IN THIS ISSUE:
www.masource.org
NO.01
ISSUE
SPRING 2023
© 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 10
Market Pulse
• Page 18
Benefits of Assets
Exchange Structure
• Page 06
Member Interview
• Page 14
How to Negotiate Better
• Page 22
What is My Company
Really Worth?
A QUARTERLY PUBLICATION
OF THE M&A SOURCE
2 | T h e B r i d g e | S p r i n g 2 0 2 3
Updates + Insights
for the Lower Middle Market
T h e B r i d g e | S p r i n g 2 0 2 3 | 3
Content.
Learn more about the M&A Source’s
efforts to move the chains as the Source
for all things LMM.
LETTER FROM THE CHAIR
04
Insights to help you get the most
out of an agreement and business
relationship.
HOW TO NEGOTIATE
BETTER BUSINESS DEALS
14
Explore a snapshot of data from the
Q4 2022 quarterly report.
MARKET PULSE
10
Blue River Financial Group unpacks one
of the most important questions to ask
before merging or selling.
WHAT IS MY COMPANY
REALLY WORTH?
22
Linnea Westlake discusses her
experience working as a lower middle
market professional.
MEMBER INTERVIEW
06
Understanding the benefits and mechanics
of this transaction structure.
BENEFITS OF ASSET
EXCHANGE STRUCTURE
18
NO.01
ISSUE
SPRING 2023
The Bridge
A QUARTERLY PUBLICATION
OF THE M&A SOURCE
4 | T h e B r i d g e | S p r i n g 2 0 2 3
Chair’s Letter
Welcome to the first ever e-zine edition of the
M&A Source Bridge! This new format brings
you even more robust LMM focused education
and insights, all with the aim of advancing your
acumen and success. It’s just one of the many
exciting enhancements we’ve intentionally
enacted in pursuit of our aim to be the Source
for learning, networking and deal opportunities
in the LMM transaction community.
Another exciting enhancement is our 2-day
Deal Market, first introduced at our 2022
Fall Conference and based on overwhelming
feedback, featured again at the upcoming
Orlando Conference + Deal Market, May 23-
24. This expanded Deal Market increases the
level of collaboration and opportunity exchange
between private equity, family office, search
fund, and intermediary members. Our Deal
Market has SOLD OUT and with more than 300
people in attendance, it’s definitely where the
serious dealmakers within our industry come to
make connections and fill their pipelines.
With education and excellence being our
primary pillars, we’re also focused on
redesigning our courses and developing clear
educational paths to meet the spectrum of
needs ranging from newer advisors to tenured
investment bankers. We want to accelerate the
success timeline of the new entrant and support
the advanced development of the tenured
professional, and in doing so, will be shifting to
a multi-channel delivery model for our courses.
This means you’ll have access to a wider
learning selection for your needs, year-round.
With so much happening it can be hard to keep
apprised, so here’s a quick punch list of other
recent programs and enhancements:
•
The new M&A Source website provides
a more user-friendly experience, richer
member profiles and easier access to the
content you’re looking for with an industry
leading brand image.
•
The new monthly “Chair’s Corner” helps
you stay updated on initiatives within the
organization and increases communication
between members and leadership.
•
Our newest member benefit program,
Digital WOW provides a significant savings
on digital marketing services for your
practice, thereby helping you drive more
leads. In total, the annual savings of our
member benefit programs now easily
exceeds $7,000 and we’re continuing to
explore more programs.
•
Our recent virtual course on selling Hotel/
Hospitality businesses geared towards
emerging advisors was a sellout.
•
We continue to see 30+ students in each
CM&AP training class hosted by Kennesaw
State University’s Coles College of
Business.
I could go on, but as I think about this list,
two things are apparent. One, we’re moving
the chains – we have a list of things we want
to get done and we’re checking the boxes.
We’re improving across a number of functional
areas, building member value and growing the
Association as a result. Two, none of this would
be possible without our volunteers. So firstly,
a heartfelt and sincere thank you for all that
you do. Secondly, I invite those not currently
involved to consider doing so. You’ll not only
become an important part of our association’s
growth story, but you’ll also make some of your
strongest and best professional connections
when you get involved.
To that end, I invite all of you to attend our
open Leadership Meeting being hosted during
Moving
the Chains
T h e B r i d g e | S p r i n g 2 0 2 3 | 5
breakfast at the Conference on Wednesday,
May 24th. You’ll hear updates from current
Board Members and Committee Chairs and
learn about the different ways you can become
a part of what we’re building. Our industry and
our association requires the continuous energy
of new leaders to advance our brand as “The
Place for Lower-Middle Market Deals.”
In closing, I must comment on the historic
passage of The Sales and Brokerage
Simplification Act which took effect on March
29, 2023, exempting from SEC registration
M&A brokers and intermediaries representing
privately held companies for sale with earnings
of less than $25 million or revenues less than
$250 million. The monumental passage of
this Bill is the culmination of a nearly 20-
year industrywide effort where many have
donated time, energy, knowledge, and financial
resources in what became known as “The
Campaign for Clarity.” The impact of this on the
LMM deal community is huge, and on behalf of
the entire M&A Source we thank you for your
efforts.
Our Conference + Deal Market is just around
the corner and I look forward to seeing many of
you there and to recognizing our association’s
top performers at our awards ceremony. For
me personally, this is where I come to build my
toolbox, get new perspectives and develop
new relationships that will impact my business
for years to come. So If you can’t be with us in
Orlando, I look forward to seeing you at the Fall
Conference + Deal Market in NC October 15-18.
Best Regards,
Scott Mashuda
M&A Source 2023 Chair of the Board
Learning
Webinars.
Free, Timely Discussions for
the LMM Community
»
View Upcoming Webinars
Every month, M&A Source brings you live
webinars featuring practical advice and updates
from industry experts on a range of topics from
financing and marketing to legal and economic
forecasts. M&A Source members can access our
robust library of webinar recordings by logging in
to the Member Resource Portal.
6 | T h e B r i d g e | S p r i n g 2 0 2 3
Member Interview
Tell us about your pre-M&A career and how it
led you to doing this work?
I spent a large part of my career in corporate
life – mostly building/leading client facing teams
(sales, business development, professional
services). I was a technical sales/biz dev
oriented person comfortable with large,
complex, multi-faceted “solutions” (term over
used for a couple of decades) with long tedious
sell cycles. Early on I helped smallish clients
start their businesses with the products and
services being offered. Later, I was helping
large clients “right-size” (also over used term
for at least a decade) with cost savings derived
from “solutions”. For a while I took on the role
of “driving” “bleeding edge” technology into
the marketplace (aka almost impossible but
I’ve always been up for a challenge). In the
early years of corporate life, I had extensive
freedom and latitude to do entrepreneurial
things and loved it. As time went on, I felt like
I was continually dealing with the “square peg,
round hole” problem…I didn’t’ fit. I enjoyed
a very fun entrepreneurial time before the
“dot bomb” working with fast growth startup
companies helping them gain traction and
move toward something beyond negative IRR
but that sweet phase came to an end with that
era. Eventually my role morphed into helping
the companies I worked for kick things up a
few notches in preparation for the sale of the
company. I did that a bunch of times and finally
I was exhausted by being in startup mode every
four years, not to mention weekly plane rides
– sometimes all over the world – while making
others wealthy. My dad was the 50’s “mailroom
to boardroom” guy (large HVAC brand) but
he always liked his internal M&A experience
the most. That stuck with me and at least
subliminally, likely edged me toward what I’m
doing now.
What personal characteristics and strengths
have supported your success in this industry?
This is not an easy business within which to be
successful. Nothing we do is “rocket science”
“Nothing we do is “rocket science” so to
speak but it takes dedication, empathy,
significant experience and a lot of work.
It is as much art as science.”
Linnea
Westlake
Linnea Westlake
Linnea Westlake is owner of Linnea Westlake
Advisory and the San Diego office of
Transworld Business Advisors. Linnea is a
Certified Business Broker (CBB), Certified
Business Intermediary (CBI), Exit Planning
Advisor (CEPA), M&A Professional (CM&AP)
and M&A Master Intermediary (M&AMI). She
is a member of the California Association of
Business Brokers, International Business Broker
Association, Exit Planning Institute, M&A Source
and ProVisors. She is currently waiting for
final approval of her M&A Master Intermediary
designation.
T h e B r i d g e | S p r i n g 2 0 2 3 | 7
so to speak but it takes dedication, empathy, significant
experience and a lot of work. It is as much art as science.
Over the last 5-6 years, I have often thought that I should
have pulled the trigger and gotten started sooner, but
all my prior experiences (and at times frustrations) have
prepared me well for this industry and the journey I share
with my clients. I have tremendous admiration and respect
for the entrepreneurs I work with. I have personally lived
much of what they go through “day to day” and I am
genuinely “driving” for the best possible outcome for them.
What is your greatest M&A accomplishment?
That I am successful because of and for my clients. Some
have been very small and others lower middle market. A
large part of my business comes from past clients (both
the buyers and sellers) – even some with whom the
journey was arduous. Actually, most are arduous because
of all the spinning plates. There have been a bunch of
businesses that I have taken to market a few years after
1st conversation. I helped them assess what they needed
to do to get the exit they wanted – and they did it! I really
enjoy working with entrepreneurs with technical or other
specialized professional background that have “built a
better mouse trap” and created a company that is now
too big and/or more complicated that what they want to
manage but still a little too small for most PE or VC. The
sellers want to take chips off the table and let the buyer
take it to the next level. I love this stuff.
With regard to the majority of your engagements, do you
work as a team or do you handle things on your own?
I generally quarterback the entire engagement. It is just
simpler. That said, I am blessed with an extensive network
of good people I can tap to bounce ideas off, task with
elements of the process, and otherwise bring value to my
clients through professional services I do not provide.
Do you just do M&A or do you provide other services –
valuations, consulting, etc.?
I do whatever my clients want but the ultimate purpose –
and how I earn my living – is to get the deal done. Along
the way, there is a lot of consulting, a broker opinion of
value, exit planning advice and a tremendous amount of
concierge service/hand holding customized based upon
client need.
What is the biggest mistake you have made when
working on a deal?
Allowing a buyer (after the fact exposed to be marginally
qualified) to take a good business hostage with an
8 | T h e B r i d g e | S p r i n g 2 0 2 3
exclusive LOI (or even APA) for too many days.
What are the three most important qualities
that you think a good M&A advisor needs to
have?
Depth and breadth of experience
Extraordinary work ethic
Considerable empathy with superior integrity
What is your most interesting deal that you are
working on today?
It’s a lean and highly profitable professional
services company that leverages a proprietary
analytics tool to facilitate successful large
scale project management of IT and related
development and risk mitigation initiatives for
government, utility, financial institutions, big
consulting, and SI firms.
How long have you been an M&A Source
member and what do you get out of your
membership?
I joined within the last two years and attended
my first conference in San Diego, fall 2022.
It was a very good experience. I met some
great people and learned some important new
things from both fellow advisors and industry
resources/sponsors. M&A Source seems to
have new spirit and I like it.
As a seasoned M&A advisor, what changes
and trends do you see on the horizon that will
impact on M&A?
Right now, for those seeking SBA financing,
it is a more difficult time for buyers. It’s an
expensive and time-consuming path forward
for all involved. That means sellers may need to
be a little more flexible when it comes to seller
financing if they wish to attract a large pool of
candidates. The best businesses will sell to a
liquid cash buyer, perhaps with a small seller
note, +/- earnout, or re-investment in “newco”.
There still seems to be a lot of money on the
sidelines for the good businesses. The good
ones can be in the “eye of the beholder” and the
formulaic buyer that can’t see past the dream
target metrics will miss out.
What advice would you give to new people
entering the profession?
Be sure you want this. It can be very rewarding
but not a profession for someone looking for
part-time work or semi-retirement – at least
not until you have really done it. Be prepared
to be patient and persistent. Pursue all the
education you can get. Things change and you
will never know everything you need to know.
Do it for the right reasons. You could make a
good – even great – living but commit to the
best outcome for the clients you choose to work
with first.
Member Interview
Linnea
Westlake
T h e B r i d g e | S p r i n g 2 0 2 3 | 9
“Things change and
you will never know
everything you need
to know. Do it for the
right reasons.”
Please tell us something about yourself that has nothing
to do with your M&A career.
This is where I get uncomfortable. I enjoy talking about
my work with clients and colleagues and become
uncomfortable when it’s “me”. Perhaps it’s because I’m
more of an introvert than extrovert. Here goes with the
top-level stuff.
Most who know me well are aware that I have always
been horse obsessed (as in show jumping horses). Levy
is semi - retired and now 22 going on 12 but not showing
anymore. Also, I am Standard Poodle crazed. Currently I
am mom to another AKC Champion Stud poodle (Joey 10)
and a new AKC puppy (Missy 5 months) who is starting
her show career now. These passions create many
opportunities for terrific life-long friends with others who
share them with me. The horses and dogs have been my
“kids”.
On another front, I really enjoy learning about other people
with cultural background different than my own. I speak
quite a bit of Spanish and a little German and generally
have an “ear” for languages. It’s been a while since I lived
internationally but I have lived in Switzerland, Bolivia,
and Austria for 1 – 4 years over time. On my most recent
international excursion, I joined friends in the UK just after
the Jubilee and as Wimbledon was starting. We hiked the
Cotswold Way – a lovely 130 miles or so over 7-8 days if
you count detours.
Bucket List - Since I started in this business, I’ve not had
the time to ski or play golf as I would like and endeavor
to change that. Also hope to add an African Safari and
Alaskan Cruise in the next few years.
1 0 | T h e B r i d g e | S p r i n g 2 0 2 3
Market Pulse
Insights From the
Q4 2022 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.
Get More Insights
THE Q1 2023 SURVEY RESULTS ARE BEING COMPILED
AND WILL BE VIEWABLE SOON
2M - 5M
5M - 50M
10
12
MEDIAN NUMBER OF MONTHS FROM
LISTING / ENGAGEMENT TO CLOSE
8M
10M
2M - 5M
5M - 50M
10
12
MEDIAN EBITDA
MULTIPLE PAID
4.1M
4.1M