Term of the Day

Capitalization Ratio

Capitalization ratio, also known as financial leverage ratio, is the ratio that determines the contribution of each financial component to the total capitalization of the company. There are many (Read on)

Past Terms: Seed CapitalForced Liquidation ValueU.S. Bankruptcy Code

What Your Supply Chain Business Is Really Worth

Jock Purtle, owner of digitalexits.com, explains the types of valuations to consider, the average multiple that supply chain businesses are selling for, and how your business compares.
A Summary of M&A Fees for Sell-Side Transactions

Investment banks offer expertise and know-how that can add significant value to any transaction, but complicated fee structures can be daunting. In order to negotiate a fee structure that will achieve your goals, understand the factors that go into one.
Why the Next 180 Days Are Significant When Preparing to Sell Your Business

When business owners are preparing to sell, the next 180 days is a critical time period to execute all significant changes that may be essential to improving their business' valuation and closing a deal.
Seller Beware! Top 12 Mistakes to Avoid When Selling a Business

Don't assume that because you have built and operated a successful company, you can also undertake the sale of your company. Here are 12 potential mistakes that can make the difference between a home run or a strike out.
The Exclusive Negotiations Fallacy

It is a common fallacy that an exclusively negotiated deal is faster, easier and quieter than a structured process. In reality, the acquirer with exclusivity rarely moves with urgency.
How Industry Consolidation Can Impact a Business Exit

Have you considered the stage of consolidation in your industry and how that might impact your plans for an exit?
5 Approaches to Generating a Track Record for a Winning Valuation

A company’s financial track record is one of the fundamental drivers of value. Learn five simple approaches you can take to start growing your company's value today to prepare for a sale.
Earnouts or Burnouts: Don't Get Burned on an Earnout

Earnouts are difficult legal clauses to manage and can often lead to misunderstanding and difficulty realizing them. Here is a practical example of some of the pitfalls that sellers should watch for.
Is the Time Approaching to Sell Your Business?

Three areas to consider when deciding if now is the right time to sell your business.
When Deciding to Sell, Prepare for Disappearing Owner Perks

When preparing an owner to sell his/her business, it's usually to prevent a deal from blowing up because of a buyer's actions. However, M&A advisor, Dave Kauppi, recounts his experience with a seller that risked closing a deal over losing owner perks.
Do You Know What Your Company Is Worth?

Banks, shareholders and government agencies never ask a private business owner what their company is worth, but that doesn't mean you don't need to know.
Preparing for an Actual Increase in Purchase Price During Due Diligence

It's a common concern for business sellers that their price will be knocked down as a result of what's discovered during the due diligence process. But what if what's discovered is positive? Find out how one M&A advisor prepared for this possibility.
Comparing Comparables: The Problem with Transactional Data

George Abraham of Business Evaluation Systems explains the Direct Market Data Method and the issues facing transactional data from the top three databases.
A Visual Framework for Business Valuation

Tim Vipond of Corporate Finance Institute offers a visual aide here that he's created to help better understand business valuations and how a potential buyer will value your business when it comes time to sell.
Envision, Plan and Implement Your Business Transition

Jack Beauregard talks about his book, "Finding Your New Owner: For Your Business, for Your Life." If you are a business owner over the age of 50, this book could save your business, your wealth and your life.
A Calculation of Value Report and an Appraisal...There is a Difference

George Abraham of Business Evaluation Systems explains what a calculation of value report is and how it differs from an appraisal. Knowing the difference can mean money saved up front and down the road for you and your business.
3 Principles Successful M&A Deals Have in Common

Every deal has its own unique challenges, but just about every successful deal has three key elements in common. Find out what they are here.
Confronting Yourself: The Emotional Journey of Selling Your Business

For many entrepreneurs, the hardest part of selling their business is wrestling with their own emotions. Here are some tips for successfully navigating a sale.
Business Valuation: An Analysis of Risk

In valuing a business, an appraiser must analyze every aspect and quantify his/her analysis of the company’s risk into value. George Abraham of Business Evaluation Systems details 9 key risk factors to be considered in the appraisal of your business.
Increase Your Company Debt? Why Not, It May Be an Option to Selling

For companies with low debt on their balance sheets, leveraging back to an optimal capital structure can allow an owner to monetize the business - without selling.
'Best of Breed': An Aggressive Valuation Strategy for the Best Mid-Market Businesses

The best companies can't always be compared to their peers. That's where the best of breed strategy comes in. Find out how it's used in IPOs - and how those lessons can be applied to mid-market businesses.
11 Reasons to Use Earnouts in the Sale of Your Company (Part 2)

Dave Kauppi, M&A advisor with MidMarket Capital, Inc., gives five more reasons out of 11 why earnouts should be considered when selling your technology (or other) company.
11 Reasons to Use Earnouts in the Sale of Your Company (Part 1)

Sellers have historically viewed earnouts with suspicion as a way for buyers to get control of their companies cheaply. However, here are the first six of 11 reasons why earnouts should be considered when selling your technology (or other) company.
Diversifying Without Selling Your Business

Business owners often have all their wealth tied up in their business. But diversifying doesn't have to involve selling - or even giving up control.
Top 10 Buzzwords to Use When Talking to Private Equity

The use of these 10 buzzwords is music to private equity investors' ears. Just be sure to back them up with facts.
Venture Capital Alternative for the IT Entrepreneur

MidMarket Capital, Inc. explains their "smart equity" model and how it can serve both small entrepreneurial firms looking for an investment with the appropriate growth partner, and large industry players looking to enhance their new product strategy.
For High-Tech M&A, Strategic Value is Not Automatic

Dave Kauppi, president of MidMarket Capital, Inc., describes his recent experience in helping a health care information system company get the best value when selling to a strategic buyer.
6 Key Components of the Entrepreneurial Operating System

Entrepreneurs looking to streamline their processes will want to listen to this latest Divestopedia podcast with our guest, Mike Paton, who explains the 6 key components of the Entrepreneurial Operating System and how to implement EOS in your business.
Mezzanine Financing and Investing Explained

Mezzanine financing may be a great way for growing businesses to bridge the gap between what conventional banks will lend against assets and the total value of a new project/acquisition. Investing in such debt may also be worth adding to your portfolio.
What to Expect After Closing a Private Equity Deal (Part 3)

Paul Wormley from Hadley Capital continues his candid discussion of what to expect when you close a private equity deal in this third and final part of the article series.
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Deal sourcing refers to the process through which financiers such as investment bankers, private equity firms, family offices, business owners, strategic buyers and Read more

Fixed charge coverage ratio (FCCR) measures whether an organization has the ability to pay its fixed expenses such as tax, interest and lease payments. This is a Read more

The Securities Exchange Act of 1934 is legislation passed by the United States Congress that empowered the Securities and Exchange Commission (SEC) with broad Read more

An irrevocable proxy is a type of proxy that cannot be revoked for a specific period of time. Though most proxies are revocable, some can be made irrevocable with Read more

Normalization is a financial process where any nonrecurring expense or income is removed from financial calculations, such as EBITDA. The idea behind normalization Read more
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