Private Company Capital Newsletter from Brereton, Hanley & Co.

Private Company Capital Newsletter

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Article Archive

March 28, 2005

I. ANNUAL VALUATION MULTIPLES: Multiples paid in 2004 at an all-time high, all industries rise. The best kept secret last year and this is that the average price (multiple of EBIT) paid for privately-held companies valued between $5 million to $250 million is now 7x. Read this 4-page report based on IMAP's proprietary transaction data.

II. 3 REASONS BUSINESS OWNERS CAN'T RETIRE WHEN THEY WANT TO: Making the shift from maximizing income to maximizing business value can be tricky. A "heads-up" on what sacrifices you should make now in light of the projected transaction value, tax liability and re-investment income prospects is offered in this 2-page article. Learn more.

III. INSIDE THE MYSTERIOUS WORLD OF PRIVATE EQUITY GROUPS & RE-CAPS: "PEGs" are calling everyone in an effort to invest their money. The number of PEGs formed to invest in or acquire mature, middle-market companies has exploded 10x in the last decade. Many business owners only want partial liquidity today, yet want to remain with and grow the business (perhaps with selected acquisitions of their competitors) for 3-5 more years, but with less risk. What is the PEG's approach and goals and do they overlap with your's? Learn more.

IV. CONTROLLING YOUR VALUE: Top ways to immediately increase value. Obviously, you should always be trying to enhance the value of your firm. However, when it comes to a potential sale, there are additional considerations you must take to ensure that your present and future value is maximized. Before you pursue a buyer, you should have a reasonable idea of how a third party will value your business. Many owners know the "rules of thumb" common in their industries. But these only provide a rough approximation of value, and can be misleading for a business whose financial parameters do not line up with those of its competitors. Value is a dynamic concept, and as a seller you have great control over it. Here are the top seven ways in which you can increase it . . .

May 6, 2005

I. TURNING AROUND THE FAMILY BUSINESS: What makes a good candidate for a turnaround of the family business and what are the steps in the "work-out" process? Read this article for the full story.

II. HOW BABY BOOMER RETIREMENT MAY NEGATIVELY AFFECT YOUR COMPANY'S VALUE: Check out one of the most amazing graphs you ever seen by reading this article about how the 77 million million Baby Boomers entering retirement (and presumably selling their businesses) could depress private company valuations.

III. THE STRATEGIC PLANNING IMPERATIVE: Running the business through the rear-view mirror or the windshield? Why it's important to do forward strategic planning if you plan to access capital or prepare for an M&A transaction and why who facilitates this planning is important. Read how strategic planning can lubricate your liquidity event.

IV. SELLER'S COUNTDOWN: If you're thinking about selling your business in the next 3-5 years, check out this 24 month "countdown" of what to do to be prepared.

July 12, 2005

I.  GROWING THROUGH ACQUISITIONS: Despite recent improved economic conditions many companies are still struggling to reach their growth aspirations organically. Recent research suggests that acquisition-led strategies can be value creating in any industry, and are essential in some. Read this article for the full story.  Go to article

II. 2005 MID-YEAR UPDATE: M&A activity continued to be strong in the first half of 2005. According to preliminary figures from Thomson Financial, the total value of announced transactions increased approximately $81.4 billion, or 17%, to $548.3 billion for the first six months of 2005, versus $466.9 billion for the same period in 2004. Go to article

III. M&A MULTIPLES: A KEY TO VALUE OR A DISTRACTION?:  During negotiations, relying too heavily on reported multiples can do a disservice to everyone.  This article explores some of the subtleties with reported multiples and offers ideas on how to properly position multiples in negotiations. Go to article

IV. THE CURRENT TAX ENVIRONMENT: A GIFT TO PRIVATE BUSINESS OWNERS?:  The new tax billed passed in 2003 marks the first time in at least 60 years that we have enjoyed a capital gains tax rate below 20%. In addition, it is the first time that dividends are taxed at rates below income tax rates. What does this mean to the after tax proceeds of the sale of your business? Go to article