You know how it goes. Some billionaire or corporate conglomerate throws out a huge bid for a business acquisition that everyone is certain is way over the top. It’s impossible such an outlandish offer could be profitable or even justified based on the subject entity. From the LA Clippers $2 billion sale to the next windfall for a teenage phenom who creates a gimmicky phone app; it seems as if one of these b ...

Benchmarking the firm’s performance We all know financial ratios are a barometer of the health of a company. Now, let's help our client's unleash the power of these ratios to improve their businesses. Here's how. ...

Up until now, all the corporate M&A talk for 2014 has surrounded the $45 billion deal Comcast has made for Time-Warner Cable. That’s not just because of the price tag. If approved by regulators, Comcast would end up as the internet gatekeeper for one out of every three homes and businesses in the country. That’s also a lot of power and control over internet access, quality and service for one third of t ...

New changes to the law could mean new client service opportunities The Securities and Exchange Commission (SEC) has issued a No Action Letter that allows unlicensed professionals to receive commissions for the sale of privately held securities in a sales transaction. ...

Comcast recently filed its public interest statement with the Federal Communications Commission (FCC) explaining how the American public will benefit from its $45 billion planned merger with Time Warner Cable. Comcast claims the merger is necessary because it can’t compete with the likes of Google, Apple, Verizon and Netflix--companies with a national footprint. On the flipside, over 50 public interest grou ...

Can private companies really increase their value 80-100 percent by limiting unsystematic (controllable) risks? The November/December 2013 issue of The Value Examiner featured Ken Sanginario’s article entitled, “The Valuation Business: A Strategic Road Map for Success.” In this article, Sanginario answers questions raised by skeptics to make the case that value doubling for private companies is possible. ...

Maximizing value by minimizing risk Most private company owners are not aware of the impact of company-specific risk on the value of their businesses. When they are faced with a need to increase the value of their businesses in order to close a value gap, they typically only focus on growing sales, reducing costs, or making an acquisition. None of those strategies are the most effective initial way to incre ...

Pharmaceutical companies that have remained among the world’s top 20 largest have all gone through a megamerger with a $10+ billion target company between 1995 and 2005. That sounds like good news, and it is—for the shareholders. On the flipside, such gargantuan couplings tend to wreak havoc on internal management systems, as well as organizational and critical programs; even research and development suffer ...

In a Q&A by Inc.com, former Vice President of Finance for Yahoo, Dennis Morgan, discusses the most important points of handling an acquisition, based on his $5 billion worth of deals while with the internet giant.  In the article, Morgan discuss why deals go wrong, how to close the gap with a proper operating plan, where deals fall through on the operations level, the need for a strategic roadmap and th ...

In an optimistic prediction from Reuters, middle market M&A activity should carry lots of opportunities throughout 2014.  The positive outlook comes after a combination of more certainty with respect to Fed tapering and fewer concerns about government stalemates.  The prediction also relies heavily on the observation that companies previously focused on cost savings have begun to shift their attention t ...

The next generation Pursuing an acquisition for the sake of improving the top line is risky.  A company can focus on creating value by reducing their cost of capital and thereby improving their risk profile.  Business valuation analysts are uniquely positioned to offer advice on risk and devise strategies for corporate clients to reduce risk exposure.  These measures usually lead to improved sales, profitab ...

Spinoff deemed an attempt to hinder and delay debtor’s creditors In December 2012, Tronox Inc. creditors concluded their case to recover at least $14 billion in damages from Anadarko Petroleum Corp’s Kerr-McGee unit over a spin off they claimed drove Tronox into bankruptcy. In 2006, Kerr-McGee spun off part of its business as Tronox before selling itself to Anadarko for $18.4 billion. Tronox, which was prev ...

In 2013, 30 percent of brokered deals and 31 percent of investment bank deals fell through after a Letter of Intent was signed.  According to Pepperdine University’s Graziadio School of Business and Management, valuation gaps in pricing were the number one reason that M&A ventures failed.  This was followed closely by non-fiscal demands from either party that were deemed “unreasonable”.  Interestingly, ...

Everyone knows that in a merger or acquisition deal, time is not a friend.  The longer transfer negotiations drag on without an agreement, the less likely a deal is going to be signed.  This is mostly because over time, both parties are more likely to adopt adversarial positions.  When things slow down, firms begin to assume the successor isn’t making the transaction a priority and may not the right candida ...

Is there a disconnect between client expectations and advisory services? Valuation professionals are uniquely positioned to help clients identify opportunities and third parties that can take them to a proverbial next level. Business valuation is about more than just benchmarking and deriving a defensible conclusion of value, it should entail understanding the value and interplay of governance, risk, relati ...

Earn-out provisions require careful planning This article examines the challenges surrounding earnout provisions, particularly when the subject entity has a short history, but high growth potential, such as in untested technology. Carefully constructed earnout contingencies may help alleviate disagreements between the transaction parties and avoid valuation disparities in the process. ...

Gaining a competitive advantage for the mid- and small-market businesses In response to McKinsey & Company’s published article, “M&A as Competitive Advantage,” Bart Basi and Marcus Renwick explore the usage of M&A as part of a larger strategy, rather than a stand-alone deal. Special focus is given to the benefits relating to mid-market and small, closely held businesses, where the bulk of M& ...

Avoiding problems with an SMLLC This article reviews the benefits of considering the use of F-reorganization in mergers and acquisitions in addition to the more familiar disregarded entities (DEs) or single member limited liability company (SMLLC). F-reorganization can be used to overcome specific challenges, particularly as they relate to an SMLLC. ...

Agreements that work for both death and lifetime transfers Buy/sell agreements are absolutely critical to succession planning, but are too often neglected. Even when they are set up, they are generally structured to be funded by life insurance proceeds, in the event of death, rather than company cash flow. John H. Brown explains why this can be a big mistake and how certified valuation analysts (CVAs) are i ...

The American Institute of Certified Public Accountants (AICPA) reports that in less than five years, 75 percent of all CPAs will be at or very near retirement age. Naturally, there’s an undercurrent of panic in the profession. Small and midsize firm owners are reluctant to sell to large operations, not to mention the pain of watching what they’ve spent a lifetime to create simply disappear. There’s also the ...