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Where is the Boom in Business Sales by Aging Business Owners?

Are You Ready for Sale Anyhow?

More than a decade ago, Richard Jackim and Peter Christman wrote a book called The $10 Trillion Opportunity. In the book, the authors forecasted massive future sales of private businesses because of the aging of baby boomer business owners. They were right in that there were millions of aging business owners. However, they were early in their prediction of a tsunami of private company sales by those baby boomer owners. Now, more than ever, business owners should be preparing themselves, and their businesses, for the next transaction wave.

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Shotgun Buy-Sell Agreements Are Not Ideal

Shotgun agreements are found in some buy-sell agreements, but we do not see them regularly. Often used to break deadlocks between owners, a shotgun buy-sell agreement is an agreement where, upon the occurrence of a trigger event, one party makes a determination of price and the other party chooses whether to buy or sell at the given price. While I don’t recommend this type of agreement, in this post, we discuss some of their common characteristics as well as their advantages and disadvantages.

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#3: Handbook on Business Valuation for Business Owners

EBITDA, Enterprise Value and Enterprise Value Multiples

In this post, we look at what are called total capital, or enterprise-level earnings indications like Earnings Before Interest and Taxes (EBIT) and Earnings Before Interest, Taxes, Depreciation and Amortization (EBIDTA). In addition, we will look at EBIT and EBITDA multiples to see how they compare with equity-based multiples like the net income and pre-tax earnings multiples.

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#2: Handbook on Business Valuation for Business Owners

The Gordon Model and Equity-Based Multiples

In the last post, we talked about the basic valuation equation. This equation is derived from something called the Gordon Model (and a couple of other names). We said before that valuation is a combination of art and science. It is time for a bit of the science. We’ll introduce a few equations in support of the basic valuation equation, so don’t let this bother you. After we see the “science” underlying this equation and understand a few more things about valuation, we can talk about more interesting questions.

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Interim Time: The Time Between Now and a Future Sale of a Business

Use Interim Time Wisely to Prepare Businesses and Owners for Ultimate Sale

Is business ownership a binary thing? Do we either own our businesses or not? The binary notion leads business owners to think either in terms of the status quo or of an eventual sale of the business. The truth is that between the two bookends of status quo and an eventual third-party sale are many possibilities for creating shareholder liquidity and diversification and facilitating both ownership and management transition

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9 Characteristics of Good Buy-Sell Agreements

Future Thinking Required

The creation of buy-sell agreements involves a certain amount of future-thinking. The parties must think about what could, might, or will happen and write an agreement that will work for all sides in the event an agreement is triggered at some unknown time in the future. This post addresses nine important characteristics of buy-sell agreements that are important for business owners and for attorneys advising them.

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Ownership and Management Transition Planning or Mere Hope?

Recently, an attorney and financial planner called me to talk about a client who was discussing his ownership, management succession plans, and the life insurance associated with his “planning.” During our two-hour discussion, I learned about the client’s situation and was able to offer potential modifications to his current transition plan.

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Dell “Loses” the Appraisal Battle but “Wins” Overall

Statutory Fair Value in Delaware

Dell Inc. engaged in a management buyout (“MBO”) in October 2013 that effectively took the Company private, leaving Michael Dell in control (75% of its stock) with a financial sponsor (25% of its stock).  The majority of shareholders tendered their shares, and received the offered consideration.  Certain shareholders dissented, setting in motion an appraisal proceeding in […]