Middle Market M & a: Handbook for Advisors, Investors, and Business Owners

ISBN-13: 9781119828105 / Angielski / Twarda / 2022 / 448 str.

Thomas A. Stewart

Recenzje

"Understanding how private businesses access capital for growth and successful owner transition is one of the most critical and least understood parts of the small and medium-sized business economy. This second edition of Middle Market M&A is a must read for anyone who needs to master the ever-evolving dynamics of the private capital marketplace. There is no better reference book for equity investors, private company owners and the advisors that unite them."--BRETT PALMER, President Small Business Investor Alliance (SBIA)"Often overlooked or discussed only as an afterthought, Marks and his co-authors have focused on an increasingly important part of the vibrant M&A market -- the so-called 'middle market' where indeed the most deals take place. This market is huge as are the implications for buyers of mid-sized companies, their founders and sellers, the myriad advisors, investors and business school students. This book should be on the bookshelf of every one of those groups. This handbook provides not just an overview of the necessary elements for success in mid-market dealmaking, but is a rigorous and, importantly, up-to-date compendium of the broad range of issues that anyone dealing in this market will encounter."--SCOTT MOELLER, Director, M&A Research Centre; Professor, University of London

Spis treści

Preface xxiiiAcknowledgments xxixPart One Middle Market Overview 1Chapter 1 The Middle Market 3Performance and Impact 4Definition 5Characteristics of Middle Market Companies 7Ownership 7Access to and Use of Capital 8Organization 8Chapter 2 Private Capital Markets 11Segmented Markets 12How Market Players View Risk 17Capital Providers 17Owners' and Managers' Views of Risk/Return 18Buyers 20Market Activity 26Chapter 3 Valuation Perspectives for the Private Markets 31Private Business Valuation Can Be Viewed Through Different Standards of Value 32Market Value 34Investment Value 37Fair Market Value 37Fair Value 37Incremental Business Value 38Owner Value 38LBO Value 39Collateral Value 39Book Value 39Valuing Intangibles 39Why the Different Versions of Value? 41Valuation as a Range Concept 42Value Worlds and Deals 43Part Two For the Business Owner/Operator and Entrepreneur 45Chapter 4 Transition, Succession, and Exit Planning 47A Decision Framework 491. Owner Ambitions and Goals 502. Industry Cycle 513. Business Cycle 524. Company Foundation 53A Team Approach 53Chapter 5 Value Growth and Optimization 55Increasing the Return on Invested Capital 57Strategic Position 58Customer Base 59Cost Structure and Scalability 60Working Capital 60Human Capital 61Reducing the Risk of Investment 62Awareness and Planning 63Growth Plans and Relative Position 63Leadership Team 63Predictability of Revenues and Earnings 65Concentrations 65Compliance 66Keeping Current 67Ease the Transfer of Ownership 67Financial Information 68Contracts 69Title to Assets 69Corporate Structure and Attributes 70Don't Lose Focus on the Core Business 70Summary 71Formula Definitions 72Part Three The M&A Practice and Processes 75Chapter 6 Practice Management 77Primary M&A Advisors 78Marketing the M&A Practice 80Target Audience 80Networking 81Marketing and Advertising 81Pretransaction Consulting 82Valuation Services 82Other Consulting Services 82Becoming an Expert 82Client Acceptance 83Confidentiality 84Client Engagement 84Identification of the Parties 85Scope of Service 85Limitations and Disclosures 86Fees-- Selling Advisor 86Example Fee Structures 88Termination and Tail 89Buy-Side Engagements 89Licensure Issues in the M&A Business 90Chapter 7 Sell-Side Representation and Process 93Selling Process Overview 93Step 1: Preliminary Discussions with Seller 94What Is the Transaction? 95Value Expectations 95Process 96Step 2: Data Collection 97Step 3: Industry Research and Identifying Buyers 100Research Market Buyers 101Step 4: The Marketing Book 101Preparation 103Seller Motivation 104Financial Disclosures 105Specific EBITDA Presentations 105Balance Sheet Presentation 105Other Financial Disclosures 106Prospective Financial Presentation 106Step 5: Marketing Process 106Clear the List with the Seller 107Initiate Contact with Buyers 107Obtain Nondisclosure Agreements 108Distribute the Book 108Follow Up, Discuss, and Set Expectations 108Step 6: The Auction Dynamic and Negotiations 109Negotiated Sale 109Private Auction 111Public Auction 112Step 7: Buyer Interest and Transaction Structure 113Term Sheets 114Indication of Interest (IOI) 114Letters of Intent 114Deal Structure 116Asset versus Stock Structure 116Other Tax Deferral Techniques 117Step 8: Due Diligence 120Step 9: Definitive Agreements 121Step 10: Closing Process 122Price and Valuation Changes 123Terms and Conditions Changes 123Third-Party Challenges 123Allocation of Risk 124Other Preclosing Mistakes 124Postsale Integration 124Chapter 8 Corporate Development and the Buy-Side Process 127Why Acquire? 129The Dismal Ds 130Alternatives 131The Acquisition Process 132The Pipeline and Filter 133Approaching the Target 134The Balance between a Deep Dive and Locking In the Deal 135Lower-Middle Market versus Middle Market Deals 136Valuation from a Strategic's Perspective 137Structuring the Transaction 140The Bid 141Due Diligence 141Integration 144Practical Tips and What Causes Deals to Fail 146What Should We Acquire? 146Why Are We Doing This? 147Alignment of Interests 147Recruit the Right Advisors Early 148Allocate Enough Resources 148Every Interaction Is a Negotiation 149If It Can Go Wrong, It Will Go Wrong 149Chapter 9 Buy-Side Representation 151Buyer Clients 151Strategy 152The Filter 153Financing 154Quality of Earnings 154Coordination 156Integration 156Chapter 10 Technology in the M&A Process 157Virtual Data Room 158Market Insight and Data 159Deal Sourcing and Exchanges 162Due Diligence Software 163Project Management Software 164Comprehensive M&A Software 164Supporting Tools 165Artificial Intelligence and Technology Trends 165Technology Providers 167Chapter 11 Professional Standards and Ethics 169Holistic Advice 171Ethical and Professional Standards 172Competence and Professionalism (Reputation) 173Best Practices (Activities) 173Ethics (Behavioral Boundaries) 174The Middle Market Standard 175Part Four M&A Technical Discussions 177Chapter 12 Financial Analysis 179Financial Reporting Motivation 179Ebitda 181Balance Sheet Analysis 184Working Capital 185Normalization 190Chapter 13 Market Valuation 195Reasons for Appraisal 196Determine the Value Subworld 196Calculate the Benefit Stream 197Synergies 203Determine Private Return Expectation 205Specific Investor Return 206General Acquisition Selling Multiples 207Derive Value 208Chapter 14 Deal Structure 213Structural Priorities 213Business and Economic Terms 214Tax Structure 218Legal Structure 222Mergers 224Initial Analysis of Both Entities 224Strategic Rationale 225Valuation Modeling 225Understanding Cost, Operational, and Cultural Differences 226Developing the Integration Plan 227Deal Structure and Negotiations 227Chapter 15 Financing Sources and Capital Structure 229Perspective 229Financing Primer 230Capital Structure 230Factors Shaping the Capital Structure 234Basic Deals 237Buyouts 237Recapitalizations 242Acquisitions 243Sources and Types of Funding 245Debt 246Private Equity 249Personal Guarantees 250Chapter 16 Due Diligence 255Due Diligence Process 256The Diligence Team 256Traditional Due Diligence 257Financial Matters 258Quality of Earnings Analysis 258Balance Sheet Analysis 260Ratio Analysis 260Other Risks 261Audited Financial Statements 261GAAP Compliance 262Tax Structuring and Compliance 262Compensation and Benefits 263Legal 264Technical Due Diligence 266Business Due Diligence 267Chapter 17 Tax Provisions Used in M&A 271Tax Fundamentals 272Transaction Tax Basics 275Asset Transactions 275Stock Transactions 277Stock versus Asset Sale Example 278Asset Transaction Details 280Buyer Tax Issues 285Detailed Tax Structuring 287Installment Sales 287Risk of Forfeiture 288Assets That Qualify for Installment Treatment 288Installment Planning Opportunity 289Partnership M&A 289General Partnership Doctrine 290Partnership versus S Corporation 290Partnership Gain Tracking Rules 292Purchase Price Allocation for Partnership Buyers 293Corporate M&A Issues 293Contributions to Corporations 294Stock/Asset Sale Election: Section 338 295Mergers and Reorganizations 296S Corporation Issues 300Tax Glossary and Reference 302Chapter 18 Legal Documentation 309The Attorney's Role 309Preliminary Legal Documents 311Nondisclosure and Confidentiality Agreement 311Letter of Intent 312Acquisition Agreements 316Structure of the Deal 316Stock Sale/Merger 316Asset Purchase 317Representations and Warranties 318Qualifications to Representations and Warranties 319Indemnification 320Transaction Statistics 321Consulting and Employment Agreements 322Regulatory Compliance 322Chapter 19 Regulation and Compliance 323Protecting Investors: Securities Act of 1933 324Exemptions under the 33 Act 326Commonly Used Private Placement Exemptions 327Keeping The Markets Honest: Securities Exchange Act of 1934 329Requirements and Rules 329Williams Act 330Antitrust Issues and Laws You May Encounter in the Deal 331Hart-Scott-Rodino Act 332Transactions Involving Foreign Investors, Foreign Trade, and National Defense Matters 333Other Regulatory Issues and Laws You May Encounter in the Deal 334Bulk Sales Laws 334The WARN Act 335The Investment Banker's Perspective 336SEC Provisions Regulating Broker-Dealers 336M&A Brokers No-Action Letter 338Finders 344Investment Advisers Act and Investment Company Act of 1940 345FINRA Provisions for Broker-Dealers 347The Company's Perspective 350Process of Issuing, Selling, or Exchanging Securities for a Deal 351State Blue-Sky Laws 354Considerations for Public Companies 355Chapter 20 Cross-Border Considerations 359Is Cross-Border M&A the Right Move? 360Culture 361Country Risk 365Financial Risk 365Market and Operational Risks 367The Legal Environment 367Labor and Employment 370Negotiations 371Due Diligence 372Integration 372Summary 375Glossary 377Notes 417About the Authors 423About the Contributors and Reviewers 427Index 445

O autorze

KENNETH H. MARKS is Founder and Managing Partner of High Rock Partners, a boutique firm of strategic and M&A advisors. He is an expert in mergers, acquisitions, and financing of emerging growth and middle market companies.CHRISTIAN W. BLEES is President and CEO of BiggsKofford Certified Public Accountants and BiggsKofford Capital Investment Bank. He is the lead instructor of the Certified Merger & Acquisition Advisor (CM&AA) credentialing program.MICHAEL R. NALL is Founder of Alliance of Merger & Acquisition Advisors and a recognized speaker on the valuation, growth, and sale of middle market companies.THOMAS A. STEWART served as Executive Director of the National Center for the Middle Market, and Editor-in-Chief and Managing Director of Harvard Business Review.