Advice for CEOs

In the first part of this article, I discussed the importance of due diligence to determine whether a prospective acquiree’s technology will be as valuable going forward as it has been in the past. I would like to present a real world example.

All M&A transactions have a lot in common. The acquirer must perform rigorous due diligence to verify the history and quality of the target company’s earnings, the validity of its assets, the collectability of its Accounts Receivable, the extent of current or potential litigation. Risks--such as customer concentration and threats from competitors—must be carefully considered.

In the first part of this article, I addressed the current strong environment for middle market M&A and the basic categories of buyers: private equity, strategic acquirers and family offices. How are these deals financed? Middle market company owners and their transaction partners have a range of different types of capital available to facilitate a transaction and create liquidity.

There are increasing signs of a recovering U.S. economy and record setting amounts of capital sit in the hands of large corporations (“strategic buyers”), Private Equity firms (“PE”) and hybrid investors (neither strategic nor PE, for example wealthy individuals and family offices). Private business owners contemplating a sale are fortunately faced with a myriad of options. Add to these traditional middle market lenders, commercial finance companies and Business Development Corporations (BDCs) all flush with cash, it is no wonder that many company owners are confused and uncertain as to how to maximize the exit value of their business - or take some money off the table.