Musings at the End of a Good Year

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This was a good year. Not only was my business good but the satisfaction I received from doing it was rewarding as well. I learned some new things and reinforced older concepts that proved still to be sound. RGA had ten different assignments this year from very early stage companies to ones that have withstood the tests of time. There were three companies that came to me via referral in the early spring. All of them were considering selling and asked us to value the company first, then help them understand what they were in for in the selling process. Two of them decided to go forward and I helped them form their deal teams.

Of these two companies, one will close with Cash in hand this month and the other is entertaining offers “as we speak”. I always tell my clients it takes about a year to sell a company but one of these companies definitely beat that estimate and the other should be coming in right on schedule. BTW, the one that signed and will close this year will receive a surprisingly high multiple -in excess of 9X EBITDA. There is hope of all of us.

What happened to the rest of RGA’s assignments? One company was approached by a buyer almost 2 ½ years ago and I am still helping him through the deal. Some deals take longer than others. Most of the others went through our process, tucked all that information away and are waiting for when they want to exit.

What did I learn this year and was any of it surprising?


Of the ten assignments I had this year, three businesses are about 30 years old and two are 50 years old. All of them are in basic industries. Four out of the five had steady records of earnings and the one that didn’t had some marvelous years in and amongst the stinkers. There is a market for these companies and what they have in common is that they will not be “out-technologied” by anyone. They are “bread and butter” businesses and will be around forever.


You can’t get away from it as much as some would like. It always gets down to the numbers. The one company that will actually sell this year had a CFO and good numbers. The one getting offers did not have a CFO but with the people we put in there to help them along, they are now in pretty good shape numbers-wise. The third company that has not gone to market is still trying to close its 2014 books without a CFO. Numbers do matter and the cleaner they are, the easier it will be to sell.


When you buy real estate it’s all about location, location and location. When you buy companies it’s about management, management and management. My client company that will sell this year has an absentee owner with competent management in place. That became a very powerful selling tool. Most of the time, the owner of the company will leave after the business is sold. Who will take over? All companies should have a succession plan in place all the time. It is no surprise that buyers love good management.


All the clients I work with are so much smarter at the end of the process then they were at the beginning. I can’t think of a situation were more knowledge doesn’t trump less knowledge and what it takes to sell a business is no exception. When the investment banker or broker comes in he is much happier having a client with a realistic approach to value, a general knowledge about how the process is going to work and a working familiarity with the vocabulary of deal making. When a buyer recognizes that the seller is educated as to what is happening, a much deeper respect emerges which will help when the negotiating begins. Preparation adds value to a seller’s business.

As far as preparation is concerned, I hope you are all prepared for a joyous, peaceful and safe holiday season and may all those good feelings carry forward to a prosperous new year.