Upcoming “State of M&A” Webinar

BLUF: We have an upcoming webinar on the current State of M&A. Please shoot us a note if you have topics in mind you’d like us to cover

I’ll just go ahead and skip all the trite pleasantries about how we are in the “new normal” and get right to it: are you curious what is going on with M&A deals? I mean… it’s been quite a year, right?

It’s been nearly one year exactly since I wrote “Is the M&A Window Closing?” And it’s now going on 6 months since I did a whole host of webinars and events on “M&A and COVID.” When I wrote the “Window is Closing” article, my biggest concern at the time was not a specific threat to the M&A market – rather a general sense of foreboding that this market is just too good to be true. (Wishing I had taken the odds on “global pandemic” being the thing that tumbles the economy….)

In any event, the market has definitely changed. On one hand, M&A deals are still happening! On the other… a lot depends on the industry and the health of the target company. And even in those industries that remain healthy the logistics of running a “process,” interacting with buyers / sellers, and diligence has often materially changed. We’ll be discussing those issues and more with a few industry experts.

Stand by for event logistics / registration!

COVID using a FCFO for cash flow forecasting

COVID-19 and Outsourcing Accounting

We are receiving a lot of requests from companies that are looking for outsourcing some or all of their internal accounting during the COVID-19 crisis. First, we are feeling the pain too, and definitely get where you are coming from. Second, from a work process and technology perspective we are well positioned to support. We’ve traditionally supported most of these assignments remotely, and we’re prepared to help.

If you’ve found yourself in the difficult position of reducing in-house overhead staff, please reach out to schedule a no-cost consultation.

Webinar: COVID, M&A and Valuations

Based on the the number of people asking questions regarding what COVID means for M&A, their valuations, and buying or selling a company, we thought a webinar was probably in order. We’ve got two dates coming up:

– 3/19 @ 11:30AM EST – Register Here https://hubs.ly/H0nFB4t0

– 3/24 @ 11:30AM EST – Register here https://hubs.ly/H0nFB3W0

Quantive’s Dan Doran will be leading both sessions (and both will be the same content – so pick your poison). Dan will present a few different playbooks to address:

– What should I do if I’m currently on the market?
– What should my decision matrix look like if I *wanted* to go to market this year?
– How will COVID impact my valuation?
– If my exit is on hold, how should I think about positioning / defending / growing value in the meantime?

Hope to catch you there….

Quantive’s Dan Doran Wins 2019 Exit Planner of the Year!

This year at Exit Planning Institute‘s 2019 Excellence in Exit Planning Awards, Dan Doran was awarded Exit Planner of the Year! This award is named after EPI cofounder, Peter Christman, and is the highest honor that you can receive in the exit planning industry. Please join us in congratulating Dan on such a fantastic achievement!

Read on to find EPI‘s take on Doran winning the Exit Planner of the Year award:

“It is awarded to a CEPA who can be directly tied to changing outcomes for business owners and leading advisors. This advisor makes significant contributions to the industry, exemplifies the core values and characteristics of EPI and the CEPA designation, while making a uniquely significant impact on the larger exit planning profession on a local, regional, national and/or international scale. Doran earned the CEPA designation in 2016 and has since become pivotal member of the CEPA faculty, EPI Capital Region chapter president and launched the EPI Rocky Mountain chapter. He is dedicated to engineering a road map for his clients in order to produce the outcome they desire.”

Congratulations to Joseph Strazzeri for winning 2019 Leader of the Year and to Vincent Mastrovito for winning 2019 Member of the Year!



It’s 4Q and We’re Coming in Hot! What to Expect from Quantive

Hey folks! Checking in as we turn the page into 4Q19- and it’s a busy quarter we have coming up! Like you we’re wrapping up loose ends, grinding on big projects, and buckling down to hit revenue targets. In the meantime, here’s a couple of things we have in the works:

Event – Aligning Shareholder Intent (EPI DC Chapter)

In our monthly event series we are chatting with a group of experts on what it takes to get shareholders headed in the right direction. A well aligned ownership group is a powerful force, and getting interested aligned is critical to high performance! Our good friend-of-the-firm Aaron Ghais will be moderating this one.  Register here.

Dan Doran Speaking @ CEPA Programs (Phoenix and Chicago)

Dan is an instructor at the Exit Planning Institute’s “Certified Exit Planning Advisor” program. He’ll be speaking on business valuation and value enhancement in Phoenix (October) and Chicago (November).

Doran a Panelist at 2019 Cyber Security Summit

Dan will be participating on the “Risk Mitigation / Financial Planning panel and discussing M&A Consolidation and post-merger integration. Program is October 8, 2019 in Tysons Corner, VA. Register here.

Event – M&A vs. ESOP Smackdown

You heard it hear first- M&A is a better option than an ESOP exit for most entrepreneurs. Of course our fellow panelists will vehemently disagree… which is why this is going to be such a fun event. Register here.

And that’s just the beginning! More to follow as we fill out our dance cards and close out FY19.  Hit us up if you’d like to chat!

Is the M&A Window Closing?

So here we are, halfway through 2019 and judging by the commentary from various talking heads, press releases, and my good friends in wealth management, it seems we really have no idea how strong the economy is. Maybe I’m just not a careful listener, but it sure seems like on one day the news is dire (tariffs! Iran! The jobs report!), and then the next day everything is fantastic (the stock market! GDP! The jobs report!) Within all of these mixed messages I think all of us have one nagging question – just how long can a good thing last?  

This leads me to probably the most frequent question I get from business owners and entrepreneurs that are thinking about selling.  The question is almost always a two part-er: how is the M&A market? And should I sell now or wait a bit to do X, Y, or Z? (And damn that last one is a doozy.  You can always wait for the next good thing to happen… but should you?).

Thanks to this constant stream of questions on this subject we’ve developed a playbook for sorting it out.  


Can You Afford to Sell Right Now?  

First off, this is hands down a generationally best sell side market.  If you want to sell a company and you can afford to, then by all means go to market.  How do you know if you can afford to sell right now? You need to answer two questions: what is the current value of my company?  And how much do I need? The former is best answered by a valuation – it’s a relatively modest investment to get clarity from an independent expert on how the market will price the asset you have built.  The second question should be answered by working with your financial planner. Getting granular on how your financial situation will look after the sale (using your current valuation as likely the largest input to that analysis) will help answer the question.  

Recapping: if what you have (i.e. the current value of your company) exceeds what you need (i.e. the capital that your financial plan requires in order to meet retirement goals), then by all means do-no-pass-go and go to market now.  


What Do I Gain by Waiting?  

For some folks the outcome of the first step will clear: you absolutely cannot afford to go to market. And clarity is great. But what seems to happen more often than not is a gray area. Perhaps the numbers are close but not quite there. That’s not a fun decision framework.

If you are in this category the real question is what do you gain by waiting? I’m constantly saying “the passage of time is not a strategy.” Waiting alone will not fix a value gap – we are already at the peak of the market. Values likely aren’t going to materially increase. Or put another way, there is at least an equal likelihood that values start to decrease.  

With this dynamic in mind, consider this: if you have an actual strategy to grow value and pursue that plan diligently, then waiting may make sense. On the other hand, if you are hoping that the market further matures and delivers a great value for your company… well I’d politely suggest that that isn’t the best strategy.    


What is the Probability of Success?

Let’s assume that you decide to pursue a value growth strategy to close your value gap. How confident are you that you can execute on plan?  

Similarly, entrepreneurs are constantly chasing the next big thing. We all do this – the next big project, the upcoming contract win, or maybe the new product launch. Healthy businesses always have a next new thing- it’s what feeds the beast and underpins growth. But that same cycle can feel like a hamster wheel with owners constantly chasing the next increment of success.   

In either case, it’s time to start handicapping the likelihood of successful execution. On our end, when we work with clients on value engineering assignments we do just that: by correlating actual impacts to enterprise value to both the probability of success and time to execution we can start to understand how value might change over time.  For instance, a given initiative might result in an additional $250k of income, require 18 months of time, and have a high likelihood of success. If the market currently would value that company at 5x, that initiative is worth $1.25M in enterprise value.  


What is the Probability that the Market Turns First?

Of course all this assumes that we have time to execute.  The market, being a nebulous collection of individual participants, doesn’t care about our plans whatsoever.  Take our example from above. What would happen if you executed on plan and in 18 months … but the market turns and now prices the company at a 4x? Well… it’s not going to feel good, that’s for sure. See below: 


In our example – that quarter million dollars of hard fought gains would yield exactly zero dollars in improved enterprise value in a market downturn. That’s not to say it’s not a worthy project – the company would still be delivering those earnings back to shareholders. But in terms of pursuing a sale you very well could be literally missing the market.  



We are always talking about how “timeline is everything.” If you have a short term horizon you can only impact so many things. Your decision to go to market now means you aren’t going to massively increase enterprise value suddenly. And that’s okay if the numbers work for you – it’s a great market! If you do decide you need to wait – be it for that next big win or to put in some hard work – that’s okay too. Just understand that you are on the clock and that a market downturn may erase the gains you’ve been holding out for. Finally, if you run the numbers and realize that you need to grow value beyond what can reasonably be expected in the short-term then it’s time to buckle in for the next 3-5 years and enjoy the ride.  

Need some help working on this decision matrix? Drop us a line.

Quantive Welcomes Susan Trivers!

We are so pleased to announce that Susan Trivers has joined the Quantive Team!

Susan brings 20 years of experience working with small to medium business owners to help them increase the financial value of their company. She engages with owners to ensure their focus and energy are aimed towards innovations for future growth and nurturing relationships with buyers in order to allow them to exit on their own terms.

You can read more about Susan here.

Welcome Susan!

Thinking About an Exit? Begin with the End in Mind.

Statistics tell us that for most entrepreneurs and family business owners, their operating business makes up about 80% of their net worth.  What’s more is that most business owners that we work with are what we think of as “business rich and cash poor.”  They’ve built a very valuable – yet very illiquid – asset.  The vast majority will rely on the liquidation of this asset in order to meet their retirement goals.  While that liquidation may be a traditional M&A exit (i.e. a sale to a strategic or financial buyer), other viable options could also be a sale to family members, to management, or even to employees.  Regardless, if the proceeds from the transfer are needed to fund retirement, creating a financial plan focusing on the liquidation outcome is the cornerstone of sound transition planning.

Why Traditional Financial Planning Often Fails

In one sense, it’s hard to knock financial planning.  For the most part, financial planning embodies every bit of sound advice we’ve ever received: be prudent with your money, save well, invest wisely, and plan for the future.   Most financial planners utilize sophisticated modeling techniques that are designed to help their clients understand what their retirement will look like based on their anticipated spending level, savings rates, and their current assets.  In fact, most planners frequently use a Monte Carlo simulation, running 10,000 simulations of their financial plan in order to help assure a 95% (or better) outcome.  What could go wrong?

Modeling using Monte Carlo – or any other technique for that matter – follows the old adage “garbage in, garbage out.”  Remember we discussed that for most business owners, the preponderance of their net worth is tied up in their business, and that liquidating that asset is required to fund retirement? That’s an incredibly important input to any financial model: how much will they actually be able to walk away with when they transition ownership?

In my experience, most financial plans for business owners are constructed using a “guesstimate” for this number. Putting a finer point on this: the most important input to the model that helps guide retirement is a guess.  Having been involved in thousands of valuation assignments, I can tell you with incredible certainty that this guess is almost always too high.

Getting it Right

Well before going to market, entrepreneurs need to understand two numbers.  First, after all taxes and fees, how much do they need to walk away from any transaction with?  This is where traditional financial planning shines.  A good planner will work with them to understand their lifestyle needs and turn that into a financial plan that makes sense for them.  Second, the owner absolutely must have a realistic understanding of the current market value of their company.  The key word there is realistic – having a best guess isn’t helpful and potentially undermines the whole financial plan.

With these two numbers in hand – what business owners need from a sale plus where their current market values stand – they have essentially created a road map for where they need to drive the company.  Is their company currently worth $15 million while their financial planner helps determine they only need $10 million?  Great – they’re well positioned to transition at the time of their choosing.  On the other hand, what if the numbers are reversed?  If the business is only worth $10 million but they need $5 million more, then it’s obvious that there is some significant work to do.

So, what’s next?  They need to create a growth plan that is geared not just towards revenue growth, but also towards growing enterprise value.  We’ll cover that in our next article.

Exit Planning: When to Engage a Business Valuation

If you are considering selling your company step 1 should be understanding what the company is worth. Just like selling a car: before you go to the dealership you consult Kelley Blue Book, right? The same logic holds for a business: you can’t price it well if you don’t know the value.

Why a Formal Valuation?

  • Your business is probably your largest asset. Now isn’t the time to work on the back of a napkin.
  • A qualified, certified Valuation Analyst can help get the RIGHT number for your business
  • A formal valuation serves as a blueprint for demonstrating value in your company
  • A certified valuation helps back up your asking price during negotiations

So When to get started?

Now. If you are considering a sale (or perhaps received an unsolicited offer), you can’t negotiate from a position of strength if you don’t know your value. Worst case scenario, you engage a valuation, the value is lower than you would like, and you have a roadmap for how to get to the number you need.

Using a Valuation for a Shareholder Buyout

Shareholder buyouts occur frequently in closely held businesses and often are costly for parties that feel that the payout is unfair – whether too high or too low.

Triggering events for buyouts happen all the time, yet as a business owner they are often not events you spend time thinking about every day. They include:

  • Retirement of a shareholder
  • Shareholder seeking to exit partnership
  • Death of a shareholder
  • Inability to continue working together
  • Shareholder involved in a divorce

They can also be costly if the ownership interests transferred are not valued properly, primarily due to the time and expense associated with litigating shareholder disputes or resolving transactions with the Internal Revenue Service. Even when a buy-sell agreement exists, it may be prudent for the shareholders to engage the services of a trained and accredited valuation professional.

Valuation professionals help mitigate the risks associated with a shareholder buyout by preparing a supportable, well documented valuation report that is based on a well-defined assignment, comprehensive data gathering, and a thorough analysis of the factors affecting the value of the business. The failure to engage a professional to work through valuation leaves the parties involved open to acrimony, drawn out negotiations, and the potential for costly litigation.

Defining the assignment

Confusion and misunderstandings arise in shareholder buyouts when the valuation assignment is not carefully defined between the appraiser and the shareholders for whom the valuation is being prepared.

The most critical aspects of defining the assignment are choosing the appropriate standard of value and properly addressing the impact to value of control and minority interests.

A common standard of value is fair market value, under which a minority interest is valued with the appropriate lack of control and lack of marketability discounts. However, shareholders in a buyout situation may prefer that 100 percent of a company be valued regardless of the ownership interest that will be transferred, since they may be negotiating based on the pro rata value of the entire corporation.

Another standard of value used in shareholder buyouts is fair value, which is commonly used in dissenting shareholder valuations and minority oppression cases. Because fair value is a statutory standard defined by state case law, the business appraiser should further clarify in the engagement letter what discounts will or will not be considered in a valuation under the fair value standard.

Tip: Understanding standards of value is critical, as various discounts for control and marketability can have an enormous impact on the value of the interest appraised.

Gathering the data

Once we have defined the parameters of the assignment the appraiser must gather data, to include both company specific information and industry information. Part of this process normally includes a management interview to both gather data and clarify any of the information provided.

Of concern is access to reliable company data. Depending on the context that the valuation is being performed under, management may have a vested interest in the outcome of the valuation and their answers may be skewed.

A skilled appraiser will determine whether management’s statements makes sense based in context of the company’s within its industry and the market factors that drive the industry.

Analyzing the data

The next step in the appraisal process is for the appraiser to analyze the data gathered and to develop valuation models. An appraiser must ordinarily consider each valuation model or method that is likely to be applicable to the subject company.

Approaches will often include the asset approach involves determining a value indication using the value of the assets of the business less the liabilities. Since the net asset value does not include the intangible value of the company, the asset value will often “set the floor” for any valuation.

The income approach involves ascertaining the value of the future economic benefit stream of the company in today’s dollars. The anticipated benefits are usually based either on historical income statements, adjusted to reflect the ongoing earnings of the business, or forecasted income statements.

Of critical importance is making normalizing adjustments. As small business’ financial statements are often managed to a tax purpose normalizing adjustments are often required to indicate the true economic benefit of ownership. (That being said, minority owners may not always be entitled to such adjustments based on their lack of control. This is a critical point to understand when Defining the Engagement.)

Tip: Normalizing adjustments can have a very large impact on value. Discuss with your valuator if they are appropriate for your situation.

Using the Market Approach, the appraiser will use actual market transactions involving either sales of entire businesses or minority interests. This can provide objective, empirical data for developing value measures that apply to the valuation. This empirical data is critical in valuations for the purpose of shareholder buyouts, because it provides support for values derived under the income approach.

Timing Considerations

Ok, so you get the idea as to how the process works for a shareholder buyout.  But when do you get the valuation?   In our experience shareholders often take a “wait and see” approach, often letting the other party take the lead in pricing discussions.  Negotiating theory tells us that this is a bad move.  But even more importantly, waiting tends to exacerbate the gap between parties – both financially and personally.  More often than not this leads to more strife – which leads to more lawyers, accountants, and valuation folks driving up expense!   With many years working on these matters time and again, we strongly feel that it’s best to be proactive when it comes to getting the valuation completed.


Even if a shareholder does not agree with the opinion of value, the shareholder is less likely to challenge a comprehensive, well documented valuation report by an accredited professional.

When the shareholders involved in a transaction understand and agree with the valuation process, they are more likely to negotiate successful transactions and avoid potentially costly and lengthy litigation.


  • What is the standard of value?
  • Fair Market Value, Fair Value, or something else?
  • What Discounts will be taken? What portion of the business will be valued?
  • Involve your analyst early
  • Insure data discovery is robust
  • Avoid the “wait and see” approach!