02 Sep Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Business Transition Academy entitled “How to Find the Right Buyer for Your Business, Part 1” discusses how business owners can properly prepare to sell their business and how to decide who the right buyer is. Some think it’s all about who will write the biggest check, but there’s more to it.
The first consideration when it comes to choosing a buyer is whether you plan to sell internally or externally, and what options exist within each of these strategies. As you consider potential buyers, it is important to consider how each can affect value, fees, taxes, the business and you.
Internal buyers may include a manager, employee, family member or shareholder.
External buyers may include a customer, competitor, supplier, financial buyer or private equity group.
A recent blog post from Viking Mergers & Acquisitions entitled “What is the Effect of COVID-19 on Business Valuations?” discusses how COVID-19 can impact business valuations in different ways. With the economic effects of COVID-19, this question is top of mind for many business owners, especially those who plan to sell in the next few years.
One consideration is the timing of the business valuation relative to when COVID-19 was considered known or knowable in the U.S. Valuations dated prior to when COVID-19 was known or knowable may not be impacted at all, whereas valuations dated after are more likely to be impacted.
Another consideration is if COVID-19 is considered a subsequent event, meaning even if the valuation was dated prior to when COVID-19 was known or knowable there may need to be explanation of the effects of COVID-19 since the valuation.
It is also important to consider the valuation method being used. The Discounted Cash Flow method may allow for year-by-year modeling to show how the business will normalize over time. The Market method may require analysis and adjustments of similar past transactions relative to COVID-19.
A recent article from Chief Executive entitled “M&A During Covid-19: Another “New Normal” or Back to Business?” discusses the impact of COVID-19 on mergers and acquisitions, and what CEOs can do about it.
COVID-19 has brought great economic uncertainty, negatively impacting valuations and making it very difficult to prepare accurate financial projections. M&A activity saw a sudden drop in activity in the early months of the pandemic, however deal activity has started to slowly pick back up as companies with cash have begun to make moves.
CEOs can respond to these shifts by making sure communication with key shareholders is strong, assessing corporate preparedness, evaluating ways to bridge gaps in value, and expecting a longer deal process.