Following a decade of quantitative easing and low interest rates, the US economy has generated greater than $1 trillion of capital for investing into private companies – and there is pressure to put these investment dollars to work. This circumstance supercharges the opportunity for private business owners to create wealth, deconcentrate risk or move on to the next phase of life.
Aligning Owner Motivation with Deal Costs
The obvious uncertainty for a business owner embarking on a sale is whether the business is saleable (at all) and whether the proceeds will be enough. Business owners must understand how their personal motivations and emotional attachment to the business will influence business decisions. More than ever, business owners seeking to “get out” need to be sure they possess the skills and acumen to tell their story during a sale process.
Having seen the conflict of owner motivation and seller opportunity play out in hundreds of transitions, BPM developed a stage-gate process for ownership transitions that empowers the seller to confirm salability and enterprise value before committing to a full process. In doing so, BPM aligns owner motivation – and increased confidence – with a building level of professionalization and business acumen as the process moves forward through each stage.
Enterprise Value / EBITDA Expansion
BPM’s Corporate Finance Consulting team, having supported 500+ ownership transitions in the last six years, has the expertise to guide business owners through the deal process and transfer corporate wealth to the family. We enable sophisticated buyers to engage with sellers by employing a high level of business acumen through heightened credibility and visibility; improved financial reporting; and increased information flow. Evidencing this type of business acumen at the time of sale positively effectuates value – and will influence purchase price multiples. A compounding effect can be achieved, if this expansion of purchase multiples is combined with improvements in margins (EBITDA). The chart below highlights how dramatically value increases with this combined improvement. In the below illustrative example, a niche manufacturing business with revenues of $40M experiences a value increase of $10.2M.
Ownership Transition Phases and Outcomes
BPM manages the sale process to maximize the value of a life’s work and to permit an entrepreneur’s graceful exit. We focus on opportunity and areas of potential risk in all phases of the process, including how to maximize opportunities with different buyer types, how to survive due diligence, and how to mitigate deal-related pain points and the associated deterioration of value.