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Financing & Valuation of a Merger or Acquisition

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M&A Financing: Differences between Buyouts and Majority and Minority Investments

When Buyers make acquisitions in a mergers and acquisitions (M&A) deal, those purchases can take the form of a complete, 100-percent buyout (mainly for PE firms), a majority investment, or even a minority [more…]

M&A Financing: Choose an Asset or a Stock Deal

One often-overlooked area of M&A is the question of what exactly Buyer is buying. Companies themselves aren’t really sold, per se; instead, Buyer is acquiring either certain assets of the company [more…]

Mergers and Acquisitions: Financing a Problem Company

Not all companies go up for sale in the rosiest of circumstances. Sometimes, Sellers need to unload debt-laden or money-losing businesses in an M&A deal. Working out financing for these so-called problem [more…]

Finance an M&A Deal: Determine If a Buyer Is Legitimate

Sellers, take some time to determine whether a Buyer is a legitimate Buyer and not just dabbling in mergers and acquisitions. If Buyer is a publicly listed company, its financial statements are publicly [more…]

M&A Financing: Examine the All-Important EBITDA

EBITDA is a key M&A metric. Heck, it’s a key metric in all things business. EBITDA is a measure of a company’s profitability for doing what that company is supposed to do: selling a product or service. [more…]

Computing Buyers’ Return in an M&A Deal

Make no mistake: Buyers don’t enter into an M&A transaction because of feel-good business-book babble like “the right fit” and “synergy.” They make acquisitions for one simple reason: profit. Besides EBITDA [more…]

M&A Valuation: What’s a Company Worth?

Valuation (the price one party will pay another for a business in an M&A transaction) is based on what you can negotiate. And, as with most negotiations, valuation is more art than science. In fact, some [more…]

M&A Valuation: Less Non-Standard Ways of Calculating Company Worth

Five times EBITDA is an M&A industry standard for company valuation. Nobody knows where 5X came from, but all you need to know is that it’s a de facto standard. In good or bad times, that multiple may [more…]

M&A Valuation: Measures of Return

Buyers in an M&A process utilize various measurements for their investments, or at least they should. A wise investor weighs the price of the investment against the expected return and then compares that [more…]

M&A Valuation: How a Seller Can Create a Compelling Valuation

The seller in an M&A deal must make the case for valuation. Lucky for you Sellers, here’s a four-pronged attack that, when executed properly, has fetched a figure higher than the usual upper limit of 6X [more…]

How to Bridge an M&A Valuation Gap

Disagreements about the price of the company are sure to pop up in any M&A process. But you have a few options for reaching a valuation agreement, including structuring an earn-out, using a note, accepting [more…]

M&A Financing: Paying for a Company with Stock

In certain circumstances, Buyer may want to use stock to pay for all or part of an M&A deal. And in certain circumstances, Seller may be wise to accept that stock, though she should speak with her tax [more…]

Finance an M&A Deal: Buyer Uses His Own Cash

The most obvious source of capital for an M&A deal is for Buyer to use his own money. The benefits are obvious: a Buyer using his own money has total control over the situation. A third-party lender usually [more…]

Finance an M&A Deal: Buyer Seeks Financial Help from Seller

Seller financing — why would a Seller do such a thing? Oh, that’s right: to help get am M&A deal done! A Seller willing to provide financing to a Buyer gains the benefit of being able to move on to the [more…]

Types of Debt Used in M&A Deals

Debt can help Buyer make an acquisition by leveraging Buyer’s existing capital. The following covers the different types of debt common in M&A, so dig in! [more…]

M&A Investors: Institutions versus Individuals

Most often, Buyers of middle and lower middle market companies in an M&A transaction are institutions (PE firms or strategic Buyers). Individuals can certainly buy these companies, but due to the size [more…]

M&A Investors: Private Equity (PE) Firms

One possible type of buyer in an M&A transaction is a Private Equity (PE) firm. A private equity firm (sometimes known as a private equity fund) is a pool of money looking to invest in or to buy companies [more…]

M&A Investors: Common Types of Private Equity (PE) Firms

A private equity (PE) firm is a pool of money looking to invest in or to buy companies. Not all PE firms in the M&A business are the same. The following will clue you in on a few common types of PE firms [more…]

M&A Investors: What’s the Difference between Private Equity and Venture Capital?

From an M&A perspective, private equity (PE) firms differ from their more famous cousins, venture capital (VC) funds, in terms of the types of investment each fund pursues. PE firms typically invest in [more…]

M&A Investors: What’s a Strategic Buyer?

Strategic Buyer is simply a fancy term for corporate Buyer. Companies make acquisitions for a slew of reasons: growth, new markets, new products, buying out a competitor, and more. Strategic Buyers often [more…]

M&A Buying: Determine the Value of a Troubled Company

In addition to considering the nature of the target’s downturn (macro-economic, managerial, or changes in customer preferences, a wise Buyer also looks at a few other key considerations when determining [more…]

M&A Company Valuation: Trim Staff and Cut Dead Weight

If you want to maximize the company’s valuation before heading in to an M&A deal, you need to maximize the company’s profits. One way is to reduce and eliminate wasteful expenditures, and because the largest [more…]

Banker Involvement in M&A Deals

The decision to sell a business means the owner eventually has to tell his banker of the M&A transaction or pending transaction. The first step is to review the loan covenants for any guidance as to when [more…]

M&A Offering Document Thesis: Ways to Present Company Value to a Buyer

When writing an offering document, you need to include an argument for why the M&A deal is a good choice for the Buyer. One of the following thesis options might suit your offer: [more…]

What Add Backs Are Legitimate in an M&A Deal?

An add back, for the uninitiated in M&A numbers, is an expense that is added back to the profits (most often earnings before interest, taxes, depreciation, and amortization, or EBITDA) of the business [more…]

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