Category: Exit Planning

Alternative Investments, Buying & Selling a Company, Exit Planning

Business Unit Divestiture Deal Structure: Whatever It Takes

Gregory Pearl

When a company is looking to divest one of its units, the best acquirer is a strategic buyer with lots of cash. Wait, that seems to be a terrific buyer for almost any type of business! There are other alternatives, of course.  Each approach has its positives and negatives. Private equity firms are often good places to shop a business that is for sale. Assuming that business is large enough and without too many problems.  Private equity firms tend to be more demanding in what they are buying than strategic industry buyers. They are more demanding in their due diligence.…

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Alternative Investments, Decision Making, Exit Planning

Business Unit Divestitures: Unpleasant But Often Necessary

Gregory Pearl

It is common for larger companies to divest units that are underperforming or otherwise do not meet strategic goals. This practice is likely to increase. Whether the M&A market is hot or not, divestitures are a challenging activity requiring strong support from equity stakeholders and management. The divestiture activity should not be treated as an inferior activity to acquisitions. Divestitures have its own set of challenges. Confidentiality needs to be maintained and this may harm both the seller and the buyer. The selling company may not adequately understand what is going on in the unit being sold. For the seller,…

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Exit Planning, Tax

Life Insurance Can Play a Role In Both An Exit Plan and an Estate Plan

Gregory Pearl

Most people have an aversion to life insurance salespeople, they can be aggressive and often unpleasant. But don’t let that negative sales culture prevent you from recognizing the role that life insurance can play in your estate and exit planning. But even if you have a fairly modest business and estate, life insurance can play an important role. Of course, life insurance can increase the size of your estate should you pass early. And for young families in need of a breadwinner, life insurance can provide invaluable financial protection in the event of premature death. In large estates (businesses) life…

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Buying & Selling a Company, Decision Making, Exit Planning

Speed Is Your Friend: Keep The Transaction Moving Forward

Gregory Pearl

There are many things that can slow down and prevent a business from being sold. But time delays are probably the most likely reason a deal will not occur. There are other possible reasons, of course, but time delays are a big one. The more time that goes by, the more likely the parties involved (read buyer) will become tired and frustrated. As time goes by, the seller is in a condition of uncertainty. Expenses will increase and other potential buyers will be missed.  Eventually, one side or the other will just give up and move on. The length of…

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Alternative Investments, Buying & Selling a Company, Exit Planning

Are Private Equity Groups for You?

Gregory Pearl

In recent decades more and more capital has flowed into the alternative investment category of private equity or Private Equity Groups (PEGs). Maybe because of this higher profile, we get asked repeatedly by business owners in the lower middle market if they can sell to a private equity group. I’ll say this right up front – most likely the answer is no. Private equity investments have traditionally been focused on large companies, the so-called middle market and especially the lower middle market have been ignored. That has changed in recent years as more capital has entered this investment category.  Seeking…

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Buying & Selling a Company, Decision Making, Exit Planning

The Bugaboo of Confidentiality

Gregory Pearl

Business owners are rightly concerned that if word gets out that their company is for sale, vendors and customers might get spooked. And the business performance will be hurt thereby hurting the company’s value. On the other hand, “you can’t sell anything if you can’t talk to anyone.” So there must be a happy medium. Where is that? But first, remember that almost always a prospective buyer will need to sign a confidentiality agreement issued by the seller. This is standard and binding on the buyer. Even with an agreement, there are steps that can be taken to help keep…

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Buying & Selling a Company, Decision Making, Exit Planning

Why Confidentiality Is Important

Gregory Pearl

Selling a business is a strange mix of advertising – communicating – that the business is for sale and keeping the whole process confidential. Confidentiality is very important. If word gets out that the business is for sale, people will start to question if they can rely on it. The whole uncertainty surrounding a sale may hurt business performance, thereby resulting in a reduction in the sales price. The conclusion: To get the maximum amount for your business in a sale – keep everything confidential. Here are some of the problems that can arise if word gets out that your…

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