Permanent Podcast: Real Talk About Private Equity and Buying, Selling, and Operating Small Businesses

We all have our own negotiating style and most of them can be effective... if you stick to it.  Whatever method you choose, you're best served knowing as much as you can about the buyer's motivations.  In this episode, we give you a list of questions that will help you prepare to represent your needs and your company in the most effective way.  Discussion with Brent Beshore and Emily Holdman start...

What the heck is a BATNA?  It's an industry acronym for Best Alternative To a Negotiated Agreement.  In other words, what's your backup plan if negotiations with a prospective buyer fall through?  In this episode, we talk about the importance of developing a solid BATNA and the role it plays in your conversations with buyers.  Discussion with Brent Beshore and Emily Holdman starts @ 1:15.

All buyers have one thing in common: they expect a return on their investment.  So what is the best way to market your company to buyers knowing they won't invest if they don't see growth potential?  This episode hits on some important do's and don'ts as you present your business to prospective buyers.  Discussion with Brent Beshore and Emily Holdman starts @ 2:0 5.  

Prospective buyers will express their valuation of your company in different ways.  While some will give you a set valuation number, others may use a multiple of earnings or an even more complex formula to be calculated at a predetermined time before close.  In this episode, we examine the pros and cons of each method and important considerations as a seller as you contemplate an offer. Discussion...

As a seller, it can be easy to fixate on the valuation and cash at close numbers, especially when they are some of the largest you've seen in your lifetime.  But the structure and terms of the deal are equally important.  In this episode, we explore how to work with your potential buyer to make sure the structure of your deal is a reflection of your needs and expectations.  Discussion with Brent B...

Buyers commonly make the first move in a transaction.  As a seller, this often catches us off guard (in a good or bad way).  In this episode, we discuss how to digest an initial offer and the importance of communicating our expectations clearly and transparently.  Discussion with Brent Beshore and Emily Holdman starts @ 1:34.

What will your role look like post-close?  Do you plan to exit immediately or stay on indefinitely?  And how do you want to be compensated in this next phase of your business?  In this episode, we examine the different employment structures available and their potential impact on you, your personal finances, and your company.  Discussion with Brent Beshore and Emily Holdman starts @ 1:50.

Many company owners own real estate associated with their business in order to expand their returns.  As part of a potential transaction, buyers will be interested in the relationship between the real estate and the company and it is likely that real estate will be part of the deal terms in some form.  In this episode, we step through the terminology and calculations used around real estate in tra...

Reps and warranties.  Indemnification.  Caps and baskets.  Are you still awake?  In this episode, we break down the legalese into digestible concepts and walk through how this section of a contract can be used to protect yourself and communicate critical information to a potential buyer. Discussion with Brent Beshore and Emily Holdman starts @ 2:34.

Done well, Employee Option Pools present compelling incentives for the employees running the company post-close.  As with most components of a deal, the structure and the math matter.  In this episode, we talk about potential pitfalls and the hallmarks of a well-constructed employee compensation plan.  Discussion with Brent Beshore and Emily Holdman starts @ 1:09.

While it's common for Private Equity firms to charge fees as part of the transaction, these fees can take on many forms.  Some firms are transparent and only charge enough to cover their expenses, others not so much.  In this episode, we cover fee types and structures, as well as things you should watch out for when examining the fees your potential buyer plans to assess.  Discussion with Brent Be...

The math behind Net Working Capital seems straightforward, but agreeing on this number is often the most contentious part of doing a transaction.  Why is there so much nuance and why is getting this number right so critically important?  This episode dives in to this crucial negotiation point and we share how we almost lost our first deal because of it!  Discussion with Brent Beshore and Emily Hol...

In situations where the buyer and seller disagree on future earnings, earnouts help bridge the gap by taking a "wait and see" approach to a portion of the valuation.  But they can also cause trepidation in sellers as they introduce uncertainty.  In this episode, we lay out some questions you should consider before agreeing to an earnout in your transaction.  Discussion with Brent Beshore and Emily...

The first component of financial deal terms is the amount of cash at closing.  But even something as simple as "cash" can take on many different forms.  In this episode, we examine the various types of cash at closing, why they are used, how they are structured, and the potential impact on your company after close.  Discussion with Brent Beshore and Emily Holdman starts @ 3:09.

In many ways, the deal components are more important than the purchase price.  When it comes to purchase price, there is often a tug - of - war between buyer and seller.  This episode explores this back and forth by looking the motivations, mechanics, and messiness of agreeing on a price.  Discussion with Brent Beshore and Emily Holdman starts @ 1:55.

When people hear about a transaction the first question they ask is: "What is the valuation?"  While the answer seems simple on the surface - a single number - the way valuation is decided can take many different paths.  In this example-packed episode, we show the diversity of approaches taken towards valuation and talk about why methodology matters.  Discussion with Brent Beshore and Emily Holdma...

What is an intermediary?  What do they do?  How do I know if I need to hire one?  In this episode, we present a list of helpful questions to answer as you consider hiring one of the most important advisors on your transaction team.

Your advisor team is critical to the success of your transaction.  But how can you build your own Dream Team?  In this episode we lay out a clever strategy we learned from an original Dream Team member, Larry Bird.  Discussion with Brent Beshore and Emily Holdman starts @ 1: 23 .

Picking a great team of advisors is the most important transaction decision you will make.  So what should your team look like?  What should you look for in an advisor?  In this episode we discuss the members and attributes necessary to build a stellar advisor team.  Discussion with Brent Beshore and Emily Holdman starts @ 2:58.

Investors and advisors often speak in terms of "multiples."  The key question is: a multiple of what?  Potential buyers are interested in the true earning power of your business.  This episode explores the ins and outs of EBITDA and other methodologies for measuring earnings.   Discussion with Brent Beshore and Emily Holdman starts @ 1:38.

Private equity firms, fundless sponsors, search funds, family offices, strategics… the buyers of private businesses vary widely in the way they acquire, operate, and finance their purchases.  In this episode, we go deep on each type of potential purchaser and look at their incentives for buying, typical financing structures, operational preferences, and the practicalities of working with each type...

Private company transactions come in a variety of flavors, but most fit into two major buckets: buyouts and recapitalizations.  In this episode, we discuss the differences between the two transactions and provide a helpful and comprehensive list of questions for business owners who are becoming minority owners to help set expectations with their buyer.   Discussion with Brent Beshore and Emily Hol...

If there's an unexpected area where we see people stumble, this is it.  Making wise decisions about who knows about your transaction and when is critical .  In this episode, we step through each group of stakeholders and discuss considerations about the content and timing of your message to each one.   Discussion with Brent Beshore and Emily Holdman starts @ 5:42.

Prospective buyers will ask you some of the most challenging and personal questions you've encountered.  Can you trust them and answer honestly?  In this episode we take a look at the issue of confidentiality and how legally bound mutual trust makes a transaction possible.   Discussion with Brent Beshore and Emily Holdman starts @ 1:14.

All businesses have issues and buyers will figure them out eventually.  The good news is the vast majority of them can be addressed.  In this episode, we lay out the main categories of potential deal killers and how to proactively deal with each one before they derail the sale of your business.   Discussion with Brent Beshore and Emily Holdman starts @ 4:09.