Why Renaissance M&A?
We would ask the same question. Let’s grab a coffee to discuss.
What’s my business worth?
That’s not an easy question to answer without sitting down for a discussion and then a review of your specific information. Values can vary depending on many factors including company stage, size, industry, concentration issues, revenue/earnings trends, synergies, buyer profile, etc. In our experience, the majority of later-stage small to medium sized businesses (companies under $25M in enterprise value) will sell in the 3x to 6x EBITDA range. Because business valuation is complex and a key consideration before deciding to sell, the first step in our process is to prepare a preliminary value estimate so that expectations are aligned and a clear understanding of value is determined before going to market.
How long is your process?
Our go-to-market process will typically take between 6 and 9 months. The process length is influenced by transaction complexity, buyer motivation, or if significant ‘bumps’ are encountered.
What kind of information do you need from me?
We typically collect the following preliminary information to assist in gaining an understanding of your business, its recent performance and a high level estimate of potential market value, including:
- Last 3 years financial statements and tax returns
- In-house YTD (as current as available)
- Forecast (if already prepared)
- Corporate chart
- Details on any ‘normalizations’ – i.e. salaries above or below market, rent above or below market, personal expenses run through the business, non-recurring revenues or expenses, etc.
When we begin our process, the list of required information gets considerably longer as we work to populate an electronic data-room that will be used by potential buyers and their advisors to access your information securely. During the later stages of our process, buyers will invariably request additional due diligence information that will be added to the data-room. It is not unusual for several hundred due diligence items to be required over the course of a full sale process.
What is your experience/background in mergers and acquisitions?
Check out our bios and you will see that our team at Renaissance has decades of M&A experience across a wide variety of industries along with the academic credentials one would expect from a professional M&A practice. We are a team with big firm caliber focused on providing value to our small to mid-market clients. Please refer to our transactions to see a few deals completed.
How do you find buyers?
We find buyers by building a purchaser roster specific to suit each engagement we are working on. Buyer categories include individual buyers, family offices, private equity groups and strategic purchasers.
For a smaller, local business, we will generally approach individual buyers, family offices and smaller strategic purchasers subject to the vendor’s preferences. As the client we are working with gets larger, they tend to get out of the reach of individual buyers who are replaced by private equity groups and larger strategics.
Individual buyers, regional family offices and private equity groups are sourced through our business network. A larger network of purchasers is established via our international affiliation (see msiglobal.org) and through the use of platform sites like Pitchbook and Capital IQ, which allow us to find high potential purchasers from around the world that fit specific criteria.
Where can things go wrong?
There is no limit to the number of ways that a deal can go sideways – one of the primary reasons why having an experienced deal-maker by your side at the negotiating table is important. Some typical areas of friction in a deal include:
- Price – getting to a price that satisfies both vendor and purchaser is always a challenge;
- Earnings Normalizations – defending any market adjustments for salary, bonuses, rent, non-recurring expenses and other adjustments to EBITDA;
- Consideration – sellers want cash on close while buyers tend to want deferred payments and earn outs;
- Working Capital – there is a science behind determining how much WC is needed to run a business, but many deals still collapse because the buyer and seller cannot reach agreement on the level of closing working capital included in the purchase price;
- Financing – buyer’s financing can fall through prior to closing the transaction;
- Assignment of Contracts – buyers will typically want the benefit of all your contracts (for example, leases and equipment) and if those cannot be assigned that creates problems;
- Vendor Fatigue – selling your business can be a long, tiring process and there will be points along the way where you will wish you never started. Pushing through and staying at the table is more than half the battle. Our clients lean on us during those tougher periods in the process.
Every deal has its own unique challenges but RMA will be with you every step of the way to ensure a successful close.
How involved do I or my team need to be?
Having an M&A advisor will take a meaningful amount of the workload off your shoulders but there will still be much for you to do including assembling due diligence information; making presentations to potential purchasers; attending follow-up meetings/calls with potential purchasers; attending due diligence meetings with the chosen purchaser; being part of extensive review and discussion around legal agreements and more. Typically, you and your CFO will be actively engaged throughout the process.
How does RMA maintain confidentiality?
Confidentiality is critical to all our clients and is something we take seriously. We require all potential purchasers to sign a Non-Disclosure Agreement which commits that any information shared will be held strictly confidential and prohibits them from soliciting clients or staff. We do extensive research on our potential purchaser rosters and only approach a limited number of credible high potential buyers. Prospective buyers get additional information about your business gradually as they move forward in the process. We keep all critical information confidential for as long as possible prior to closing the transaction – and sometimes until after it has closed.
What kind of tax planning do I have to do?
Proper structure and related tax planning can often make the difference in your decision to proceed with a sale – it can save thousands, if not millions, of dollars for you as the seller. To achieve an optimal outcome, this planning needs to be done years in advance of a transaction. We can work with your existing tax advisor or, if needed, refer you to a tax specialist we have worked with previously. We will also ensure that your transaction is structured to maximize after-tax proceeds at the time of the transaction. But remember, working with a tax advisor well in advance is important.
What happens to my employees?
It varies, depending on your business. At the start of the process we will discuss and explore with you what an ‘ideal’ outcome looks like, including what happens to staff. This is often a key consideration for vendors and can often be more important than maximizing price.
The type of buyer may dictate the options available for employees.
- For example, if the buyer is a private equity group, they may need all staff to stay in place and continue to operate the business as per usual.
- If, however, it’s a much larger competitor that’s buying then there may be some duplication in roles which would result in downsizing.
- In some instances, the buyer may have excess capacity which could result in shutdown and consolidation with a meaningful loss of jobs.
For this reason, understanding our client’s objectives will help us tailor the types of purchasers we approach.
Why do I need an M&A Advisor if I already have an accountant?
Your accountant is likely very knowledgeable in accounting and taxation but probably does not have direct experience in negotiating terms and conditions for a sale transaction. An M&A advisor has specific and extensive experience in managing and negotiating M&A transactions – buying and selling private companies. They are fully dedicated to running an ‘investment banking’ process. They have a clear understanding of market values and terms and knowledge of recent and similar type transactions. They also have business networks and access to M&A tools and platforms that assist in finding and evaluating potential buyers. M&A advisors have a network of professionals to assist with pre-sale preparation, taxation, legal, insurance, wealth management, accounting valuation, etc.
What's your fee structure?
M&A fees are usually comprised of an up-front work fee and a success fee. The work fee should be a relatively modest fee which is intended to confirm that the vendor is committed to the process. The success fee is a percentage of the selling price and is only earned if the company is successfully sold. Success fees vary depending on the size of the transaction from as high as 7 percent on a $5M sale to as low as 2 percent on a $50M transaction. We pride ourselves on our flexibility and frequently are able to customize a fee structure that best meets our clients’ needs.
How many deals have you done in my industry?
Our team has worked on over 125 M&A transactions so chances are good that we’ve had some exposure to your industry. That being said, we can also show you transactions where we had no prior industry experience and far exceeded our client’s expectations. We get deals across the finish line.