IN THIS ISSUE:
www.masource.org
NO.04
ISSUE
WINTER 2024
© M&A Source. All Rights Reserved. | The insights and opinions expressed herein are those of the authors and do not represent professional counsel nor an endorsement by M&A Source.
The Bridge
U P D AT E S & I N S I G H T S
F O R T H E L O W E R M I D D L E M A R K E T
• Page 04
Letter from the Chair
• Page 08
Market Pulse
• Page 14
Difficult Selling Decisions
• Page 06
Member Interview
• Page 10
Selling Your Business
A QUARTERLY PUBLICATION
OF THE M&A SOURCE
2 | T h e B r i d g e | W i n t e r 2 0 2 4
Updates + Insights
for the Lower Middle Market
T h e B r i d g e | W i n t e r 2 0 2 4 | 3
Content.
Unpack some of the past, present,
and future efforts of M&A Source.
LETTER FROM THE CHAIR
04
Discover common pitfalls that can
kill your deal before it gets started.
SELLING YOUR BUSINESS -
COMMON DEAL DRIVERS
AND KILLERS
10
Explore a snapshot of data from the
Q3 2023 quarterly report.
MARKET PULSE
08
Read personal insights into a career in
M&A with our latest member interview.
AN INTERVIEW WITH
M&A SOURCE MEMBER,
KATRINA LOFTIN
06
Dive into why it can be so hard
for business owners to make wise
selling decisions.
WHY IT’S HARD FOR SOME
OWNERS TO CONSIDER SELLING
THEIR BUSINESSES
14
NO.04
ISSUE
WINTER 2024
The Bridge
A QUARTERLY PUBLICATION
OF THE M&A SOURCE
4 | T h e B r i d g e | W i n t e r 2 0 2 4
Chair’s Letter
I hope this letter finds everyone well and
enjoying a fun-filled and prosperous winter!
I’m writing this from frigid Nashville where I’m
currently feeding a much-needed fire in my
living room, which is reminiscent of how I see
my role moving into the Chair’s seat of M&A
Source’s board.
Fanning the Flames
•
Raised over $50,000 from members for BIEF with
matching donations from M&A Source.
•
Hired Digital WOW, a digital online marketing firm
to target experienced members on LinkedIn and
grow our experienced advisor base - a central
focus of our strategic plan.
•
Purchased a new learning management system
that will elevate the M&A Source brand and allow
us to add functionality for members like making
our catalog of online courses (that are currently
being recorded!) accessible.
•
The Bridge was moved to an online magazine eZine
from what was previously an email newsletter.
•
Refined our awards program and criteria for the
spring conference.
•
Added member benefits like ClientsIO, Vertical
IQ, and SourceScrub (which is now available at
½ price due to MAS supplementing the cost on
behalf of its members!).
•
We added (and continue to add) new courses to
our conference lineup!
•
We added a new women’s initiative to our
conference offering, which will continue this year!
•
We divided the deal market into two days and
added private equity groups to our membership
•
And we continue to modify (Up!) our requirements
for the M&AMI certification (to $5M EV deal from
$1.5M previously). This change will take effect in
July to the new 2024 requirement so get your deals
in now if you’re close.
The bottom line is that there are a lot of reasons
to be excited about the organization right now,
outside of just the spectacular growth and the
growth of our members’ practices. Thanks to
all of you members we’re able to provide more
benefits and resources to help us all do more
deals! But we’re not done.
As we move forward, your input will remain critical
to our collective success. The flame of progress is
a communal effort, and I encourage each of you to
share your thoughts, suggestions, and aspirations.
Feel free to reach out to me at any time…or
catch me in Louisville at our Spring Conference
+ Deal Market, May 13-15. Mark your calendar -
registration will open mid-February!
I’ll see you there where we can celebrate our
past accomplishments, embrace the present
momentum, and look forward to a future where
the flames we fan today warm up deal flow for
those who will follow.
Here’s to fanning the flames of success!
Best Regards,
Lamar Stanley
M&A Source 2024 Chair of the Board
It is with an exhilarating mix of enthusiasm and
gratitude that I step into the role of Chair for M&A
Source. The title, “Fanning the Flames,” aptly
captures the spirit of what lies ahead for all of us.
Just as I tend to the fire in my living room, I see
my responsibility as Chair to nurture and amplify
the vibrant momentum ignited by my predecessor,
Scott Mashuda (and the chair’s before him),
the dedicated Board, and all of our exceptional
members who continue to keep our organization
and community strong.
Over the past year, we’ve enjoyed advancements
in many areas, including but not limited to:
T h e B r i d g e | W i n t e r 2 0 2 4 | 5
Our upcoming episodes feature in-depth discussions on sale
leasebacks and exclusive M&A Source member benefits. Stay
ahead in your field by subscribing - just scan the QR code and
choose your preferred platform. As a member of the M&A Source
community, this is your gateway to staying connected, making the
most of your membership, and enhancing your M&A expertise.
Don’t miss out - subscribe now and join
a community dedicated to professional
growth and excellence in M&A!
Dive into the world of mergers
and acquisitions with the M&A
Source Podcast, your go-to
resource for industry insights
»
6 | T h e B r i d g e | W i n t e r 2 0 2 4
Member Interview
Tell us about your pre-M&A career
and how it led you to doing this work?
Prior to getting into brokerage, I owned a small
car dealership with my dad. That was a great
experience as it taught me all the reasons why
most Seller’s want to sell and how difficult
that decision can be. A business broker was
canvasing the area and came in and asked if
I wanted to sell. That cold call led me to list
the business and later go to work for the same
brokerage.
What personal characteristics and
strengths have supported your
success in this industry?
I was lucky to have Grandparents that were
business owners and taught me about
business very early. My hobby growing up was
racing cars so I had to learn to be tough and
resilient, both essential skills in our industry.
What is your greatest M&A
accomplishment?
I think my greatest accomplishment has been
helping Seller’s reap the rewards of years of
hard work and stress. When I can sit back now
and talk to some of the people I have been
fortunate enough to work with and see how
happy and stress free they are, it makes me
want to do deals forever!
With regard to the majority of your
engagements, do you work as a team
or do you handle things on your own?
I take the lead on my engagements, but it
is definitely a team sport. We have great
support in our office and I also have a team
of professionals I rely on such as good
accountants, attorneys, lenders, and due
diligence specialists.
An Interview with
M&A Source Member,
Katrina Loftin
Katrina Loftin
CBI, M&AMI, M&A Business Advisors
T h e B r i d g e | W i n t e r 2 0 2 4 | 7
Do you just do M&A or do you provide other
services – valuations, consulting, etc.?
My main focus is engagements, but I also assist Seller’s
in planning for their eventual exit, often times, years in
advance which typically includes valuations.
What is the biggest mistake you have made
when working on a deal?
Early in my career I excluded a buyer from an engagement
for the life of the listing. They ended up buying the
business in the 11th month of my engagement after I had
done extensive work on the transaction. Since then, I’ve
only excluded a buyer for a certain amount of time or limit
the fee for them.
What are the three most important qualities
that you think a good M&A advisor needs to
have?
1. Structured - you have to be organized and diligent with
systems in place. Structured, not rigid.
2. Resilient - you have to have the ability to get up, brush
yourself off and get back to work no matter what happens.
3. Creative - Deals are getting more complex and you have
to think outside of the box to get transactions completed.
What is your most interesting deal that you are
working on today?
I have an old school mail-order catalog business that is
killing it. Pretty interesting with all the technology available
today that a business like that is doing so well.
How long have you been an M&A Source
member and what do you get out of your
membership?
I have been a member for 25+ years. Not only does
M&A Source provide you with amazing benefits, but
I have also learned so much from the classes and
other members over the years.
As a seasoned M&A advisor, what
changes and trends do you see on the
horizon that will impact on M&A?
I think we will see more competition among advisors
and more people getting into our industry.
What advice would you give to new
people entering the profession?
Take as many classes as you can afford, mistakes
are costly in our industry. Find a mentor and learn
as much as you can from them. If you get that great
engagement and you don’t really know what you
are doing, ask a senior advisor to help you, it is well
worth splitting the fee with them for the training.
Please tell us something about yourself
that has nothing to do with your M&A
career?
I’m a big sports car person. I love going to car shows
and races. I was fortunate enough to race cars for
25 years. Tons of fun! I also really enjoy being on the
Board of the National Automobile Museum.
“When I can sit back now and talk to some of the
people I have been fortunate enough to work with
and see how happy and stress free they are, it
makes me want to do deals forever!”
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Market Pulse
Insights From the
Q4 2023 Report
THE MARKET PULSE IS OUR QUARTERLY SURVEY OF ACTUAL
TRANSACTION ACTIVITY AND CURRENT BUY/SELL TRENDS, PROVIDING
CRUCIAL INSIGHTS TO PROFESSIONAL ADVISORS, BUSINESS OWNERS
AND BUYERS/INVESTORS. QUARTERLY EXECUTIVE SUMMARIES
ARE AVAILABLE ON OUR WEBSITE WITH THE FULL SURVEY REPORT
RESERVED FOR SURVEY PARTICIPANTS.
THE Q4 2023 SURVEY RESULTS ARE BEING COMPILED FOR RELEASE
LATER THIS FEBRUARY.
Get More Insights
T h e B r i d g e | W i n t e r 2 0 2 4 | 9
2M - 5M
5M - 50M
10
12
14
MEDIAN NUMBER OF MONTHS FROM
LISTING / ENGAGEMENT TO CLOSE
12
TIME
AMOUNT OF EXIT PLANNING PRIOR TO MARKETING BUSINESS
NONE
LESS THAN 1 YEAR
BETWEEN 1 AND 2 YEARS
BETWEEN 2 AND 3 YEARS
BETWEEN 3 AND 5 YEARS
GREATER THAN 5 YEARS
N/A REPRESENTED BUYER
45%
29%
13%
8%
5%
0%
0%
29%
35%
12%
24%
0%
0%
0%
TIME
MULTIPLE TYPE
SDE INCLUDING WORKING CAPITAL
SDE NOT INCLUDING WORKING CAPITAL
EBITDA INCLUDING WORKING CAPITAL
EBITDA NOT INCLUDING WORKING CAPITAL
TTM EBITDA INCLUDING WORKING CAPITAL
TTM EBITDA NOT INCLUDING WORKING CAPITAL
7%
56%
27%
7%
2%
0%
6%
0%
50%
17%
28%
0%
0.0
2.0
4.0
6.0
3.0
2M - 5M
5M - 50M
3.8
MEDIAN SDE
MULTIPLE PAID
1 0 | T h e B r i d g e | W i n t e r 2 0 2 4
As a rule of thumb, all good deals die seven times. Most
business owners are under the impression sales are
simple, like real estate transactions. However, that’s
an unfair comparison. People tend to be stoic about
investment real estate, but when they have dumped
their heart and soul and decades of their lives into their
business, the selling process is emotional and stressful.
It’s not dollars and cents to the seller; it’s personal. To
the buyer, the economics have to be just right, the risks
uncovered and mitigated to justify an expensive bid. To
both sides, allowing too much time to pass will cause all
mole hills to turn into mountains. As a result, people act
irrationally and walk away over superficial negotiating
points, but just as quickly as things fall apart, they can
come back together.
Taking your company to market for sale is an emotional
and difficult journey at the best of times, and it’s vitally
important to put your best foot forward to maximize your
value amidst incredible competition. Business owners
should engage with an experienced M&A advisor with
deal experience. A firm with growth advisory services
can assist entrepreneurs in understanding the value
of their most valuable asset: their business. After
instigating and implementing a plan for scaling the
business, an advisory firm can then manage the entire
sales process and facilitate a successful transaction.
What kills a deal before it gets started?
While every M&A deal is different, there are key attributes
which attract buyers, yet others which could make them
walk away. Entrepreneurs are great at running their
business, but they rarely look at their company through
the buyer’s lens. Sellers must check their ego and
objectively evaluate their companies in a new light -the
way buyers do. They must ask themselves: “What can we
showcase to a buyer? What opportunities will strengthen
our sellability and maximize value?” An advisory firm can
help the seller understand there’s more to a business sale
than hard work and the American Dream.
These are common drivers of enterprise value
which can kill a deal before it gets started:
#1:
Financial Performance and Accurate Financial Records
There’s an age-old adage that buyers buy companies which
are thriving, not surviving. Strong financial performance
year-over-year paints a picture of a healthy, growing
company with the opportunity to scale. None of this would
be possible without accurate and complete financial
records. Accrual-based financials are the language of
business, so sellers should consider a financial statement
audit, or even hiring a fractional CFO or CPA firm to clean-
up financial statements. Financial statements can be seen
as the resume for a business. Buyers may walk away when
financials appear inaccurate or incomplete.
#2:
Missing or Weak Management Teams
All buyers spend a significant amount of time understanding
the organizational structure of companies they might
acquire, especially the strength and experience of the
management team. There are many questions to answer
in due diligence. Can management take the company to
the next level? Will they stay on with the company post-
acquisition? Are there management gaps which need to be
filled? Are there egos and conflicts which could derail the
business downstream? If the answer is yes to any of these,
the seller should remedy this before going to market.
#3:
Cash is K ing
In one case study, a business owner packaged a new
line of soy sauces with unique and creative ingredients.
Selling Your Business:
Common Deal Drivers and Killers
ONE OF THE MOST COMMON PHRASES OFTEN HEARD IN MERGER AND ACQUISITION
NEGOTIATIONS IS: “THE DEAL IS DONE; WE’RE NOT BUYING THE COMPANY.”
Steve Conwell
CEO of Final Ascent
Jude David
Vice President, Mergers &
Acquisitions with Final Ascent