AMDEL

Years of Experience You Can Trust

WHAT WE DO

Mergers And Acquisitions

Our professional team has been involved in all aspects of buying; selling and restructuring privately held companies on behalf of the business owner. As owners and operators of our own portfolio of companies, we are uniquely positioned to understand both the financial and non-financial aspects of mergers and acquisition transactions.  With our vast network of domestic and international relationships, Amdel can perform comprehensive search assignments for our clients to locate the most appropriate well-financed partner for each specific situation.

Private Placements

For companies that are unable or unwilling to access the public securities market, private financing is a desirable option.  We offer extensive experience marketing, distributing, and negotiating private equity and mezzanine capital placements. We are in touch with the active institutional investors and the terms available in the private markets at any given point in time.

Debt & Equity Funding

For those companies actively seeking to increase or refinance existing bank loans or structure debt financing relating to expansion opportunities, Amdel will provide a full range of investment banking services to satisfy these needs. We prepare complete financial presentations and assist business clients throughout the process of negotiating pricing, terms, and covenants on new borrowings and recapitalization to enhance liquidity and improve cash flow.

Business Valuations

When looking to either buy or sell a business, a comprehensive and objective valuation of the business is critical in determining the price. A valuation of a business is also necessary to determine estate and gift taxes, develop a buy-sell agreement, develop an employee stock ownership plan and determine an appropriate loan collateral amount. Amdel has extensive experience in providing both high level comparable valuations and detailed multi-approach valuation analysis for both publicly and privately held companies

Our Partners

Mergers And Acquisitions

Our professional team has been involved in all aspects of buying; selling and restructuring privately held companies on behalf of the business owner. As owners and operators of our own portfolio of companies, we are uniquely positioned to understand both the financial and non-financial aspects of mergers and acquisition transactions.  With our vast network of domestic and international relationships, Amdel can perform comprehensive search assignments for our clients to locate the most appropriate well-financed partner for each specific situation.

Private Placements

For companies that are unable or unwilling to access the public securities market, private financing is a desirable option.  We offer extensive experience marketing, distributing, and negotiating private equity and mezzanine capital placements. We are in touch with the active institutional investors and the terms available in the private markets at any given point in time.

Debt & Equity Funding

For those companies actively seeking to increase or refinance existing bank loans or structure debt financing relating to expansion opportunities, Amdel will provide a full range of investment banking services to satisfy these needs. We prepare complete financial presentations and assist business clients throughout the process of negotiating pricing, terms, and covenants on new borrowings and recapitalization to enhance liquidity and improve cash flow.

Business Valuations

When looking to either buy or sell a business, a comprehensive and objective valuation of the business is critical in determining the price. A valuation of a business is also necessary to determine estate and gift taxes, develop a buy-sell agreement, develop an employee stock ownership plan and determine an appropriate loan collateral amount. Amdel has extensive experience in providing both high level comparable valuations and detailed multi-approach valuation analysis for both publicly and privately held companies

GROW OR GET OUT:

WHAT ARE YOUR ALTERNATIVES AS A BUSINESS OWNER?

Question 1

Should you continue to grow your company, add new product lines and value-added services, expand geographically, add better IT services and if so…how do you finance this growth?

Question 2

Sell your business outright, or partially if you’d rather stay with the company as it grows

Question 3

If you need debt or capital funding for you business, we can help with that too.

THE ANSWERS CAN BE FOUND AT OUR EXCLUSIVE ONE DAY WORKSHOP, FOR YOU AND YOUR ADVISORS (CPA, Attorney etc.), CONDUCTED ON –SITE FOR YOU ALONE, AT YOUR LOCATION.


Schedule A Free Workshop

For more information call (732) 772 0755 ext. 222

or

Email bill@amdelinc.com with alternative dates you desire, and we will confirm one of those dates for you within 24 hours.

 

 

TOPICS INCLUDE

  • Buying and Selling Businesses
  • Industry Consolidations and Roll-Ups.
  • Recapitalizations, Equity Groups and Becoming a “Platform Company.
  • Valuing Your Company to Determine True Market Worth.
  • Hidden Assets Within your Company.
  • How to Determine if Your Company is Properly Positioned to Sell.
  • Understanding What Buyers and Investors Look for.
  • The Current Trends in The Merger and Acquisition market.
  • How to Maximize the Selling Price of Your Business.
  • Reviewing Your Business & Personal Objectives.

THE 10 STEPS

FOR MAXIMIZING SHAREHOLDER VALUE

The following describes Amdel’s Merger & Acquisition Ten Step Process designed to maximize shareholder value by obtaining the best price and deal structure for our clients:

Step One: Assessment of Company Value

Determination of the Fair Market Value of the client’s company in accordance with Revenue Ruling 59-60 and other guidelines for the valuation of privately held companies (Not disclosed to interested buyers).

Step Two: Strategic Business Review

On-site review of the client company’s organization (Completed in conjunction with Step One).

Step Three: Preparation of Confidential Strategic Business Review Report & One Page Confidential Profile

A comprehensive document, The Confidential Strategic Business Review Report, is prepared which describes the client company in detail. Submitted to interested buyers only upon receipt of an endorsed Non-Disclosure Agreement.

Preparation of a one-page Confidential Profile, which highlights the acquisition opportunity without disclosing the name and location of the client company. Used during the initial Buyer/Investor Contact Phase.

Step Four: Targeted Buyer Search

A Targeted Buyer Search is performed utilizing Amdel’s database of 3,500 active buyers and 10,000 Private Equity Groups and Investment Funds. This search is then filtered and modified to create a list of potential Synergistic Buyers, Highly Capitalized Buyers, also known as Target Buyers.

Step Five: Initial Buyer Contact & Database Placement

Targeted Buyers are directly contacted by Amdel Associates, and receive the client’s Confidential Profile and a Confidentiality Agreement.

Step Six: Interested Buyer Contact & Followup

Upon receipt of a signed Confidentiality Agreement, The Confidential Strategic Business Review Report is sent to interested buyers/investors.

Step Seven: Limited Auction Price Maximization

Amdel follows up with interested buyers and obtains indications of interest from potential purchasers using an auction-based approach.

Amdel obtains a Letter of Intent from buyers submitting the highest purchase price, and conducts a credibility review and verification of financial qualification of interested buyers.

Step Eight: Buyer Visit Coordination

Amdel Associates counsels client relative to pending buyer visit and provides guidance relative to preparation of Buyer Visit Agenda & Meeting Objectives (management presentation, facilities tour, additional documentation required, buyer-client interface & discussion guidelines and other relevant details to ensure a positive image and successful meeting).

Step Nine: Final Review of Optimum Letter of Intent

Amdel will review with client and his advisors, CPA, Attorney etc. the best buyer offers for, comparative purposes, and then conduct final negotiations with the chosen buyer to obtain the most favorable price and terms. The client is not obligated to accept any offer presented.

Fact 1

Should you continue to grow your company, add new product lines and value-added services, expand geographically, add better IT services and if so…how do you finance this growth?

TIME LINE

Steps one through five of the Merger and Acquisition Process can generally be completed within 30 to 45 days, depending on the client company’s scope of operations.

The time to complete steps six through ten, ending with the successful closing of the transaction, is in the range of four to eight months, depending on whether the buyer is based in the United States, or is an International buyer.

Buyer Identification
Industry
MINIMUM
Gross Sales
MINIMUM
Company EBITDA
(Earnings Before Interest,
Taxes, Depreciation, Amortization)
Location
Private Equity Group 1 
Healthcare
$70,000,000
$6,000,000
Northeast
Contact Buyer
Private Equity Group 2
Specialty Manufacturing
$45,000,000
$3,000,000
West Coast
Contact Buyer

AMDEL

Years of Experience You Can TrustOur experience over the past 30  years tells us that there are 7 types of buyers for most businesses .

The primary questions that you, the seller of a business, needs to answer are:

• Which buyer is right for you?

• Who will give you the most total value for the sale of your business ? 

7 Types of Business Buyers

Click on the tabs below to reveal their characteristics and some areas of Caution

Type 1: Strategic Buyers

Add, diversify, or expand into a new business

Expand geographically or looking for synergistic fit (products & services)

Consolidation of functions typical (accounting, purchasing, human resources, etc.)

Owner may not be required to stay unless “Earn-out Deal Structure.”

Caution: Anticipate some of your people will be made redundant

Type 3: Private Investment Groups - Equity Funds

Looking for synergistic fit with their portfolio companies if target company meets their investment criteria (revenues, EBITDA, etc.)

Looking for new “Platform Company” for eventual add-on acquisitions

Transaction will typically be a “recapitalization.” 70% to 80% equity in company with upside 3 to 5 years out through an IPO or sale

Not interested in day-to-day operations

Will provide strategic direction at the Board level

Caution: Requires strong management team in place

Type 5: Downsized Executive

Could be a good alternative if he has significant cash for down payment and company lacks a strong management team

Evaluate his entrepreneurial skills vs. big company mentality.  He may not be a “Hands On” person if this is needed

Consider a “Phased” transaction

Buys percentage of equity to learn business with option to buy remainder of shares

Caution: Avoid risk of taking note and substantial earn-out paid out of profits. You could get the company back

Type 7: Competitors

Can typically expect consolidation of functions and people made redundant

Caution: Confidentiality extremely important in discussions – avoid word “Leaking” on street that you are for sale or in trouble – negative impact with customers

Caution: Competitor has valuable information if deal does not close (customer list, pricing strategies, etc.)

Caution: May not maximize value compared to other buyers

Type 2: Financial Buyers

Looking for consistent or higher earnings – increased earnings per share if buyer is a public company

Looking for growth opportunities and possible add-on acquisitions

Exit strategy – sell company or take public

Management Team expected to stay – few if any people made redundant. Owner can exit after earn out if management team is strong.

Caution: Looking at pure economics of the deal

Type 4: Industry Consolidators

Typically use the IPO “roll-up” as a strategy and then add-on acquisitions

Could be an equity group or a dominate company in the industry

The question – is bigger better if you are in the same geographic area with the other companies in the “Roll-up”;  and have very little synergy with the other companies?

Owner/sellers can anticipate a small amount of money upfront with company (buyer’s public) stock as major percentage of purchase price

Not an exit strategy unless a strong management team in place

Caution: Most IPO “roll-ups” in the 1990’s performed poorly

Caution: Typically 144 Restricted Stock and may have to wait in a long line to sell stock

Type 6: Management & Employees

Could be a good deal if a LBO-Leveraged ESOP (Employee Stock Ownership Plan) strategy is used

Don’t waste time or share financial and confidential information until they “HAVE” a commitment to finance the transaction – not “IF” they can arrange the financing

Caution: If leveraged ESOP is used, be prepared to pledge your proceeds from the sale (QRP) as collateral for their loan

FREQUENTLY ASKED QUESTIONS

When is the best time to sell my business?

If you are like most business owners, you have devoted many years of hard work, sweat, and emotional dedication to your business.  Thus you are not only selling a business, but a lifetime.

There are several factors that you will consider when deciding to sell; including  personal , business and financial considerations.

Your Personal Considerations should include:

Why do you want to sell ?

Can you give up your “baby” ?

How long would you be willing to stay with your business after the sale ?

Other interests – what will you do after you sell your business ?

What is your lowest “Happy Number?” Would you take a check for this amount and leave?

Your health

Your age

Your family dynamics – do you have children that desire to transition into owner/operators of your business ?

Your estate planning needs.

What are your economic needs after your business is sold ?

Your “Financial Security” needs ?

Your financial needs to live the “Life Style” that you choose ?

Your capital needs for other investment opportunities that you wish to pursue ? 

Only you can figure out if selling your business fulfills your personal needs.

Your Business  Considerations are more objective and should include:

Is the timing right? Is this a good time to sell ?

Is your company properly positioned ?

Is there a management team to ensure continuity of operations ?

What are the risks associated with keeping your business ?

What changes need to be made to your business to enhance value ?

Do you have the time and knowledge to complete the selling process ? (8 to 14 month process with  500 to 600 hours of meetings – start to finish )

Disruption – can you afford to take this time away from managing and running the company?

Do your present professional advisors (CPA, attorney, etc.) have experience in merger & acquisition transactions and can they help?

Will you need to invest more capital, both now and in the future, to grow your business ?

The welfare of your employees and key executives after the sale ?

If all of the above considerations have led you to the decision to sell your, then our 30 years of experience has taught us one thing :

The best time to sell a business is when it is growing in both revenue and earnings, and is forecast to continue that growth for at least the next 3 to 5 five years.

 

REMEMBER :

The highest cash price that you will receive for the sale of your business is paid by a buyer that views your business as a growing entity , both now and far into the future !

ation.

What selling price do I place on my business ?

There is no “Formula” that exists for the valuation of a business which is universally applicable or acceptable . Several IRS rulings have established that

“No general formula may be given that is applicable to the many different valuation situations arising in the valuation of such stock”

Other IRS rulings establish the need to include market research as a vital element of any evaluation:

“Valuation…is, in essence a prophecy as to the future and must be based on facts available at the required date of appraisal”.

The ultimate value, or selling price ,  of a closely held business is not based on any one , two or three factors. It is instead based on all relevant facts.

The range of value for a closely held business is influenced by:

1. Primary Economic Return to the buyer;

This approach combines the residual value of all assets, the discounted future cash flow, and the dividend paying capacity of the closely held business and establishes the primary economic return to the buyer for their acquisition investment.

In addition, to discounted future cash flow, the buyer of a business will normally be acquiring current assets such as accounts receivable and inventory, plus fixed assets such as machinery and equipment , furniture and fixtures, rolling stock, etc. The residual value of these current and fixed assets could represent additional return to the buyer. 

Recasting Financials increases Primary Economic valuation :

Basically , it is the future of a company that the seller is selling, and the buyer is buying . Accordingly, the primary objective of the Business Valuation Process for the seller is to maximize the selling price by examining the company’s historic financial performance, and conduct financial recasting,  to establish the base of a salable and realistic future performance. 

Privately held companies keep reported profits- and thus taxes- as low as possible . This practice is both normal, fully compliant with the tax code,  and entirely proper.

“ Anyone may so arrange his affairs that his taxes shall be as low as possible. He is not bound to choose the pattern which will best pay the Treasury. There is not even a patriotic duty to increase one’s taxes. “

Thus to gage a company’s true earnings history , income statements should be recast to convey a realistic accounting of what earnings would have been had the principal objective of the business owner be one of creating the highest profits possible, without minimizing taxes. manner . Typically 3 to five years of historic analysis of profit and loss is used. In assessing historic financial performance , Earnings Before Interest, Depreciation, and Taxes(E.B.I.D.T) is an important measure of financial performance.

Along with income statements, balance sheets must be recast to accurately reflect the likely current market value of a company’s assets and liabilities. Depreciation , inappropriate inventory valuation techniques, and inflation are among the factors which can cause market value to differ from book value.

2. Synergistic Factors

This approach looks at influences to valuation that include factors that are highly attractive to a specific  type of buyer. They constitute the foundation of a synergistic valuation in which secondary influences to value may include:

  • New Market entry – where a customer of the business represents a situational off balance sheet asset for the buyer.
  • Growth in existing markets – where a customer base plus the eliminatin of competition represents a situational off balance sheet asset for the buyer.
  • Add-on products or services for existing clients of the buyer.
  • Financial consideratins such as improved Return On Sales, which often occurs when, for example,  a manufacturer acquires a service company.

Buyers that include Synergistic factors in their valuation of the selling business will often pay a premium over and above what Pure Economic buyers are willing to pay. But even synergistic buyers must consider the ultimate economics of their acquisition. 

Who would be the best buyer for my business?

Our experience over the past 30  years tells us that there are 7 types of buyers for most businesses .

The primary questions that you, the seller of a business, needs to answer are:

Which buyer is right for you?

Who will give you the most total value for the sale of your business ? 

Below is a list of the 7 types of business buyers. Click on them to reveal their characteristics; and some areas of caution .

Strategic Buyers

Add, diversify, or expand into a new business

Expand geographically or looking for synergistic fit (products & services)

Consolidation of functions typical (accounting, purchasing, human resources, etc.)

Owner may not be required to stay unless “Earn-out Deal Structure.”

Caution: Anticipate some of your people will be made redundant

Financial Buyers

Looking for consistent or higher earnings – increased earnings per share if buyer is a public company

Looking for growth opportunities and possible add-on acquisitions

Exit strategy – sell company or take public

Management Team expected to stay – few if any people made redundant. Owner can exit after earn out if management team is strong.

Caution: Looking at pure economics of the deal

Private Investment Groups – Equity Funds

Looking for synergistic fit with their portfolio companies if target company meets their investment criteria (revenues, EBITDA, etc.)

Looking for new “Platform Company” for eventual add-on acquisitions

Transaction will typically be a “recapitalization.” 70% to 80% equity in company with upside 3 to 5 years out through an IPO or sale

Not interested in day-to-day operations

Will provide strategic direction at the Board level

Caution: Want strong management team in place

Industry consolidators

Typically use the IPO “roll-up” as a strategy and then add-on acquisitions

Could be an equity group or a dominate company in the industry

The question – is bigger better if you are in the same geographic area with the other companies in the “Roll-up” and have very little synergism with the other companies?

Owner/sellers can anticipate a small amount of money upfront with company (buyer’s public) stock as major percentage of purchase price

Not an exit strategy unless a strong management team in place

Caution: Most IPO “roll-ups” in the 1990’s performed poorly

Caution: Typically 144 Restricted Stock and may have to wait in a long line to sell stock

Downsized Executive

Could be a good alternative if he has significant cash for down payment and company lacks a strong management team

Evaluate his entrepreneurial skills vs. big company mentality. He  may not be a “Hands On” person if this is needed

Consider a “Phased” transaction

Buys percentage of equity to learn business with option to buy remainder of shares

Caution: Avoid risk of taking note and substantial earn-out paid out of profits. You could get the company back

Management & employees

Could be a good deal if a LBO-Leveraged ESOP (Employee Stock Ownership Plan) strategy is used

Don’t waste time or share financial and confidential information until they “HAVE” a commitment to finance the transaction – not “IF” they can arrange the financing

Caution: If leveraged ESOP is used, be prepared to pledge your proceeds from the sale (QRP) as collateral for their loan

Competitors

Can typically expect consolidation of functions and people made redundant

Caution: May not maximize value compared to other buyers

Caution: Confidentiality extremely important in discussions – avoid word “Leaking” on street that you are for sale or in trouble – negative impact with customers

Caution: Competitor has valuable information if deal does not close (customer list, pricing strategies, etc.)

What are the Deal Terms and Structures of selling a business ?

In any transaction involving the the sale of a privately held business, it is usually the seller that ultimately dictates the price that he will accept,  but it is the buyer that dictates the terms of the deal.

Thus , if the buyer accepts your selling price, then you will most likely need to accept his payment terms or structure.

Our experience over 30 years has taught us that most business sale transactions take the form of a structure that can include all, or some, of a combination of cash, stock, notes, and earn out.

Let’s look at some pros and cons of  each component of a total deal structure:

All cash ?

Pro: Clean break from company (invest net proceeds)

Con Substantial Tax Consequences

Installment Sale ?

A pay out of the purchase price over pre negotiated annual installments.

Pro: Tax bill spread out and buyer pays interest on amount due

Con: Buyer may not be able to pay remainder due in future years

Buyer Note ?

The payment of the purchase price to the seller over a period of time, including interest, at a pre negotiated interest rate. Buyer gives either a  personal guaranty (best) , or corporate only guaranty , to the seller 

Pro: Principal and market interest payments over period of years.

Con: Buyer may default on principal or interest payments in future.

Buyer’s stock ?

Pro No tax on stock until sold- in most cases

Pro: Participate in growth of buyer’s company

Con: Stock could decrease in value

Con: May be restricted stock (public company) and take time to sell

Con: Illiquid market (private company) – no outlet for sale of stock 

Earn Out ?

Involves some form of payment upon deal closing, with additional payment in the future (2 to 3 years) upon the achievement of mutually agreed to performance objectives.

Pro: Can be a benefit to the seller if  future company  performance is anticipated to be very good in the next few years.

Con: Seller needs to stay active in the business to ensure performance objectives are met in order to realize the benefit.

Executive Management and/or Consulting Contract ?

An arrangement that compensates the seller of the business for his services as a member of  Executive Management or as a consultant to the business, for a specified period of time.

Pro: Seller participates in managing the future success of business.

Pro: Increases probability that Installment sale  and Buyer Note payments will be fulfilled in future.

Con: Seller may not enjoy, or adjust to,  working with new “owner” of the company. 

Based on your personal and financial objectives , as well as your current position in life, only you can decide what combination of deal structure works best for you.