Florida Bank’s Effort to Make Itself ‘Pristine’ Pays Off

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By Robert Barba
August 8, 2013

John Tranter knew he had a rare gem. But no one was shopping for gems during the financial crisis, so he decided his time was best spent really polishing it up.

The move paid off. In the week since his bank, Gulfstream Bancshares, announced it would sell itself for $77 million to CenterState Banks (CSFL), the transaction has been the buzz of their home state of Florida.

CenterState’s stock has risen 10% since the announcement. Meanwhile, the deal price of nearly 1.5 times Gulfstream’s tangible book value has probably renewed the M&A hopes of sound banks in the Southeast that, like Gulfstream, kept getting passed over as buyers sought bargains for the dented, damaged and distressed.

“To me, this is truly the first healthy-bank deal in Florida in five or six years, where you have a healthy buyer buying a healthy target — and they are paying a decent premium for it,” says Brady Gailey, an analyst at Keefe, Bruyette & Woods. “There are a lot of small, healthy banks in Florida, but I think they and the buyers have been skeptical about trying to get out and do a deal. With the market rewarding this deal the way it is, I think it could lead to more healthy-bank M&A in Florida.”

With credit quality being the banner issue in Florida, one of Stuart-based Gulfstream’s most distinct features is its asset quality. At the end of the first quarter, noncurrent loans made up 1.12% of the bank’s total loans. While the state’s 203 banks had an average noncurrent ratio of 5.32%, 54 banks had a ratio equal to or less than 1.5%, according to data from BankDATAWORKS, a Chicago bank-analytics firm.

Gulfstream sought to be a rebel from its inception. Tranter said that he and his colleagues are mostly former Barnett Bank employees, but as Gulfstream was forming in 1998 they made a concerted effort to be different.

“Barnett was all things to all people, but as we were putting the concept together I thought you probably have a better chance of long-term profitability by focusing on a few things,” Tranter says. “It took longer to grow and took more focus, but it was great once we got critical mass.”

The bank focuses on small businesses, entrepreneurs, professional businesses and affluent investors. The $572 million-asset company’s loan portfolio is 27% commercial and industrial, and 75% of its commercial real estate is owner-occupied.

Meanwhile, nearly 40% of its deposits are demand accounts. That percentage “is high in any market,” says Michael Rose, an analyst at Raymond James, the investment bank that is representing Davenport-based Center State in the deal. “That is approaching Texas bank levels.”

The decision to sell was largely based on a desire to have liquidity, Tranter says. “We are 15 years old, and the traditional de novo tends to do a liquidity event much sooner than that,” Tranter says.

M&A in Florida was hot in the years before the downturn, but Tranter says he was busy focusing on expanding south into Palm Beach County, not selling the bank. Then the downturn hit, and nearly 70 banks failed in Florida. Even though the pace of failures has slowed considerably, last week regulators seized a bank in Florida. Traditional M&A all but dried up, largely because of skepticism about credit marks.

“It was like trying to catch a falling knife,” says Jim Cassel of Cassel Salpeter, an investment bank in Miami.

Unable to control the larger economy, Tranter says he decided to get the bank in the best shape it could. It increased its loss allowance for noncurrent loans to at least 200%, and it aimed to build its capital ratios to twice the regulatory minimums for well-capitalized institutions through retained earnings. If it could clear up any questions surrounding

capital and credit, his theory went, potential buyers could focus on strengths like its average deposits of $120 million at its four branches.

“We wanted our metrics to be pristine,” Tranter says. “My goal was to have a deliverable book that was visible. Our earnings visibility is as good as ever. A buyer wouldn’t have to mess around with provision or our efficiency.”

Scott Salpeter, President at Cassel Salpeter & Co., LLC

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By admin 
August 15, 2013
 
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IBISWorld caught up with Scott Salpeter, President at Cassel Salpeter & Co., LLC , to find out firsthand what’s going on with the investment banking industry.

IW: What challenge do you and your company face right now?

SS: Keeping up with the speed of knowledge creation and information dissemination across a broad range of industries.

IW: How does IBISWorld help you overcome this challenge?

SS: IBISWorld is an important tool in providing timely, useful and concise data and information for our analysts to quickly come up to speed on a subject.

IW: What do you foresee happening in your industry within the next year?

SS: Investment banking, like most service professions, continues to become more crowded and it has become harder to differentiate oneself.

IW: Tell us something interesting about yourself:

SS: You may be surprised to learn that I am an avid hockey fan and Florida Panther season ticketholder since day one of the franchise.   

Cassel Salpeter & Co., LLC is a middle market investment banking firm focused on providing independent and objective advice to middle market and emerging growth companies.  Thier investment banking and advisory services include broad capabilities for both private and public companies, including: mergers and acquisitions; restructurings, including 363 sales and plans of reorganization; equity and debt capital raises; fairness and solvency opinions; valuations; and financial and strategic advisory.

Their senior partners are personally involved at every stage of all assignments.  Their success is based on unbiased advice, understanding each client’s business objectives, providing value added services, and our extensive relationships and expertise.  They have forged relationships and executed transactions, both nationally and internationally.

Headquartered in Miami, Florida, Cassel Salpeter is led by James Cassel and Scott Salpeter.  Member FINRA and SIPC.

Banking on U.S Growth

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By: Rochelle Broder-Singer
August 2013

CS-Florida Trend-Banking on U.S growth-Media clip-August 2013

James Cassel: The middle-market is important, under appreciated

By James Cassel
July 14, 2013

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The middle market is the principal driver of our labor market and economy, but it’s also the most misunderstood and least appreciated. Like it or not, it’s time for everyone to brush up on their understanding of this important business segment and certain key issues surrounding it.

Many fail to appreciate the significance or economic impacts of the middle market because the vague term “middle market” means different things to different people. Some say that companies with $5 million to $500 million in annual revenues are middle market, while others say companies with $50 million to $1 billion in revenues are middle market. Others define it based on the values of the businesses rather than their revenues. Based on our experience at Cassel Salpeter, an investment banking firm specializing in the middle market, we define it as any business with $10 million to $250 million in enterprise values. We do not base it on revenues. No matter what method or range you prefer to use, the numbers confirm that the middle market deserves our attention as it is the great economic driver of our economy.

Simply put, the middle market affects us all. If you’re a small company, middle-market businesses are probably among your most important customers. If you’re a large company, middle-market businesses are either your key vendors or constitute a large share of your customer base. They also supply many goods and services to consumers.

Middle-market businesses create more jobs than small and large businesses. In Florida, middle-market companies boosted employment almost nine percent and accounted for 45 percent of all jobs created in the state during the past year, according to the National Center for the Middle Market. A recent analysis of BLS data by Forbes shows that U.S. businesses with 50 to 1,000 employees created 1.8 million jobs nationwide between March 2011 and March 2012. These jobs accounted for more than half of all new jobs in the country and more than five times the number created by companies with more than 1,000 employees. This will only increase as confidence in the economy continues to grow.

In Florida in particular, the middle market is also important because it is a key driver for the state’s private equity investment market. In 2012, Florida ranked fourth nationwide in the number of private equity investments made, according to the Private Equity Growth Capital Council. Private equity firms invested $17.3 billion in 115 Florida-based companies last year, the data show.

When it comes to mergers and acquisitions activity, the middle market clearly takes the lion’s share in the United States in terms of number of transactions. This is often overshadowed by the headline-grabbing mega deals. Considering all these trends, we can expect private equity activity to increase throughout the balance of this year. The uptick in the economy will motivate buyers to look for high-quality businesses where they can invest their capital. Moreover, many private equity funds have legacy middle-market investments that might be ripe to liquidate with the improvement in the economy.

As the U.S. continues its path toward economic growth, middle-market businesses — particularly those in manufacturing, food and beverage, consumer products, financial services, healthcare, technology and new media — are likely to experience continued growth.

How do middle-market businesses attain this success? Simply put, they combine the best of both worlds. They enjoy the benefits of smaller companies (nimble, flexible, low operational costs, etc.) and those of larger companies (experienced senior leadership, proven track records, financial stability, deep market penetration, etc.).

Middle-market businesses are also entrepreneurial and often family owned. A recent survey from Deloitte Growth Enterprise Services shows that mid-market companies that identify themselves as entrepreneurial get almost 40 percent more capital investment, almost 60 percent more employee productivity and almost 50 percent higher profit margins.

What does this mean for business owners in South Florida? OPPORTUNITY. Some things to consider as you look toward the remainder of 2013:

How strong is your relationship with middle-market businesses, and how well-positioned is your business to seize new opportunities to partner with middle-market companies?

How should you modify your product or service offerings to meet the emerging needs and growth segments of middle-market businesses?

Should you consider marketing to new customers or clients within the middle market?

How can you position your small business to join the ranks of the larger, more established middle market?

As the economy continues to grow and opportunities continue to emerge, owners of small, medium and large businesses who take the time to understand, embrace and support the middle market will gain a significant competitive advantage.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. www.casselsalpeter.com

Jim Cassel: Remember your priorities when selling your business

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By: James Cassel
June 16, 2013

Thinking about selling your business? Think first about your employees, customers or clients, and lenders. Many business owners don’t give these key constituents the upfront attention they need as they begin to position their businesses for sale, and they miss opportunities to derive the greatest values for their businesses and reduce the potential for problems.

Fact is, planning will enable you to avoid issues that are likely to arise as potential buyers evaluate considerations related to these stakeholders, who they may consider critical to the long-term success of the business. Here are some helpful considerations for middle-market business owners interested in successfully positioning their businesses for sale:

Employees. Although employees can be a major asset during the sale process, they can be a great cause of substantial angst as companies position themselves for sale. Potential buyers believe that employees are important assets playing a vital role in the long-term success of businesses. For this reason, it is important for business owners to plan ahead and consider:

At what point should we inform our employees of a possible sale?

What members of the leadership team should be informed and how early in the process?

In addition to a strong executive management team, do we have an effective middle-management team to help ensure a seamless transition when the business is sold? How should we portray this to potential buyers?

What new contracts should we put in place to help ensure that key employees stay with the company? Should they include stay bonuses?

What current employee contracts should be amended or terminated?

Do we have in place the non-compete, confidentiality and other agreements that are necessary to protect our company’s intellectual property, proprietary information and client roster?

Does our company have strong employee morale and loyalty and should we take any steps now to improve these areas to further strengthen the business?

What messages should we be sending to employees, and how?

What steps would we take if the word gets out before we had planned?

Should we be concerned about a mass exodus of employees if they hear rumors that the company will be positioned for sale, and what message should we begin sending now to employees related to the future of the company and their careers here?

Should we give bonuses to employees after the sale to thank them for their loyalty? Keep in mind that planning ahead can enable the company to pay these in the most tax advantaged way. Former City National Bank president Leonard Abess, Jr., made headlines as “the role model for corporate responsibility” when he doled out $60 million of his own money in bonuses to 471 employees and retirees, including everything from clerical staff members to executives, following the $927 million sale of the bank. 

Customers or clients. Potential buyers want to see that earnings are sustainable or growing and that the customer base is diverse enough to minimize the risk of losing customers who would flee along with the founders. Moreover, as potential buyers evaluate businesses, they consider not only revenues from customers or clients but also the types of clients and the nature of the client relationships. Some of them may know your clients and approach them to get their insights as part of their due-diligence, which can cause problems. Key considerations for business owners include:

Do we have the necessary contracts in place, or should we amend the agreements with terms that are more desirable to potential buyers? Are there change of control provisions?

Are most of our customers or clients happy and satisfied?

What percentage do we expect will continue doing business with us after the company is sold and what steps should we take now to help increase that number?

What percentage of our clients currently renew their agreements? What is the average longevity of contracts?

What types of changes in our current structure, such as A-level clients we should consider cultivating or C-level clients we should consider terminating, in order to better position the business?

What messages should we be sending clients as we position the business for sale?

How and when do we inform key customers of our plans to sell?

What do we do if the potential buyer wants to speak with our customers as part of the due diligence?

How do we respond when rumors get out about a possible sale?

How do we deal with customer concentration?

In the sale process, what do we do if a current customer wants to buy our business?

Lenders. It’s important to check relationships with your lenders and determine:

Can our existing loans be transferred to the new owners? Are there any terms in our existing loans that should be addressed before we can sell the business?

Are our loans in good standing? Are we in compliance with all of the covenants and conditions?

Are there prepayment penalties?

What loan modifications could help strengthen the business?

Are there any terms in our existing loans that could hinder a sale, and how should we address these issues? Are there change of control or due on sale provisions?

What collateral does the lender have?

Without doubt, in today’s competitive market, buyers are more skeptical and analyzing businesses more closely than ever. There is much that can be done to prepare for a sale and ensure a smoother process. Those who work with qualified advisors and plan ahead by considering their employees, customers and lenders are more likely to maximize the value of their businesses and minimize the number of headaches.

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. www.casselsalpeter.com

 

For City National, it’s Chile in Miami

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By Lindsey White
May 29, 2013

Bankia’s City National Bank of Florida franchise drew a great deal of buyer interest, months of speculation and ultimately a Chilean buyer eager to expand in the Miami market.

On May 24 Chile-based Banco de Credito e Inversiones SA, or Bci, announced plans to acquire Miami-based City National in a deal valued at $882.8 million.

During the past six months, several names emerged as potential suitors for City National. While many observers had speculated that a Latin American buyer was likely, Bci garnered less attention than companies like Brazil’sBanco do Brasil SA.

“This bank kind of emerged at the last hour,” Paula Johannsen, a managing director at Monroe Securities, said of Bci.

Bankia disclosed that, after initial contact with 31 entities, it received expressions of interest from 13 financial institutions that led to six nonbinding offers. The final negotiations revolved around three entities.

Observers say the Chilean buyer got a good deal. “I think they got an excellent franchise for the price that they paid,” said Thomas Rudkin, a managing director at Syndicated Capital Inc.

The price is less than the $927.0 million that Bankia’s Caja Madrid paid for an 83% stake in City National Bancshares Inc. in 2008. “This has proven that when City National’s Spanish parent bought the bank, they overpaid for it,” said James Cassel, chairman and co-founder of Miami-based investment banking firm Cassel Salpeter & Co. On the other hand, he said Bci is paying a fair price.

A press release from City National noted the deal carries a 1.5x book value, and a company spokesman later clarified that the ratio was based on tangible book value. Johannsen said that while 1.5x book would be on the low side in some geographies, in Florida that pricing is “definitely on the high side.”

This could be due to the scarcity of franchises with size and scale comparable to City National in Florida. The bank has $4.7 billion in assets, $3.5 billion in deposits and $2.5 billion in loans.

“If you look in South Florida, there are very few banks even near this size that are available,” Cassel said.

Raymond James analyst Michael Rose notes that there are only 19 Florida-based banks with more than $1 billion in assets. “[T]he scarcity value of those franchises with greater than $1 billion in assets will only increase on the heels of the CNB acquisition in our view,” Rose wrote in a May 28 report. “While predicting the timing can be difficult, we anticipate that the pace of M&A in Florida will increase in the short to intermediate term given increased regulatory burden and the still-challenged earnings outlook for many smaller banks despite an improving economic backdrop.”

Banco de Credito e Inversiones is the third-largest bank in Chile with total assets of over $38 billion. The City National transaction is part of Bci’s effort to expand its international operations by increasing its presence in South Florida, where it has had a branch since 1999.

Several factors drove Bci’s desire to expand in the Miami market. For starters, the city has a fast-growing population (up 11% between 2000 and 2010) that is 65% Hispanic, according to a company release.

Margins also attracted Bci to the deal: The Chilean bank said that net interest margins are 3.6% for banks based in Miami, compared to 3.2% in Chile.

The Miami economy presents Bci with a big potential for growth: The company said that Miami’s GDP is about $263 billion compared to a GDP of about $268 billion for Chile.

With the acquisition, Bci aims to diversify its sources of income and its loan portfolio, create cross-sell opportunities and capture the benefits of the business flow between Miami and Latin America. In a news release, Bci CEO Lionel Olavarría called the deal the next natural step in the Miami market. “[City National] is a bank prepared to benefit from the ongoing recovery in the U.S. economy,” Olavarría said.

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U.S. bank acquisitions with a Latin American buyer are few and far between. SNL Financial found just five such deals since 2000, including the City National sale. In two of these deals the buyer was based in Venezuela, while one was based in Mexico, one in Brazil, and one, Bci, was based in Chile. The targets in three of these deals were based in Florida.

Going forward, Johannsen thinks that the Miami market could see more Latin American players coming to the table, especially given how much interest the City National deal generated. “A few years ago it was the Spanish and some of the European-type banks,” she said. “Now we’re looking to South America.”

James Cassel: Seeking VC funds? Get creative

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By: James Cassel
May 13, 2013

At a cocktail party earlier this year, my friend’s daughter took the initiative to tell me about her new startup venture. Her story piqued my interest, so I did some homework and later decided to throw a little angel money into her San Francisco-based company, “FunLoop.”

Welcome to the world of “venture capital and angel investment” in South Florida.
Although we can credit the region for its progress in cultivating a venture capital (VC) community and nurturing startups, there’s no doubt the region continues to lag behind places like California, Massachusetts and New York City in terms of access to venture capital.

Think about it: Florida is the third-largest state in the country, and South Florida is the fifth-largest Designated Market Area (DMA), but we don’t have the third-largest or even the fifth-largest number of VC’s or VC-funded companies. The area has a huge gap in seed-stage capital, which happens to be the most important stage where business concepts are proved and growth strategies are developed. Although there are a significant number of angel investors in the region, they aren’t easily found unless you know what rocks to search under.

According to a recent MoneyTree Report published by PricewaterhouseCoopers and the National Venture Capital Association, the Sunshine State dropped from No. 13 to No. 18 for VC dollars invested in 2012. Investment in Florida companies dropped $141 million, or 42 percent, from 2011.

There’s no doubt that institutions like The Knight Foundation, The Launch Pad at the University of Miami, the FIU Pino Entrepreneurship Center, the Venture Hive, among others, are making tremendous strides in promoting entrepreneurship and innovation. They must continue moving forward with their fine work, which is critical to our region’s success and future. The VC’s (not to be confused with angel investors) are a growing but still small group that includes Antares Capital, Medina Capital, HIG Ventures and Florida Growth Fund, to name a few. Angel groups and networks include New World Angels and Venture Architects Investor Network.

But the undeniable truth remains that we will not be able to reach California, Massachusetts or New York City status until we have access to more capital — or the reputation for being a prime venue for this sort of entrepreneurial activity. South Florida still simply lacks the big-name, high-quality VC funds that are commonly found in other regions.

So, how do you access venture capital? Unfortunately, there’s no magic pill. Success here will require a lot of research, networking, relationship-building and luck.

There are plenty of angel investors out there, but unfortunately there isn’t one clearinghouse to find them. More often than not, entrepreneurs are finding their angels the way my friend’s daughter found me — by luck at a cocktail party or networking event.

A good way to begin: Identify and attend the right networking events and conferences that have the most fertile ground. Let your contacts know what you’re trying to do, and ask if they know any potential investors who may be interested. Some websites might be of help. Investment bankers can always help too, but few work with startup or very early stage companies. We have posted a list of venture capital resources at http://casselsalpeter.wpengine.com/knowledge/resources/

Reach out to the universities and determine what opportunities may exist for you. Florida International University, Florida Atlantic University, Nova Southeastern University and the University of Miami, for example, offer a broad range of opportunities, including everything from business plan competitions to access to funding.

Keep in mind that you may have to go find your money in other markets as well, which means you will have to travel and do lots of networking. Like it or not, you also may have to move to another city.
While we can’t ignore that VC-backed companies based in Florida, such as Citrix Systems, CBS Sportsline and Mako Surgical, have been acquired or gone public, we are still seeing many angel and VC’s investors requiring that entrepreneurs relocate to other areas before they will invest. Time and again, I’m seeing California VC’s saying: “You have to move to the valley.”

South Florida has come a very long way during the past decade. While the future looks bright, the promised land is still at least another decade away at the rate we’re going, and it will take a lot of hard work and joint effort to get there.

James S. Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies.www.casselsalpeter.com

Brazilian bank set to samba with City National?

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By Lindsey White
May 16, 2013

The rumor mill keeps churning about the looming sale of City National Bank of Florida. Recent reports suggest that Banco do Brasil SA is closing in on a purchase of Valencia, Spain-based Bankia’s Florida franchise.

On May 9, Bloomberg Television reported that Banco do Brasil is near a $900 million deal. Bloomberg originally identified Banco do Brasil as a bidder in April. On May 15, Dow Jones Newswires cited an unnamed banker as saying that the 1.18 trillion-Brazilian-real bank is in the “final stages” of acquiring Miami-based City National, in a transaction expected to close at the end of the month.

When contacted by SNL, Banco do Brasil declined to comment on its interest in growing in the Miami market — but some say the City National acquisition would make sense, given the Brazilian bank’s existing footprint in Florida.

Banco do Brasil acquired Coral Gables, Fla.-based EuroBank in early 2012. The acquisition is expected to contribute to Banco do Brasil’s expansion of business in the U.S., focusing on Brazilian and Hispanic customers, the Brazilian bank said in a first-quarter presentation.

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EuroBank, renamed Banco do Brasil Americas, had $82.1 million in assets at March 31. The bank has three branches, including a recently opened location on Miami’s Brickell Avenue.

“I just couldn’t imagine them going into the Miami market and staying at less than $100 million in assets,” said Paula Johannsen, a managing director at Monroe Securities. “They didn’t come there just to buy two or three branches of a small community bank.”

James Cassel, chairman and co-founder of Miami-based investment banking firm Cassel Salpeter & Co., said it can be a wise strategy to dip a toe into the U.S. market before diving in fully. A bank that does so can put the regulatory approval process behind it before going after larger deals. If Banco do Brasil were to bid on City National, the fact that the Brazilian bank already has a charter in the U.S. could make the seller’s board more comfortable, he said.

Cassel pointed to the example of Spanish Banco de Sabadell SA, which bought Miami-based Transatlantic Holding Corp. in 2007, before further expanding with the purchase of Miami-based Mellon United National Bank. Sabadell is also among those rumored to be interested in buying City National, along with a number of other banks.

Benjamin Bishop Jr., chairman of Southeast-focused investment bank Allen C. Ewing & Co., said the Miami market is “one of the most dynamic in the country” and “very attractive” to foreign banks looking for a foothold in the U.S. “Miami had a huge number of unsold condominiums a couple years ago on Brickell Avenue,” he noted. Today, he said, many of those condos have sold as foreign nationals scooped up properties.

“A lot of the wealth in Central and South America is going to Miami, and if anything will probably be accelerating,” Bishop said.

Observers agree that if Banco do Brasil is looking to buy, City National is an attractive target. Cassel called City National a “wonderful franchise.” The bank has a long history, a network of 26 branches with good locations, a solid core group of employees and a loyal customer base that stuck with it when City National was last sold, he said. In 2008, Bankia’s Caja Madrid bought an 83% stake in City National Banc shares Inc. in a $927.0 million deal.

Observers noted that there are several banks in South Florida, but few of City National’s size and quality. The bank had $4.74 billion in assets as of March 31, and nonperforming assets totaled just 0.97% of total assets.

This could help City National fetch a good price. According to SNL data, live bank deals announced since Jan. 1, 2012, with Florida-based targets have had a median tangible book value of 100.7% and a mean value of 102.3%. Johannsen characterized pricing for recent Florida bank deals as “all over the board,” but said that many people expect City National will generate more of a premium.

“For the international-type banks that want to get in there, it’s the best quality right now,” Johannsen said.

 

James Cassel: Plan now to get the most value from selling your business

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By: James Cassel
April 14, 2013

When selling your business, advance planning and strategic action can make a big difference toward helping you obtain the maximum value for your firm. The sooner you begin your preparation, the better.

Here is some practical advice that I have learned throughout my career leading the purchases and sales of middle-market businesses in South Florida and around the country. These tips are not only helpful if you’re planning to sell — they’re also generally good business practice.

•  Hire an effective public relations firm. Positive news coverage in credible, top-tier media outlets that reach current and potential customers as well as buyers can be invaluable in terms of elevating firm and brand awareness, securing credibility for your business and even piquing interest from potential buyers. Although directed to enhance the business, raising visibility is important. These days, depending on the nature of your business, social media might be an appropriate tool to leverage as well.

•  Get your financial and accounting records in order. It is imperative for you to be able to give potential buyers a clear, accurate snapshot of your historical financial results and condition. Without this, you won’t be able to get as much for your business. You’ll have to do all this paperwork anyway, so the sooner you get your financial house in order, the better. Preparing a budget is helpful too.

•  Review agreements with your customers. Do you have long-term contracts that will bring recurring revenues to the purchaser of your business? Do your contracts with customers have special terms, such as requirements that you personally provide service to the accounts or change of control provisions, which may have an impact on the longevity of the contracts when you’re no longer involved with the business? Make sure you review and structure agreements in advance so they will enhance the value of your business and appeal to potential buyers.

•  Review your leases. Do you have a long-term lease that new buyers will have to continue, or do you have a short-term lease giving buyers maximum flexibility? This can enhance or decrease the value of the business. I recently worked on a deal in which a long-term lease for excessive space became a roadblock to completing the deal. Sometimes, a long-term lease at favorable rates can enhance the value of a business.

•  Review agreements with your suppliers. Again, like in No. 4 above, you need to understand whether you’re locked into agreements with suppliers with which the new owner(s) of your business will be required to comply. Depending on price and terms, a long-term supply agreement can be an asset or a liability. If there are any agreements that you don’t consider beneficial to your business, then now would be a good time to try to terminate them or address the issues to avoid turning off potential buyers.

•  Review your insurance coverage. Depending on your business, liability coverage and tail coverage might be very important. Consult a good insurance agent to evaluate your existing coverage and file any gaps that might exist.

•  Do tax and estate planning. Work with qualified lawyers and accountants who can help ensure you have structured your ownership in the most tax- advantaged way in the event of a sale. Again, the sooner you do this, the better off you’ll be.

•  Discuss the possibilities with your family. As in most everything in life, it’s important to have an understanding with your family members – especially if they are part owners of your business or work in the business. Make sure your family members and other key stakeholders fully understand the possible impacts of the business sale on everyone involved.

•  Evaluate your intellectual property. Make sure it is protected and owned or licensed by the right entity. This can be a great asset or, in some cases, a great liability. Work with a knowledgeable lawyer to get your house in order. Make sure you have proper licenses for all the software you use.

•  Evaluate management. Do you have appropriate management in place or are there gaps that you should fill prior to putting your business on the market? Examine your employment agreements to ensure you have important non-compete, confidentiality and other provisions that can significantly enhance the value of your business.

•  Determine if there are environmental issues. Commissioning a study to identify all environmental issues can be a good idea. Then, you should either remediate them or at least have an accurate understanding of what will be required to clean them up.

•  Get organized. An organized business owner who comes to the table with his or her house in order gives a good impression and strong comfort level to potential buyers.

The key here is to work with qualified advisors, including attorneys, accountants and investment bankers, to put your business in the best-possible position for sale. By addressing the weaknesses and playing up your strengths now, you can help ensure you get the best value for your business. 

James Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment-banking firm with headquarters in Miami that works with middle-market companies. www.casselsalpeter.com

 

 

People on the move

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Cassel Salpeter & Co. Named Winner of 7TH Annual M&A Advisor Turnaround Award for the Firm’s Work on Airline Restructuring Deal

James Cassel and Scott Salpeter, co-founders of Cassel Salpeter & Co., an independent investment banking firm that provides advice to middle-market and emerging growth companies in the U.S. and worldwide, were named winners in the “Sector Deal of the Year: Consumer Services” category in the 7th Annual M&A Advisor Turnaround Awards for their work in the restructuring and sale of Silver Airways (formerly Gulfstream International Airlines) to Victory Park Capital. When Gulfstream International Airlines filed for bankruptcy, Cassel, CEO, and his colleague Salpeter, the firm’s president, assisted in the $30 million sale to Victory Park Capital. The award ceremony took place at the Colony Hotel in Palm Beach, FL. Please visit: http://casselsalpeter.wpengine.com/