How SWOT Analysis Can Be Used for M&A
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Commonly used for marketing and product development purposes, SWOT strengths, weaknesses, opportunities and threats) analysis also provides a framework for owners preparing to sell their company and buyers evaluating a potential acquisition.
When marketing their company and negotiating a sale; sellers typically want to emphasize their company’s strengths and opportunities. Buyers, on the other hand, are interested in strengths and opportunities, but also weaknesses and threats-particularly when they seek price flexibility. So sellers must be prepared to discuss negative factors to mitigate any devaluation on the final selling price.
Assembling Data
SWOT information usually is assembled in a four-cell grid, with strengths and weaknesses in the top two cells and opportunities and threats in the bottom cells. This presentation makes the relationship between factors easy to assess and draw conclusions from.
Strengths and weaknesses are considered internal factors; opportunities and threats generally are considered external. Of course, factors are interrelated-an internal weakness such as a poorly trained sales or marketing department can result in an external threat such as a loss of market share to competitors.
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Prepare Yourself for Deal Breakers
You're buying a rival company. The transaction is nearly complete. At the last minute, an unexpected problem arises, and the deal falls apart.
This nightmare scenario plays out countless times every year. But you greatly increase the odds of a smooth and successful acquisition by looking for potential deal breakers early in your due diligence efforts. The best time to address these situations is before the other company's problems become yours. Here are five potentially unanticipated deal breakers:
Litigation Risk
Investigate whether the target is involved in any pending legal action by shareholders or customers. Also, confirm that the company's products and operations comply with government regulations. Examine its relationships with customers, vendors, and employees. Does the company treat them with honesty and integrity? If the answer is no, acquiring your candidate could someday embroil you in a lawsuit.
Unanticipated Liabilities
The stock market's tumble exposed financial weaknesses in many companies' pension and benefits programs. Combining this with soaring health insurance premiums has left some firms unable to afford the benefits they have committed to pay. Evaluate these obligations to ensure you don't inherit an unexpected shortfall.
Labor Costs
Is the company's workforce unionized and up for contract renewal? Are there restrictions governing which employees may be hired and fired? Such situations could mean higher-than-expected labor expenses.
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Reasons To Use a Broker to Sell Your Business
by Ryan Jorden, VR Business Brokers of Calgary - Managing Partner
One of the aspects of being a business broker that never fails to surprise me is learning how many business owners tried unsuccessfully to sell their business themselves without the assistance of a trained professional. The vast majority of business owners who have tried this found the process to be way more demanding, confusing, complex, and disappointing than not, resulting in a waste of time and money. Here are four top reasons why you should hire a business broker to assist you through this process.
We manage the entire process from start to finish
I often refer to myself as being at the center of a wheel, with all other parties being the spokes. I like this analogy because we connect all parties involved in a way that keeps the deal rolling forward. It also illustrates how all parties are on the same team and working towards the same goal, which is the successful transition of ownership of a small business. Take out the center of the wheel and things fall apart pretty quickly. Experienced business brokers have years of knowledge they can use to manage and successfully navigate everybody through every stage of the business sale process. We have also seen a wide variety of situations that taught us what red flags to avoid, and we’ve learned how to complete the process in as short a time as possible with the least amount of stress. Additionally, business brokers facilitate the entire process while ensuring the necessary flow of information between all parties involved, such as lawyers, accountants, the lender, the landlord, the buyer, the seller, and any other advisors that may be involved. Keeping everybody on the same page gets deals done.
We protect your confidentiality
If you are trying to sell your business by yourself, the first mistake you’ve already made is abandoning a level of strict confidentiality that is crucial to protecting your business. Allowing a broker to confidentially market your business and engage with buyers on your behalf, allows you to explore the market without compromising your identity, while also creating a framework of expectations and rules for exchanging information with potential buyers. A breach of confidentiality can affect your business in ways that are unpredictable. Key employees could find out, your competition could use this information against you, or important customers could see it as a negative development and look elsewhere. I also encourage business owners to look at this from the perspective of a buyer - nobody wants to potentially invest their life savings in a business that may experience disruptions and complications or unpredictability that often result from a breach of confidentiality.
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Building Bonds in a Digital Age: Thoughts from The Axial Closers’ Summit
A little over two years ago, the lower middle market was faced with the ultimate stress test: could M&A withstand the total elimination of in-person interactions and still get deals done? In short, the answer was no.
While up-funnel interactions – email introductions, Zoom calls, virtual meetings – were able to quickly shift and even thrive throughout the pandemic, deals were simply not closing at the same pace. And while it wasn’t rocket science as to why, after dozens (probably hundreds) of conversations with buyers and sellers, our suspicions were confirmed: the overwhelming majority of buyers and sellers would not sign on the dotted line until they were able to shake hands and verify all of their virtual thoughts and feelings in person.
It is because of this sentiment that Axial eagerly dove back into in-person events as soon as we were able. We knew and heard our member’s desires to get back on the road and saw the opportunity to celebrate our members in a time that they yearned for a reason to celebrate. So on April 20th, Axial hosted a select group of “Closers” (members who recently closed a deal via the Axial platform) from across the country for a day of fun in the sun in Miami.
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Well-established Auto Paint Supplies Distribution Company in Miami, FL
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Since 2013, this Auto paint manufacturing and wholesale Company has been committed to providing the best service in the industry with the best quality and competitive prices. They offer a wide variety of products: 1K pearl colors, 1K silver colors, 1K solid base coat colors, 2K solid color, additives, primers, reducers, clear coats, and hardeners.
The Company also manufactures paint and coating and commercializes under its own brands with its own labels. Registered Trademark in process.
The sales increased over the years with high margins and loyal repeat customers. The online sales department has been launched recently through eBay and the sales are growing quickly.
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VR Located in Dallas, TX Sold a Metal Fabricating Plus Real Estate for $2,600,000.
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This 24-year-old metal & plastics fabricating/manipulating company provides years of experience in the machining industry. Servicing large & mid-sized companies, this company provides accurate quality & timely machined parts for commercial use. They utilize computer numerical control machining centers & turning centers to manufacture engineered prototypes, production runs to parts per sample. The business was in a 17,000 sq. ft. climate-controlled building that sits on 1.25 acres in Dallas County which the real estate was offered with the business. The owner was a family member of the founder who has not worked in the business and sold to the new owners to grow & expand the business.
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Thinking of selling your business or looking for an established
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The Changing Face of Doing Business in India
by Mandar Joshi, Chartered Accountant and Consulting Professional at CBA
Flashback Year 2019
We were contacted by a Middle East company dealing in electricals (let’s call it “ME Electricals” for confidentiality reasons). They wanted to have a subsidiary company in India that would be involved in the manufacturing, marketing, and trading of electric products. They put us with the responsibility to deliver a feasibility report to them stating how to enter the Indian markets and a Cost-Volume-Benefit analysis. We delivered the report stating that their business strategy in India should be to enter in Indian markets firstly through trading and then manufacturing their own products in India.
Happy with our report, their CEO and team members came down for a meeting for understanding the complex nature of Indian Taxation. We met them at their hotel and started briefing them about the Indian Tax Structure and the elements involved in it. At that time, there were multiple taxes for various activities subject to a minimum of 5 different taxes for each activity in a manufacturing unit like they were desiring.
When we had completed 25% of our briefing, their team stopped us. They said they need time to process all the data and details. We restarted after a small tea break. After an hour or so, we completed the briefing and left, leaving them satisfied with the information we provided. Later, when we followed up with their Indian representative, we came to know that this company ME Electricals, recalled their plans to set up the company in India.
Apparently, they became skeptical after seeing the volume and complexity of taxes in India. Middle East countries and companies were not used to such high rates of corporate taxes (such as 35%). They were also not used to this kind of heavy tax compliance and structure. As a result, they backed off.
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VR is The Only Remaining Founding Firm of The International Business Brokers Association ("IBBA").
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Have You Ever Considered Selling Businesses?
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