Due diligence is a term most of us have heard somewhere at some point. But what does it actually mean and how does it play out in specific contexts? At The DVS Group due diligence is an essential part of our dealmaking.
Valuation is calculated. Price is negotiated.
That’s one of the most important things to remember about the process of business valuation.
Business valuation is a topic that goes deep and wide. There are a lot of questions and a lot to learn.
We did the digging for you and created the second in our series of “Ultimate Guides”.
(The first in the series: The Ultimate Guide to EBITDA)
After engaging with the information below, we hope you come out on the other side with a good understanding of why valuation is calculated and price is negotiated.
We talk about EBITDA often in our office. The financial measure is important when valuing a business. Business owners, buyers of businesses and even financial advisors can be at a loss for what EBITDA truly means because it is mainly used in the sale of a business- an event they’ll likely experience once.
There is a heap of questions out there regarding EBITDA. And there is an equal amount of answers. We weeded through the resources out there and found the best answers to your EBITDA questions.
As merger & acquisition professionals, we know that much of our job is education. The work we do day-in and day-out is a little bit complicated, a little bit obscure, and a whole lot different than a business owner’s day-in and day-out work. We value and enjoy our role as educators but sometimes we get frustrated when our clients get tunnel vision and choose to focus on any problem but the one that matters. We find ourselves having the wrong conversation over and over.
Strategic acquisitions have a historical failure rate of 70-90%. That’s a pretty dismal stat.
So, what are you doing wrong? And, more importantly, how do you properly lead your team in an acquisition process when the cards are stacked against you?
Below are five of the most common mistakes we see corporate buyers make when going through the acquisition process. These mistakes can be costly – especially, if the deal dies after you chased it for months. We’ve included reminders of basic, yet vitally important, acquisition principles that will allow you to steer clear of failure and action items to help your team gain momentum in the right direction.
Use the following definitions to get accustomed to the lingo of the Small Business Administration (SBA).
“Which industry is best for
my business acquisition?”
Whether you are a corporate or individual buyer, one of your first questions in the process is likely that question.
Let me tell it to you straight – no industry is the best industry.
And I’m not just saying that so I don’t hurt any of the industries’ feelings.
You may have preferences and some industries may be better than others but, speaking from experience,
there is not a golden ticket industry that will take you to the chocolate factory of ideal businesses.
How does the SBA 7(a) loan program compare to a conventional bank loan?
The Small Business Administration (SBA) has many resources for business owners. Money is one of them – certainly enticing for anyone looking to start, scale or shift directions in their business.
You found the business you want to buy. Congrats!
There are many things that need to happen before a deal closes. One of the first steps you’ll need to take is to write, sign and negotiate a Letter of Intent (LOI) with the seller. An LOI is a non-binding document, meaning there is not a legal requirement for things to play out exactly as the document states.
SBA financing – particularly when used for business acquisition – involves very specific limitations and requirements. Because of its detailed and complex nature, using just any bank for SBA lending would be a mistake. Do your research and pick a bank that has experience and that you trust.
This is not an exhaustive shopping guide but these two tips will get you well on your way to making a solid choice in your SBA lender.
There are two main considerations when thinking about who would and could buy your business.
The first is your management team.
The second is the size of your business.
Why are these the two main considerations?
They’re the first two aspects of the business a buyer will go to in order to evaluate.
Your management team and the size of your business matter to buyers.
The distinction between a financial buyer and a strategic buyer is pretty straightforward.
A financial buyer acquires a company as an investment for returns.
A strategic buyer acquires a company to advance a business plan.
Buying a business is no easy task. When you make an acquisition there are real consequences for you and your entire team.
Before you set off down the road in pursuing an acquisition you should address the following five questions. Questions one and two are particularly vital and often overlooked.
Tombstones in the financial industry- one of those things that is done just because it has always been done.
Tombstones? Yep, tombstones.
Curious about the term? So were we.
Before we did some research, DVS team members took a guess at the reason why the term “tombstone” is the final step in announcing a closed deal.