21 Oct 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 Axial entitled “Creating Favorable Deal Structures in Times of Uncertainty” discusses how COVID-19 has impacted the M&A market and how favorable transactions can be achieved amidst economic uncertainties.
The impacts of COVID-19 include:
- When it comes to valuation, COVID-19 is now a risk to consider.
- It is becoming a buyers’ market.
- Buyers are still looking, but not just for anything, they want real opportunities.
- Buyers will take action to protect their downside risk.
- Companies not impacted by COVID-19 may receive a higher valuation.
- Risk is magnified and due diligence is more thorough.
Favorable transactions can be achieved by:
- Sellers being more flexible and creative in allocating risk.
- Sellers ensuring business systems and financials are in order.
- Sellers being well-prepared for due diligence.
A recent blog post from Transworld Business Advisors entitled “Valuations in Small Companies: Why They’re Important & How to Increase the Value of Your Business” explores the age-old question “How much is my business worth?” Before it’s time to sell, a valuation can tell you how much your business is worth and can identify ways to make it worth more.
A business valuation helps identify what makes your business profitable and what makes your business lose money. By identifying these factors, you can make improvements that ultimately make your business worth more when it comes time to sell.
Value drivers include predictability, uniqueness, recurring revenue, growth, location, diversity, organized financials and goodwill.
A recent blog post from Exit Strategies Group entitled “Get to know your buyer: Conducting Seller Due Diligence” discusses due diligence from the seller perspective. Due diligence is often addressed in regards to what the buyer will be looking at. However, it is important for the seller to conduct due diligence as well.
Areas that sellers may want to focus on during due diligence include:
- Buyer’s financial ability to purchase the business
- Buyer’s legal standing to own the business
- Buyer’s character and business acumen to successfully run the business post-sale
Conducting seller due diligence can help reduce risk in the transaction and foster continued success of the business after the sale.