




About Allegiance Capital


Allegiance Capital Corporation is a full-service investment bank specializing in the middle market (companies with revenue from $20 million to $500 million). The firm assists private companies with every aspect of selling and financing a business, including: debt restructuring, mezzanine financing, executing leveraged buyouts, strategic partnering, consulting and other related services. The firm has won multiple awards recognizing the value it delivers to clients. Examples include: 2009 Dealmaker of the Year (Dallas Business Journal), 2008 Boutique Investment Bank of the Year (M&A Advisor), 2006 Investment Bank of the Year (Dallas Business Journal). For more information, refer to the company website, www.allcapcorp.com. Subscribe to the Capital Ideas blog by visiting: www.allcapcorp.com/blog. Follow Allegiance Capital on http://www.linkedin.com/company/allegiance-capital and http://www.facebook.com/AllegianceCapital . # # #

Media Contact:
Katherine Kirkpatrick Vice President Allegiance Capital Corp. 214-217-7745
kkirkpatrick@allcapcorp.com

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

Is Business Valuation Necessary?

When you are selling your company, the marketplace determines the true value of your business. Business Valuations provided by business brokers and consultants as a rule, they are academic exercises that are out of date the day they are produced.

Valuations can be useful when one needs an objective appraisal of what a business is worth at a specific point in time, one that can stand up in a court of law. Examples would be estate planning purposes or forced redistribution of assets due to divorce.  But otherwise valuations are not worth the $30,000 to $50,000 a business owner pays.

Why? Shifts in market, economics, and competitive landscapes make valuations obsolete. Additionally, your business will be worth more to the right acquirer or acquirers. If you identify several acquirers that can benefit by adding your product lines, client base or plant locations, you drive your price higher.

For business owners seriously considering the sale of their life’s work, time and money is wasted by buying a valuation. An estimated range that is based on research and confidential discussions with acquirers that are looking for companies like yours should be made a part of the M&A process, rather than an expensive precursor to it.

M&A Markets on the Edge of Revival

In recent weeks a flurry of announcements has energized sentiments in M&A markets replacing a glum that abounded during the recession.  What does this change mean for M&A markets for the rest of 2010 and 2011?  It likely points to a revival in activity.  As we know, fundamentals are the fuel that sustains trends.  However, changes in sentiments are the spark that fires the engine

Opinions vary, but the general consensus is that the economy is recovering, albeit slowly.  Earnings reports have been good and in many cases surprisingly so.  In addition to the performance of the economy, liquidity in the system and access to credit are very important drivers in M&A markets.  Estimates differ, but all suggest liquidity is dramatically higher than in the “heydays” for M&A markets of 2006 and 2007.  Both corporations and financial groups are under pressure to deploy this liquidity, suggesting a spark of sentiment is likely to open the floodgates for M&A markets.  Lenders are active again and interest rates are lower than ever, meaning better access to cheaper capital.  All of these suggest that we could see a near term surge in M&A activity as capital moves off of the sidelines.

The Wall Street Journal no longer reads like an obituary like it did during the recession. Recent reports of M&A transactions like the HP acquisition of 3PAR have started to pepper the news. Uncertainty about future tax policy and the future of the economy seem to be driving a sense of urgency in company owners that want to strike while the opportunity is present. Fundamentals are important, but sentiments cause people to act. The fundamentals are good. And for the first time since late 2007 sentiments are good. The nexus of these suggests a window of opportunity for good companies to come to the market. For more information about Private Investment and M&A please visit Allegiance Capital Corporation’s blog at www.allcapcorp.com/blog.

Allegiance Capital Corporation is a private investment bank that guides privately-owned companies through every aspect of selling and financing a business. The company specializes in selling family-owned businesses for a premium price. The company offers Mezzanine Financing, Executing leverage buyouts, Acquisition Strategy, Business Advisory, Exit Strategy, Family business Consultation and More. Allegiance Corporation not only has a Private Investment firm in Texas and a thriving Advisory Firm in Illinois, the company offers their services in multiple locations both nationally and globally. All Capital Corporation offers buyers and sellers, advice, planning, and strategic development to maximize their buying and selling investments. To learn more about Allegiance Capital Corporation visit http://www.allcapcorp.com.