Buyouts : success for owners, management, PEGs, families, ESOPs, and mergers and acquisitions

348 Pages·2012·1.41 MB·English

by  Miller

— continued from front flap — M $85.00 USA/$102.00 CAN
I Buyouts
• The various types of buyouts from sponsored L
L
management to buyouts using parallel companies
E
and those involving family and management R
Over the past fifteen years, business owners have
Success for Owners, Management, PEGs,
had little worries about selling their businesses
Families, ESOPs, and Mergers and Acquisitions
to third parties. Those days are over; there are
now far fewer buyers with cash waiting to acquire
The definitive insider look at insider buyouts. B Once they’ve made up their minds to sell their
companies. A must-have book for business own-
businesses, most business owners have no idea
ers, key employees, and their advisors who need u
how stressful and difficult the process can be.
to be aware of the full spectrum of succession y Since 2007 and the onset of the recession, it’s
options, Buyouts is the definitive guide to insights
The only resource you’ll need to master the techniques of insider-led transition planning, o Buyouts easy to become discouraged once your business
and best practices on mastering techniques of
Buyouts presents the essentials on insider-led buyouts, with step-by-step guidance and a u has been for sale for an extended period of time
the insider-led transition planning.
wealth of case studies. and there have been no qualified buyers. Demys-
t
tifying the complex world of inside transactions,
s
SCOTT MILLER, CPA, ABV, CVA, PFS, CMAP,
Filled with tried-and-true tips, best practices, and solid guidance, Buyouts reveals secrets to Buyouts offers an option to business owners who
is President of Enterprise Services, Inc. (ESI), a
managing risk, with discussion on retention and performance incentives for key personnel, MPS want to immerse themselves in the exit planning
nationally recognized firm in ESOP consulting and and insights into getting deals financed. Author Scott Miller provides you—whether you’re a erEGucc process and work toward an ending that accom-
valuations, with over 500 clients. An entrepreneur business owner, employee, or a financial advisor—with concrete examples and real insight on gers, Fess plishes their goals.
with an extensive history of senior-level industry succession options you may not have been aware of. s anam for Author Scott Miller examines the common attri-
experience and significant equity ownership in dil O
Aiew butes underlying all business transactions such as
his employers, Miller has authored four profes- cs,n
sional publications for AICPA on mergers and The insider-led buyout—selling your company for a fair price, maintaining control over qu ESer Success for Owners, Management, PEGs, the state of the economy, financing resources, val-
i s
acquisitions, buying and selling business, ESOPs, the process, and realizing your lifelong goals—is the best of all worlds. Now you can work sitOP, M Families, ESOPs, and Mergers and Acquisitions uation insights, the consideration of professional
and valuing ESOPs. Since founding ESI, Miller has towards an exit planning process that will accomplish your goals, with Buyouts. ions, aan advisors, and how to minimize taxes. Helping you
sna make sense of the important forces at work in our
worked with hundreds of businesses throughout dg
e
m current economy, Buyouts features a compan-
the country on strategic transition planning and
e
closing transactions. nt with WEBSITE ion website and a wealth of case studies. It offers
,

proven guidance in many essential areas, including:
• Valuations: the three market approaches and
their purpose
• The basics on documents and due diligence
for both the seller and the buyer
with WEBSITE
Jacket Photograph: © iStockphoto SCOTT MILLER • Having an exit plan and knowing your options
• Taxes—a short course
— continued on back flap —
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Buyouts
i
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Buyouts
Success for Owners, Management,
PEGs, Families, ESOPs and
Mergers and Acquisitions
SCOTT D. MILLER
John Wiley & Sons, Inc.
iii
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Copyright (cid:2)C 2012 by Scott D. Miller. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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LibraryofCongressCataloging-in-PublicationData:
Miller,ScottD.,1949–
Buyouts:successforowners,management,PEGs,Families,ESOPs,andmergers
andacquisitions/ScottD.Miller.
p. cm.–(Wileyfinanceseries)
Includesbibliographicalreferencesandindex.
ISBN978-1-118-22909-5(cloth);ISBN978-1-118-28695-1(ebk);
ISBN978-1-118-28400-1(ebk);ISBN978-1-118-28274-8(ebk)
1.Consolidationandmergerofcorporations–UnitedStates. 2.Business
enterprises–UnitedStates–Purchasing. 3.Businessenterprises–UnitedStates–Finance.
I.Title.
HG4028.M4.B8962012
658.1(cid:3)6–dc23
2012012434
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
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To my wife, Jayne,
and my children, Melinda and Mark
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Contents
Acknowledgments xvii
INTRODUCTION
TheNewRealityforBusinessOwnersin2012 1
TheMiddleMarket 2
NotAnotherMergersandAcquisitionsBook 3
ChapterOrganization 4
CHAPTER1
BuyoutExamples 7
CaseStudy—SRCHoldings,Corporation 7
StartingatGroundZero 9
TheGreatGameofBusiness 9
LookingintotheFuture 10
CaseStudy—SSGFinancialServices 11
ImpactofthePlan 12
IntangibleBenefits 12
LookingintotheFuture 13
CaseStudy—QualityAssemblyandLogistics,LLC 14
SuccessFactors 15
CaseStudy—JumboHeater&Manufacturing
Company,Inc. 16
TensionsandFailure 17
LessonsLearned 18
Summary 19
CHAPTER2
TheEconomy 21
BriefOverviewoftheCurrentRecession 21
CrisesFollowingWallStreet 23
ProspectsfortheImmediateFuture2012and2013 24
NearTermRegulatoryEnvironment—TaxIncreases 25
AdditionalRegulationsComing 26
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viii CONTENTS
TheLongerView 26
GlobalPerspective 27
Summary 27
CHAPTER3
Finance 29
CommunityBanks 30
ImpactofPendingDodd-FrankAct 31
SecuredLoans 32
RegionalandNationalMoneyCenterBanks 32
MezzanineFunds 33
PrivateEquity 34
SmallBusinessAdministrationandGovernmentSources 35
SellerNotes 36
Summary 37
CHAPTER4
Valuations 39
PurposeoftheValuation 40
DeterminingtheTransactionConsideration 41
PriceandTermsBrieflyExamined 41
StandardofValueforTransactions 42
FairMarketValue 43
AdequateConsideration(EmployeeStockOwnershipPlan
andTrustSpecific) 44
InvestmentValue 45
FairValue 45
“EmotionalValue”—WhataBuyerandSellerPerceive 46
TypesofBuyersandSellers 46
AttributesofOwnership—ControlandMinorityPositions 47
ControlPosition(EnterpriseValue) 47
LackofMarketability 49
AdditionalAdjustmentstoValuation 50
ThreeValuationApproaches:Income,Market,Asset 50
IncomeApproach 50
MarketApproach 54
AssetApproach 59
Summary 61
CHAPTER5
IndustriesandBusinesses 63
TechnologyandSoftware 64
Communications 65
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Contents ix
Energy 65
CommodityGoods—RetailFoodandAgriculture 65
Healthcare 65
Manufacturing 66
Construction 66
MainStreetBusinesses 66
DiscretionaryProductsandServicesIndustries 67
ProfessionalServices 67
Summary 67
CHAPTER6
ProfessionalAdvisors 69
Attorneys 69
CertifiedPublicAccountant 70
FinancialAdvisors 71
CaseStudy:TheMaherGroup 71
InvestmentBankers 72
CaseStudy:TheMcLeanGroup 73
BehavioralScience 73
CaseStudy:HumberMundie&McClary 74
KeyEmployees 75
BoardMembersorAdvisoryMembers 76
Family 76
Summary 77
CHAPTER7
DocumentsandDueDiligence 79
DueDiligencefortheSeller 79
HaveanExitPlan—KnowYourOptions 80
ReviewLegalRequirements 81
IdentifyAdvisoryTeam 81
OptimizeValue 81
PuttheHouseinOrganizationalOrder 82
AddressKeyEmployees 83
DueDiligencefortheBuyer 83
KeyEmployeeLeadership 84
SelectionofAdvisors 84
StructuringtheTransaction 84
FinancialConsiderations 85
TaxPlanning 86
ReviewLegalIssues 86
CommonDocumentsandKeyCovenants 86
TermSheet 86
ConfidentialityAgreement 87