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CEO Advisor® Newsletter
June 2014

Mergers and Acquisitions - Private Companies


Mergers and acquisitions play a major role in many smaller, privately held companies.  For growth purposes, to address competitive pressures, advancements in technology, 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 business to the next level.  A private company may also sell to a larger private or public company for the same reasons.

 

Mergers and acquisitions also enable a private company 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) or preparation for an exit.  CEO Advisor has decades of experience in mergers and acquisitions of private companies. Gain the needed expertise to evaluate your options.

 

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

 

A. Growth Transactions

 

  1. Stock
  2. Asset Acquisition
  3. Merger
  4. Small Acquisition for Talent
  5. Strategic Alliance
  6. Joint Venture
 
B. Ownership Change Transactions
 
  1. Minority Share Sale
  2. Venture Capital Equity Investment
  3. Leveraged Buyout
  4. Management Buyout
  5. ESOP (Employee Stock Ownership Plan)
  6. Stock Repurchase
  7. Hostile Takeover
  8. Initial Public Offering

 

Growth Transactions
 
We will focus primarily on growth related transactions in this article.
 
There are several reasons why private companies choose to expand through growth transactions rather than internally or organically.  First of all, growth transactions happen much faster, virtually overnight in some cases, 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, products or services, or bring on the talent and management team that results from a growth transaction.
 

Expansion can be accomplished through mergers, asset acquisitions, tender offers or joint ventures. The following methods can be used to help a private company grow without having to create a whole other business entity.

 
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 the entirety or a portion of the assets of a private company. The assets may be tangible such as customers, inventory and machinery, or intangible assets such as software, patents and trademarks. 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 an amalgamation or absorption.
 
  • 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). 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.

 

Joint Venture - A joint venture is when two or more private 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.

 
At CEO Advisor, Inc., we have 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. today to discuss your growth needs at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit www.CEOAdvisor.com for more information.

CEO Advisor, Inc. Advises Creative Images Works on Growth and Sales Strategy
Critical Skills for the CEO/Owner
The Wharton Business School newsletter, published by The Wharton School, University of Pennsylvania did a recent poll of 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?
Leadership - 33%
Time Management - 28%
Negotiating - 22%
Understanding Your Financials - 17% 
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 the Achilles heel of most CEOs and small 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 to impact your business in a disciplined manner. CEO Advisor, Inc. works with its CEOs and small 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, 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 effectively to closing large deals. Strengthening your negotiating skills can yield a 100X return on your investment. If you are not a master negotiator and salesperson, invest in your negotiating skills and prosper in 2014 and beyond.
4. Understanding Your Financials
If there is one New Year's resolution that every CEO and small business owner should commit to is gaining a thorough understanding of the financials of your business. If you don't, you are flying blind! This includes your Profit & Loss Statement (Accrual and Cash basis), Balance Sheet, Financial Ratios, creating a 2014 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 uses their company's financials in growing their business to the next level.
Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. today at (949) 629-2520 for a no cost initial consultation, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.
Critical Skills for the CEO/Owner
The Wharton Business School newsletter, published by The Wharton School, University of Pennsylvania did a recent poll of 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?
Leadership - 33%
Time Management - 28%
Negotiating - 22%
Understanding Your Financials - 17% 
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 the Achilles heel of most CEOs and small 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 to impact your business in a disciplined manner. CEO Advisor, Inc. works with its CEOs and small 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, 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 effectively to closing large deals. Strengthening your negotiating skills can yield a 100X return on your investment. If you are not a master negotiator and salesperson, invest in your negotiating skills and prosper in 2014 and beyond.
4. Understanding Your Financials
If there is one New Year's resolution that every CEO and small business owner should commit to is gaining a thorough understanding of the financials of your business. If you don't, you are flying blind! This includes your Profit & Loss Statement (Accrual and Cash basis), Balance Sheet, Financial Ratios, creating a 2014 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 uses their company's financials in growing their business to the next level.
Contact Mark Hartsell, MBA, CEO of CEO Advisor, Inc. today at (949) 629-2520 for a no cost initial consultation, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

CEO Advisor, Inc. (www.CEOAdvisor.com), a leading business advisory firm in Newport Beach, CA, is providing growth, sales strategy and marketing advisory services to the CEO of Creative Image Works, Inc. (www.CIW.com).

 

Located in Irvine, CA, Creative Image Works is a full service custom training solutions company providing web-based, video-based and instructor-led training systems for some of the most prestigious companies worldwide, including Taco Bell, Toyota, The Capital Group, and UC Irvine-Healthcare.

 

CEO Advisor provides business advisory services affordably and effectively with hands-on work performed to assist CEOs, presidents, business owners and executives of small and mid-size companies on growth, business strategy, business planning, business processes, sales strategy, sales team building, sales training, marketing, operations, finance, funding, mergers and acquisitions advisory services to grow businesses to the next level. 
 

As a trusted CEO Advisor® to business owners since 2004, the firm specializes in providing business consulting services in a one-to-one advisory role on a weekly basis to maximize sales, profits and business value to generate a substantial return on its client's investment.

 

Mark Hartsell, CEO of CEO Advisor, Inc. states, "Creative Image Works provides services that truly impact the productivity of some of largest and best companies worldwide.  Their expertise and capabilities are invaluable in many ways.  CIW is now in a position to expand and grow to better service multiple industries and they are on a clear path to success in achieving their goals."

 

Joe Mackrell, CEO of Creative Image Works states, "Better service to our current customers and expanding our capabilities and sales coverage to fully address our target markets are our primary goals and we are now clearly on track to accomplish these goals.  CEO Advisor has provided the expertise, direction and hands-on work to propel our growth to the next level."

 

About Creative Image Works, Inc.
Creative Image Works develops custom learning solutions for Fortune 2000 companies that drive organizational performance, including eLearning, video and instructor-led training, as well as performance support tools that engage people and enable them to learn, grow and do more.  For more information, contact Joe Mackrell, CEO at Creative Image Works, Inc. at (949) 387-1805, by email at jmackrell@ciw.com, or visit www.CIW.com for more information. 

 

About CEO Advisor, Inc.
CEO Advisor provides business consulting services affordably and effectively to meet the specific needs of small to mid-size companies in a wide range of industries, including technology, media, professional service firms, light manufacturing and many more.  CEO Advisor's mission is to advise CEOs, presidents, business owners and executives with the needed expertise and focus, coupled with hands-on advice and work performed to grow your business to the next level. Contact Mark Hartsell, CEO of CEO Advisor, Inc. at (949) 629-2520 in Orange County, CA, by email at mhartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.


Client Testimonial  
 

"I want to start by telling you that I am very pleased with what we've accomplished over the last four months. It would probably be more accurate to say that I'm pleased with what YOU have accomplished. Our CEO Advisor® did what he said he would; actually DOING things instead of just telling me what I needed to do. This is always my big concern when working with consultants. So many times they offer sage advice but fail to actually do anything more than talk. You have produced a volume of tangible work that is very useful to me and my management team as we work hard to build the company in 2008 and beyond. Thanks for driving us forward." 
 

CEO, Media Services Company
 

Words of Wisdom

 

"What this power is, I cannot say. All I know is that it exists...and it becomes available only when you are in that state of mind in which you know exactly what you want...and are fully determined not to quit until you get it." 
 

Alexander Graham Bell

Inventor


 

 

"The pessimist sees difficulty in every opportunity. The optimist sees opportunity in every dif

 

Winston Churchill

Prime Minister of the U.K.