Why Companies Don’t Sell

As I write this month’s newsletter, I am working on an exciting new project that will put a powerful tool in the hands of our readers and clients.  Called the Business Sellability Index, it measures the qualitative and quantitative factors of a company that determine how easy it will be to sell, and is founded on the principle that sellability is distinct from valuation.  Stay tuned for its release; we plan to offer it for free for the first couple of months, after which we may begin charging a fee.

In the meantime, I want to share data from a very insightful, independent market research report, and provide commentary on its findings.  Each quarter, the Pepperdine Private Capital Markets Project, run by professors at the Pepperdine University Graziano School of Business, releases a report assessing the market conditions for small business transactions.  In one of their recent reports, they listed five common reasons that companies don’t sell and are subsequently taken off the market (“%” indicates percentage of survey respondents who gave this answer): Continue reading

Say Yes to the Offer

We frequently work with companies in consolidating industries.  When an industry goes through a period of consolidation, characterized by a few large companies actively and aggressively acquiring their smaller competitors, a unique set of dynamics take hold of the market.  The number of companies being sold increases, as do the prices for which these companies sell.  As a small business owner, if you notice your industry beginning to consolidate then you have a rare opportunity to make a significant amount of money.  But, you can only achieve this if you are willing to say yes.

Two mistakes that small business owners frequently make are believing that the consolidation will last forever and believing that the valuations achieved during periods of consolidation are intrinsic to all companies in the industry.

Industry consolidators, whether corporations or private equity groups, approach M&A with the general objective to acquire as many companies as possible in as short a time as possible.  Eventually, they reach a saturation point.  When that happens, many put the brakes on their acquisition programs, becoming more selective, while others stop buying altogether.  The focus can shift to greenfield expansion or simple organic growth. Continue reading

Year-End M&A Report: Audiology Industry

December 2012 marked one of the busiest months for U.S. M&A activity in recent memory, and the audiology industry made its fair share of contributions.  Last summer, we released our mid-year M&A report for the industry predicting that total deal volume for the year would be $60-75 million.  We will revise that number upward in this report, because
at least $30 million worth of transactions took place in December alone.

We now believe 2012 accounted for approximately $100 million in transaction volume.  Our estimates consider only the acquisition of privately owned audiology or hearing aid dispensing practices in the United States and do not measure transactions involving other entities within the industry.  Furthermore, this figure only measure deals initiated in 2012.  Many deals involve deferred payments, and  millions of dollars were spent covering obligations incurred from transactions that closed in previous years; however, in order to accurately assess deal volume for a given year, only transactions closed in that year can be measured. Continue reading

Bridge Ventures Announces 3 New Years Eve Deals

January 3, 2013

For Immediate Release

Bridge Ventures announced today that it assisted in three transactions that closed on December 31, 2012.  This marked four deals for Bridge in month of December, bringing an already successful 2012 to a strong finish.

Bridge represented the sellers on an exclusive basis in all three transactions, which involved companies in the audiology and hearing aid industry located in Illinois, Texas, and Colorado.  Each deal involved the acquisition of a privately owned, local or regional company by a large, national provider in the same industry.  At the request of the parties involved, specific company names have been withheld.

Like most of Bridge’s clients, these companies operate in a rapidly consolidating industry.  Bridge’s experience with consolidating sectors and its extensive  industry contacts allowed it to attract multiple qualified and well-capitalized buyers.

Craig A. Castelli, Managing Director of Bridge’s Chicago office, led all three transactions. Continue reading

Summarizing the American Taxpayers Relief Act of 2012

In the wee hours of January 1, 2013, Congress averted the fiscal cliff by passing the American Taxpayers Relief Act of 2012.  After months of speculation over the future of taxes and spending, Congress passed a bill that raises taxes on all Americans while deferring spending cuts until the Spring.  Those Americans deemed “wealthy” by the politicians were hit hardest.  The following is a brief summary of the changes most likely to impact the average Bridge Ventures client, a small business owner in one of the top tax brackets.

Continue reading