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CEO Advisor® Newsletter
July 2016

Mergers and Acquisitions - Small to Mid-Size Companies

CEO Advisor has decades of experience in mergers and acquisitions of private companies. Gain the expertise to evaluate your options to grow your business to the next level by contacting CEO Advisor, Inc.


Mergers and acquisitions play an important role in many smaller to mid-size, privately-held companies. For growth purposes, to address competitive pressures, to acquire needed technology, to address changes in your industry or economic conditions, privately-held companies acquire or merge with other companies in order to remain competitive, accelerate growth or to grow their businesses to the next level. A private company may also sell to a larger private or public company for similar reasons.


Mergers and acquisitions also enable private companies to develop a competitive advantage by increasing their depth of management team, technology and intellectual property, flexibility, growth and shareholder value. The most common reasons for a private company to acquire or merge are strategic growth, talent growth, entering a new geographic market or industry (buy vs. build), address a client concentration issue where one or two clients make up 25-50% or more of revenues, or preparation for an exit.


The following are different types of Private Company M&A Transactions:

Stock Purchase
Asset Purchase (exclusive of Liabilities)
Merger
Small Acquisition for Talent
Strategic Alliance
Joint Venture


There are several reasons why private companies choose to expand through growth transactions rather than internal or organic growth. First of all, growth transactions happen much faster whereas organic growth takes time as sales grow. A privately-held company's goal may be to eliminate a competitor, enter a new industry or geographic market, introduce a new product line, acquire key technology, acquire products or services, or bring on the talent and management team that results from a growth transaction.


The following methods can be used to help a private company grow:


Acquisition - A private company acquisition is when a public or private company buys the stock of a private company. An acquisition may also be an "asset purchase", where rather than buying the stock, the buyer simply buys all or a portion of the assets of a private company. The assets may be tangible such as customers, inventory and machinery, and/or intangible assets such as software, patents and trademarks. The acquiring company can exclude all liabilities with an asset purchase (other than specified liabilities for needed items). The selling private company may then continue as a smaller company or dissolve after the sale.


Merger - A private company merger is when two or more private companies combine to form a single entity under a consolidated management and ownership. A merger can take place through a stock swap with one surviving company or through amalgamation or absorption.

Stock Swap Merger - A stock swap can be one method of a merger where one company persists as the surviving company and brand. The surviving company will take on potential added liability so caution must be exercised with a savvy business advisor and corporate transaction attorney.

Amalgamation - An amalgamation is when two or more private companies enter into the merger agreement to form a completely new entity. In this type of merger, both private companies lose their identity and a new private company is formed to manage the consolidated assets. Amalgamation tends to occur when both private companies are of equal size.

Absorption - Absorption is when the merger occurs between two entities of a dissimilar size. In such case, the larger private company absorbs the smaller one. The merger dissolves the smaller private company and places all its assets in control of the larger private company.

Talent Acquisition - An acquisition-by-hire may occur especially when the target private company is quite small or is in the startup phase. In this case, the acquiring company simply hires the staff of the target private company, thereby acquiring its talent (if that is its main asset). Certain assets such as technologies and customers may also be acquired, as needed. The target private company simply dissolves and few legal issues are involved.


Strategic Alliance - A strategic alliance can range from a large distributor or reseller marketing and selling your products to a larger alliance with financial backing or special terms, such as a licensing deal, or commitment of annual minimum purchases.


Joint Venture - A joint venture is when two or more companies enter into an agreement to allot a portion of resources towards the achievement of a particular goal over a designated period of time. Synergies occur when businesses capitalize on joint opportunities or other combined efforts to obtain greater results than working alone, whether it is increased revenue or decreased costs.


CEO Advisor, Inc. has the expertise to guide your company through the many steps involved in a merger or acquisition.  Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

CEO Skills for Success

The Wharton Business School newsletter, published by The Wharton School, University of Pennsylvania polls executives and business owners. The results below show the four most important skills that would strengthen a CEO's performance.


Strengthening what skill would most improve your performance?

A. Leadership
B. Time Management
C. Negotiating Skills
D. Understanding Your Financials


1. Leadership
Leadership and execution is the key to success and achieving your goals. Leadership requires planning, organization, being proactive, having a crystal clear understanding of the business both financially (quantitatively) and operationally (qualitatively), hiring and managing people of multiple generations and cultures, and creating a culture of accountability to grow your business to the next level.


2. Time Management
Time management is a major factor of all CEOs and small to mid-size business owners. Not just managing time on a calendar and working 60 hours a week to keep up, but real strategy and planning to focus and structure your time on top priorities to impact your business in a disciplined manner. Executing on your business plan on a daily basis is the highest and best use of your valuable time. CEO Advisor, Inc. works with its CEOs and small to mid-size business owner clients to set goals and priorities, and truly excel in both leadership and time management.


3. Negotiating to Success 

Negotiating is the Holy Grail in business - with customers, prospects, vendors, employees, contractors, etc. We focus deeply on negotiations using some of the top techniques used by military leaders and business people.

Your sales team can benefit tremendously from sales training and negotiating skills training from securing the initial meeting to negotiating price and terms effectively to closing large deals. Strengthening your negotiating skills can yield a 100X return on your investment. If you are not a master negotiator, invest in your negotiating skills and prosper in 2016 and beyond.


4. Understanding Your Financial Statements
Every CEO and small to mid-size business owner should commit to gaining a thorough understanding of the financials of your business, and then using this information to make better decisions to increase profits. If you don't, you are flying blind!

This includes your Profit & Loss Statement (Accrual and Cash basis), Balance Sheet, Cash Flow Statement, Financial Ratios, Financial Forecast, and learning to analyze and understand how to positively impact your Gross Margins and Net Profit, as well as, pinpointing early signs of problems. CEO Advisor Inc. spends the time to ensure every client not only understands, but also uses their company's financials in growing their business to the next level.


Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. at (949) 629-2520 or emailing MHartsell@CEOAdvisor.com. 


Testimonial  


"Over a one year period, CEO Advisor® helped me to understand what my role entailed as a CEO of a small company. Together, we segmented my numerous headaches into achievable goals. I learned to focus on specific issues and predict obstacles by looking at my business in monthly, quarterly and yearly tasks by priority. CEO Advisor prepared our Business Plan and Financial Forecast as the road map for the growth of our business, and taught me how to understand financial reports, as well as, the implication of budgets and spending. I now understand how to measure the performance of my company and profitably grow my business."


CEO, Web Services Company
CEO Skills for Success

"Over a one year period, CEO Advisor® helped me to understand what my role entailed as a CEO of a small company. Together, we segmented my numerous headaches into achievable goals. I learned to focus on specific issues and predict obstacles by looking at my business in monthly, quarterly and yearly tasks by priority. CEO Advisor prepared our Business Plan and Financial Forecast as the road map for the growth of our business, and taught me how to understand financial reports, as well as, the implication of budgets and spending. I now understand how to measure the performance of my company and profitably grow my business."
CEO, Web Services Company
CEO Skills for Success 

"Over a one year period, CEO Advisor® helped me to understand what my role entailed as a CEO of a small company. Together, we segmented my numerous headaches into achievable goals. I learned to focus on specific issues and predict obstacles by looking at my business in monthly, quarterly and yearly tasks by priority. CEO Advisor prepared our Business Plan and Financial Forecast as the road map for the growth of our business, and taught me how to understand financial reports, as well as, the implication of budgets and spending. I now understand how to measure the performance of my company and profitably grow my business."
CEO, Web Services Company
CEO Skills for Success 

"Mark Hartsell and CEO Advisor, Inc. provide a unique advisory service for CEOs. He not only tackles high level strategic issues to assist CEOs navigate through challenging times, but Mark also gets very involved in actually addressing important issues head-on by performing the work to achieve tangible results.


Whether it is growing a business to the next level, turning a distressed company around or preparing a company for an exit, Mark's firm, CEO Advisor, Inc, provides a broad range of services and Mark is there for the CEO every step of the way."

 


Partner

Haynes & Boone, LLP

Words of Wisdom


"Life is a series of near misses ... What we ascribe to as luck is not luck at all. It's seizing the day and accepting responsibility for your future."


Howard Schultz
American entrepreneur, Chairman of Starbucks

"Life is a series of near misses ... What we ascribe to as luck is not luck at all. It's seizing the day and accepting responsibility for your future."

Howard Schultz 
American entrepreneur, Chairman of Starbucks



"Yesterday does not equal tomorrow. Forget the past and move towards your goals."

Tony Robbins
Motivational Speaker

"Yesterday does not equal tomorrow. Forget the past and move towards your goals."
Tony Robbins
Motivational Speaker
"Yesterday does not equal tomorrow. Forget the past and move towards your goals."
Tony Robbins
Motivational Speaker



Prime Minister of the U.K.