Adams Price recently joined The Forbes M+A Group as a Managing Director. With over 20 years of experience in strategic planning and execution of mergers and acquisitions, Mr. Price adds yet another layer of industry expertise to Forbes M+A’s existing team of senior level advisors. We had a chance to sit down with Price and ask his advice for anyone considering selling a company.
Q: I’d like to start by asking how you got into the M&A business?
A: Well, you’ll probably be surprised to learn that I started my career designing and developing software. With a Bachelor of Science in Computer Science and Business, I spent my early days designing and writing software for several industries, such as manufacturing and distribution, financial services, mining and engineering. From there, I moved into consulting where I managed a broad range of operational activities for global, multi-million dollar companies. Working with these companies provided first-hand experience on growing company value as well as identifying and executing strategic mergers and acquisitions. I found it was an area I enjoyed and have been working in M&A for the past 10 years.
Q: Do you think your non-traditional route to M&A provides any unique benefits for Forbes M+As’ clients?
A: Yes, definitely. I’ve been on both side of the negotiating table so I understand the drivers and desires of each side. Plus, I have deep experience within the technology arena. This is important for clients because I can help uncover the strategic value of a business, beyond just the financial aspects.
Q: Now, tell me what you are seeing in the market today.
A: There are a lot of companies on the market right now. But relatively few transactions are being completed. One can point to many reasons for the low success rate, availability of financing (or lack thereof), availability of alternative investment vehicles, etc. But in truth, transactions for good companies – strong performing companies with good management and a strong growth trajectory – are happening every day. And they are going at a premium. Demand for solidly performing, growing companies is very high and the EBITDA multiples are reflecting that fact.
Q: That makes sense. Thanks. Let’s talk about business owners thinking about selling. What advice would you give them based on your experiences?
A: Well, the absolute first step is to learn about the merger and acquisition process. Too many owners think they can complete a transaction in a few months. In reality, it can be long process, especially if you want get the best price. Sellers need to know what buyers are looking for and when the best windows of opportunity are. When best to go to market with a company changes over time, depending certainly on the performance of the company itself but also on the market in general: Are their acquisitive players who are active in the market? Are there macroeconomic conditions that favor marketing a company? Are there regulatory constraints that are hindering transactions or negatively affecting the enterprise values in an industry? These questions and more need to be taken into consideration when thinking about marketing a company.
Which leads me to my second piece of advice – it is very important to work with a knowledgeable transaction advisor. Talk to several firms. Get referrals from your CPA or legal counsel on which firms to approach and why. In any case, look for processes, styles and knowledge base within an organization. You also need to make sure senior level advisors are handling your account from start to finish.
Q: Why is it so important to work with senior level advisors?
A: Certainly senior level expertise is important in attracting the right type of buyer. But, once you get to negotiations it is absolutely critical to have advisors who can carefully prepare and review company information to ensure the highest value is honestly perceived by the buyer. Also, sellers need advisors who can carefully control the process and generate the best outcome for them. This can only be done by advisors who have completed many, many transactions.
Q: Can you tell us about how to determine value?
A: Yes. There are the standard factors to be considered such as the amount of cash flow and type of assets. But it is also important to put together a risk profile which looks at items such as the strength of a management team and the quality of revenues. Some questions to ask are: Is the revenue stream reoccurring or project based? Is it from 3 customers or 300 customers? How persistent will the cash flow be over time? Also, it is important to understand how the type of industry affects the value at a given time. Right now, for example, software-as-a-service has a high value, while social media is waning a little.
Q: That’s a lot of factors to consider.
A: Yes, that’s why I say anyone thinking of selling should seek expert advice. Securing the highest premium comes down to understanding all the value drivers and how to exploit them. You need to know who the best buyers are, tailor a message for each one and then go after them.
Q: You’ve provided some great advice and given potential sellers a lot to consider. Thank you so much for your time and good luck at The Forbes M+A Group.