Buying & Selling a Company, Culture and Ethics

The Top Reasons Why A Buyer Purchases A Business

Gregory Pearl

The decision to buy a business is probably one of the most important ones that you will ever make. Probably the only other decision that is more important is who you will marry. After buying the business you will be responsible for its success and the well-being and livelihoods of its employees. That’s a lot of responsibility. While there can be a possible financial reward and some satisfaction, the downside can be the assumption of risk, a loss of freedom, and almost certainly a lifestyle change. To better understand what are the reasons people buy businesses, Pepperdine Private Capital Markets…

Continue Reading→

Culture and Ethics, Decision Making

Can You Succeed Being in Business With Your Spouse?

Gregory Pearl

I’ve seen hundreds and hundreds of privately held, family businesses over the years. Many are jointly and successfully run by a husband and wife team. A husband/wife management team adds a layer of complexity over and above the normal issues of business management. The effect of that complexity depends on several factors, that my team and I have noticed. How well does the couple get along outside of the office? Do they cooperate and collaborate on their home life? Their financial life? Does one of the spouses hide information and make important decisions without the others’ knowledge and consent? If…

Continue Reading→

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…

Continue Reading→

Buying & Selling a Company, Exit Planning

Should You Use An Intermediary Or Investment Banker?

Gregory Pearl

What are the situations that the sellers of privately held businesses should turn to intermediaries for help? Is there a company that is too small or big to use an investment banker? How does an intermediary – a business broker or investment banker – add value to the process? The simple answer is almost always. For large companies, an investment banker will add much value and are almost always used. The intermediary/investment banker will do all of the preparation work, the modeling, the valuation, the offering memorandums, and so on. The large companies, despite their resources, almost always outsource all…

Continue Reading→

Buying & Selling a Company, Exit Planning

What Exactly, Is M&A Due Diligence?

Gregory Pearl

The dictionary definition of due diligence is “research and analysis of a company or organization done in preparation for a business transaction.” Basically, a buyer will conduct due diligence before the Purchase Agreement is signed to make sure they are buying what they thought they are buying.  This goes beyond just reviewing documents and contracts. With so much is at stake for the buyer in a M&A transaction, they will want to have all the facts and information available before making a final decision and going ahead. In the due diligence process, the seller will receive a long list of…

Continue Reading→

Buying & Selling a Company, Exit Planning

Pitfalls In Selling An Independent Business Or A Divestiture

Gregory Pearl

Many of the posts on this site involve discussions about selling a business. The last few posts have been about selling a business unit that is part of a larger company.  A divestiture. Selling a business and divestitures have both similarities and differences.  But maybe more similarities than differences. Here are some common pitfalls that apply to both. Not being familiar with the process. Senior managers and equity stakeholders may not recognize the amount of work required to conduct a successful sale or divestiture. The tone for the project must be set early on and those managing the project need…

Continue Reading→

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.…

Continue Reading→