The First Law of Funds Flow
If you’re an owner considering selling your business, you may land on one of a growing number of platforms and firms that market themselves as “0% fee to sellers” — we don’t charge you, we charge the buyers. But there’s…
Category Insights
Completion Accounts — and the Art of Arg-greeing
We covered what it means for a transaction to be cash-free, debt-free (see this post) and what it means to set the right net working capital peg (see this post). Today, we chat through the final stage — the completion…
The Oft Misunderstood Net Working Capital Peg
The net working capital (NWC) peg is the target amount of capital required to operate the business at time of acquisition. Sellers want to negotiate a lower peg and deliver higher actual NWC at close, and vice versa for buyers.…
The Working Capital Conversation You’re Having Too Late
What does cash-free, debt-free have to do with working capital? Well, pretty much everything. Your purchase agreement will define what happens with every single line item on the balance sheet. Specifically, each line item within assets and liabilities will fall…
I’m Buying a Business, Not a Refrigerator
I spoke to a friend who is a private equity investor. His firm completes a lot of add-on investments for its portfolio companies. He expressed chagrin with how smaller companies with fewer resources approach M&A — often, a complete lack…
Things That Quietly Reduce What Your Business Is Worth
Most business owners spend years growing revenue — and assume that’s what drives value. It’s part of the equation, but only part. When investors evaluate a business, they run through a much longer checklist. And many of the items on…
The Priority Buyer List Is a Guess
I spoke to a private equity investor recently. He described a recent sell-side process for one of their portfolio companies. They basically had no bake-off to vet investment bankers. They knew who their advisor would be – a middle-market bank…
The Deal Was Done Before the Process Started
Here’s a recent case study of a successful deal. About three years ago, a private equity investor connected with a CFO at a larger private company. The conversation touched on a portfolio company owned by the private equity firm. The…
Why I’m Writing About Middle-Market M&A (And What to Expect)
I’ve watched strong deals unravel late in a process – not because the business was fundamentally weak, but because diligence uncovered issues that should have been addressed months earlier. Things that, if surfaced ahead of launching a process, could have…
Regressing: Better Ways to Use Regression With Small Samples
Often, you’ll see charts like the following in banking materials. Figure 1: Typical regression analysis in investment banking materials Deep down, we all know this isn’t a great analysis. But regardless of our gut feelings, it’s still being used. What…