ROADMAP TO SUCCESSFUL M&A TRANSACTIONS

The foundation for successful M&A transactions is primarily based on REALISTIC EXPECTATIONS — on the part of the seller, the buyer, and their advisors as well.

Realistic expectations for sellers are established on several fronts:

• The first priority is for the seller to establish specific objectives, financial and otherwise.
  • What after-tax proceeds do they need?
  • What is the ideal structure for the transaction?
  • What role are they able/willing to play going forward?
  • What outcomes would they prefer for key employees and business continuity?
• The seller needs a thorough and transparent audit of the business to determine how likely the sale of the business will support seller objectives. This type of audit:
  • Identifies the business's historical sources of free cash flow;
  • Examines realistic growth and investment opportunities;
  • Compares value to market comparable transactions;
  • Models justification of a hypothetical buyer's business case.
• If the business is not ready to deliver on the owner's expectations, an action plan needs to be developed to get the business where it needs to be.

Realistic expectations for buyers are also established on several fronts:

• The buyer needs a reasonable understanding of the seller's expectations.
• The buyer needs access to comprehensive, organized, transparent information about the business. The more difficult the buyer finds it to assess the business, the less likely they will bring forward a fair offer.
• Armed with an understanding of seller objectives and comprehensive information on the business, buyers will frame their offer in the context of their business case — how much value will the business support given the cash flow of the business and the structure of the deal?

Advisors, for the Seller and Buyer alike, depend on all parties having realistic expectations as well:

• Transaction attorneys are best able to make a deal happen, with appropriate safeguards, if their clients are knowledgeable and realistic about the process and possible outcomes;
• Accountants are able to structure the most tax-effective deals if their clients are well coached on their options;
• Financial advisors are most effective if they truly understand the owner's end game.

Business owners gain control over the M&A process by developing realistic expectations and understanding the impact of alternative courses of action. Fulcrum Partners makes this happen for our clients by:

• Developing a candid assessment of the marketability of the business and its readiness to meet the owner's objectives;
• Educating the owner on the primary drivers of Enterprise Value, the basis for funding growth and eventual owner liquidity:
  • Consistent, Profitable, Diversified Growth of Revenue
  • Increasingly Efficient Cash Flow
• Leveraging our operational experience to provide real world advice on how buyers will assess their business. Modeling hypothetical buyer deal structures helps our clients learn to judge the impact of different alternative solutions;
• Focusing on a select few, highly qualified situations, allowing us the time to provide our clients expert coaching throughout the entire process.