12 M&A Days of Christmas

On the first day of Christmas my M&A Advisor gave to me

A Business & Market Strategy Guide

The Business & Market Strategy Guide is the first step a business owner should take when looking to optimize, grow, sell or before any other major changes to the business.  The B&MSG not only gives you a fair market value for your business, it also evaluates the company’s internal and external risks that you can then address to strengthen the business.

On the second day of Christmas my M&A Advisor gave to me

2 Key Opportunity Perspectives 

Blue Sky’s Key Opportunity Assessment is split into two major sections: Organizational Infrastructure and Strategic Planning & Implementation.  The report generates a distinct pattern that tells the story of where your business is excelling, and where it is lagging behind expectations. This survey narrative helps us to uncover the true underlying opportunities, threats, and strengths upon which you can build.  You can take the free assessment here.

On the third day of Christmas my M&A Advisor gave to me

3 Valuation Approaches

There are three approaches analysts use when valuating companies:  

Market Approach – Most commonly heard of, utilizes comparable businesses in the same size range and industry that have sold in the open market to determine a multiple of EBITDA or SDE.

Income Approach – Includes Capitalization of Earnings Method and Discounted Cash Flow Method

Asset Approach – Company assets and liabilities are restated to market value.  This is typically only used for distresses companies with significant fixed assets. 

The choice of which approaches and methodologies to utilize depends on the specific facts and circumstances of the valuation.  

On the fourth day of Christmas my M&A Advisor gave to me

4 Working Capital Analyses

A rigorous working capital analysis could include: TTM average, days in WC, WC as a percentage of revenue, and dollars of working capital. 

On the fifth day of Christmas my M&A Advisor gave to me

5 Advisors on Your Deal Team

Your deal team should include your CPA, Tax Advisor, Financial Advisor, deal Attorney and M&A Advisor.  When the whole team is involved and working in concert, you are able to make the most well informed decisions throughout the entire M&A Process. 

On the sixth day of Christmas my M&A Advisor gave to me

6 Process Stages

There are 6 main stages in the process of selling a business: Engagement Agreement, Marketing, Indication of Interest, Letter of Intent, Due Diligence, and Closing.

On the seventh day of Christmas my M&A Advisor gave to me

7 Points of Cost Structure

The Business & Market Strategy Guide utilizes a cost structure analysis to benchmark your company to its peers.  The cost structure analysis looks at Profit, Wages, Purchases, Depreciation, Marketing, Rent & Utilities, and Other Costs.  This analysis is a 30,000 ft view into the company’s operations. 

On the eighth day of Christmas my M&A Advisor gave to me

8 Benchmarks Tracking

The Business & Market Strategy Guide does a deep dive into company operations by looking at various industry benchmarks.  The eight most relevant benchmarks are shown in the report.  Some of the benchmarks are Profit Before Taxes/Net Worth, Debt/Net Worth, Current Ratio, and Days Receivable. 

On the ninth day of Christmas my M&A Advisor gave to me

9 Months to Sell

It takes on average 9-12 months to sell a business. If you are thinking of selling your business in 2022, now is the time to start engaging with an M&A Advisor! 

On the tenth day of Christmas my M&A Advisor gave to me

10 Top Customer Concentration

If you have clients that account for more than 15% of your annual revenue, this could decrease your overall business value.  High customer concentration can detract buyers.  This is a huge area of risk for a potential buyer.  The Business & Market Strategy Guide looks at your top 10 customers.  If we see a potential concentration issue, we have time to mitigate the risks. 

On the eleventh day of Christmas my M&A Advisor gave to me

11 Metrics Used for the Cap Rate

A lot of information goes into determining the cap rate for each company.  The Cap Rate is utilized in the Capitalization of Earnings Valuation Method and the Discounted Cash Flow Valuation Method.  Some of the metrics that go into the cap rate are: Risk Free Rate, Equity Risk Premium, Beta, long-term growth rate, and business specific risk. 

On the twelfth day of Christmas my M&A Advisor gave to me

12 Months of Trending

The Trailing Twelve Months, TTM, is the most recent 12 months of financial statements.  For example, if you just closed out your October books your TTM would be November 2020 thru October 2021.  This is a rolling picture of how the business is performing.  Each month we drop the oldest statement and add the new month.  This allows M&A Advisors and potential buyers get a picture of what the business is currently doing.  TTM is especially helpful when we into the later months of the year.