Brazilian bank set to samba with City National?

To view original click here.

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.


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

To view original article click here.

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.



Thinking of selling your business? Better get started

By: James S Cassel
To view original article click here.

To sell or not to sell? That is the question on the minds of business owners who didn’t sell their businesses in 2012 and are concerned about the possible impacts of rising taxes and other economic issues this year. Middle-market mergers and acquisitions activity seems to be picking up in 2013.

Fact is, if you’ve been thinking of selling, the time to begin the process was, frankly, “Yesterday.” Starting the process does not necessarily mean that you will pull the trigger and sell.

If your business is likely to be affected by any of the following factors, then it would be a wise move now to consult your trusted advisors, weigh your options, and begin taking the necessary steps to protect the best interests of your business. Timing is key to ensuring you maximize the value for your business.

Higher taxes and rising prices. Some economists are saying that the recent expiration of payroll tax cuts and spikes in food prices could subtract 0.8 percentage points from U.S. economic growth this year. According to a Reuters poll, the economy is expected to expand 2 percent this year, down from 2.1 percent last year. In light of this, households are more cautious about spending and acquiring new debt, are worried about having enough retirement savings, and are concerned about the rising prices of gasoline and almost everything else.

Choppy market conditions. While the stock market may be up at new highs, it generally does not move in a straight line and we can’t sit back and assume it’s going to continue heading north. The rebound that we’re seeing in the stock market is due in great measure to political factors, including the size of the deficit and Federal policy, making the 2013 market potentially quite a risky place.

Sales taxes for online retailers. Online retailers and other online businesses are likely to get hit with more sales taxes. In time, everyone will have to pay sales taxes for their online purchases, which will neutralize to a certain extent the competitive advantage that many online retailers currently enjoy and will seriously hurt some of margins.

Capital investments and new technologies. The continuous introduction of new technologies that we’re seeing is great in many ways, but purchasing these new technologies can often be quite expensive and require additional investments in terms of training and/or hiring employees who are able to use them.

Rising interest rates. Interest rates are expected to increase at some point and will hurt margins for some business owners.

Industry consolidations. Many industries, such as technology, travel and manufacturing, are experiencing consolidations. It’s critical for business owners to know when to take advantage of good offers to sell their businesses. I’ve seen some business owners who, after missing out on opportunities to sell, have gotten stuck holding the bag with their floundering businesses while their better-capitalized competitors have continued to grow.

Expansions. For some business owners, expansion is critically important to remain competitive and keep up with growing demands from clients, etc. However, this requires both capital and stomach – which not all business owners may possess in the right quantities.

Emotional considerations. Just as important as the practical considerations mentioned above are the emotional factors. Some business owners find that they’ve been through so many trials and tribulations during the past four years that, simply put, they’re tired. They want out. When these feelings hit, it’s usually wise to begin looking for ways to move on, as businesses require a great deal of energy and commitment to succeed.

In addition to selling 100 percent of your business to a strategic buyer, there are a myriad of other options that you can consider, such as selling your business to a private equity firm or family office. This would enable you to retain some of the upside and give you capital to grow your business while helping eliminate some of your risk by taking some of your money off the table.

Indeed, in today’s uncertain marketplace, business owners have many considerations and options to weigh, and it’s important to work with trusted advisors such as investment bankers and attorneys to find the solutions that are best for every situation. As always, it’s all about strategic planning – something that unfortunately some business owners are great at doing for their clients and customers but not so good at doing for themselves. Without doubt, business owners who roll up their sleeves and take the right steps at this time are likely to put themselves in the strongest position going forward into 2013.

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.cassel

Financial salaries on rise as sector bounces back amid a slow recovery

By: Meisha Perrin
Week of Thursday, March 21st, 2013

To view original article click here.

CS - Media Clip - Miami Today - 3.21.13

Financial planners struggle to meet clients’ fiscal cliff goals

To view original article click here.

By Paul Brinkmann

South Florida financial planners are doing their best to deal with client demands for protection from so-called “fiscal cliff” issues, but some say options are very limited.

“Ultimately, I don’t think we will plunge off the fiscal cliff, because I believe Washington will reach some compromise,” said Eli Butnaru, CEO of Miami-based Mora Wealth Management. “But at this point, this is one of the few times there just aren’t many alternatives. That’s why it’s considered a crisis. It’s much easier to say what not to do than what to do.”

Pressed for solutions, wealth managers the Business Journal spoke with for this report said they are providing ways to avoid the impact of worst-case scenarios. But many financial institutions warned that long-term investment decisions should not be based on short-term headlines about politics or fears of taxes rising. PNC Bank issued a statement Dec. 11, saying it “always maintains that investment choices should never be made based solely on headlines, and that the long-term view best serves.”

Technically, the nation will reach the edge of the fiscal cliff on New Year’s Eve, when the Bush-era tax cuts expire and mandatory spending cuts kick in. As of Dec. 12, national media reported little progress, except that President Barack Obama had offered to reduce new revenue expectations to $1.4 trillion from $1.6 trillion. But CBS News reported some Republicans in the GOP-controlled House called that “laughable.”

In Miami, Butnaru said he was dealing with limited options until a clearer direction emerges.

“In general, we don’t like defensive sectors, meaning the kind of investments that pay dividends,” he said. “We prefer equities now; we truly do not like bonds. It’s truly difficult to find a good bond today.”

Butnaru said he and his firm prefer to seek investments in emerging markets, including Chinese high-yield investments.

“It may sound like a contradiction, but we still look for quality junk bonds or investments,” he said. “High yield or junk might still do well from excess spread, because there’s still no spread available on the investment grade.”

Despite some talk about wealthy people making large investments, gifts or annuities in advance of the cliff, Butnaru said he thinks such activity is no more than normal.

Adam Bergman, senior tax attorney with IRA Financial Group, said he has seen a spike in requests to move money into IRA and 401(k) accounts.

“I’ve had a lot of feedback since November [from] people between 40 and 70 years old who are looking to do different things with their retirement funds,” he said.

“People know taxes are going up anyway you cut it, even if it’s only the health care surtax, so they want to divert as much income as possible,” he said. “We’ve seen an increase in the number of people who want this started by the new year to avoid the impact.”

Bergman said investors, who recently focused on returns from stocks and tax-deferred accounts, are now afraid of dividend taxes going up. He pointed to a few South Florida companies – including National Beverage Corp. and Heico Corp. – that issued special dividend payments in advance of the fiscal cliff.

“The day after the national elections, my phone started ringing more. I saw a 35 percent increase in calls about tax-deferred accounts on Nov. 5,” he said. “I think a lot of people just woke up and said ‘Wow, Jan. 1 is pretty close,’ and the stock market took a dive after the election.”

Bergman said some people call to ask questions, and others call to say they realize taxes will go up and they want specific things.

He also acknowledged that another reason for people putting money into tax-deferred accounts is more financial stability.

“We did see people, quite a few years ago, taking loans out on their tax-deferred plans,” Bergman said. “Things are definitely better now, and people are looking at ways to build up those accounts again.”


What is the fiscal cliff?

A combination of expiring tax cuts and across-the-board government spending cuts scheduled to become effective on Jan. 1.

The idea behind the fiscal cliff was that, if the federal government allowed these two events to proceed as planned, it would have a detrimental effect on an already shaky economy, perhaps sending it back into an official recession as it cut household incomes, increased unemployment rates and undermined consumer and investor confidence.

At the same time, it was predicted that going over the fiscal cliff would significantly reduce the federal budget deficit.


7 tips to help business owners navigate the cliff

James S. Cassel, founder and chairman of Cassel Salpeter & Co. LLC, a Miami-based investment-banking firm that works with middle-market companies, offers this advice for business owners amid worries about the fiscal cliff:

  • Although interest rates are not likely to skyrocket soon, it’s still a good time to lock into long-term financing like the big boys.
  • Consider your exposure to real estate, as the elimination of mortgage interest deductions may cause prices to decline.
  • With the Patient Protection and Affordable Healthcare Act and a new health care tax on the horizon, business owners should begin evaluating how the anticipated new costs may impact their bottom lines. They should work with advisors to consider strategies – such as whether to insure their employees or opt out and pay the penalties – and determine the best course of action that will support their business goals.
  • Consider doing more business with state government. As states begin to recover and get more tax revenue, there may be greater opportunities to do business.
  • Consider foreign markets to sell services or products. While emerging markets, such as South and Central America, and Asian markets look better than Europe, don’t forget Europe.
  • With more efficient equipment available and a diminished need for manual labor, you should consider “reshoring” (i.e. bringing back to the U.S.) whatever you currently manufacture offshore.
  • Look at your customer base and, if you think your business may be affected by government actions, develop a plan and consider measures like cost reductions or layoffs.

Factors to Consider when Shopping for a Business

To view original article click here.

By James Cassel

It’s not enough to land any company. You need to search for one that’s right for you, at the right size and price.

MIAMI, Florida, November 25, 2012 – When looking for a business to buy, you can forget immediate gratification. Businesses can’t be found under rocks. It’s a more complex process that takes more time than most people expect.

We hear it often: “I’m looking for a business in Florida with $10 million in revenues, making $2 million per year or more. Or I want to buy something with a minimum of $5 million of EBITA (Earnings Before Interest, Taxes and Amortization). Can you point me to one?” Sure, if I could find a needle in a haystack.

There’s no good database or source to search with those types of broad parameters. Even if such a database existed, the “anything goes” approach wouldn’t be in your best interest. It’s not enough to just find any business — you need to find the one that’s right for you, at the right size and price. Institutional buyers verses individual buyers may have different views, needs and wishes.

Some buyers have a pretty clear notion of what they want: a small- to mid-sized business, like a small distribution company or mom-and-pop chain of dry cleaners. In those cases, they can work with business brokers who carry listings like real estate agents. There are a couple of those in every town, and also good websites like, and that post business-for-sale opportunities. S&P Capital IQ is always a good source for information.

Investment bankers are helpful to those looking for larger businesses with specific and well-defined criteria. These are deals that aren’t listed and require research and knocking on doors, a very disciplined approach.

Private equity firms assign their staff members to search through databases for opportunities and make calls to owners to introduce themselves and gather all the intelligence they can. Again, databases don’t cut it for these types of business searches, as the information is often incomplete, erroneous and/or misleading. In addition to databases, there are many other places to look, such as trade magazines.

Here’s a classic example: A partner at private equity firm called us a few years ago wanting to meet a specific business owner who wasn’t returning his phone calls. Dunn & Bradstreet’s credit reporting showed the business had about $15 million in revenue per year and netted $1 million in profit per year. The owner took my call because he knew my name and was curious how I was related to my sister-in-law who’d taught his child in pre-kindergarten. We had a nice conversation and agreed to have lunch with my client. At lunch, he said his business’ revenues were actually about $80 million per year with more than $10 million in profit. When I asked why the report we had obtained contained a different figure, he said: “So people like you don’t bother me. If I gave the real numbers, every private equity firm and investment banker would be calling me.”

Those interested in bigger businesses can always leverage industry trade shows and hire investment bankers to do the buy-side work and knock on doors. Franchise fairs are a good option for buyers interested in franchises. Don’t forget to look at bankruptcies: Often you can have a good business with a bad balance sheet, and you can fix the business by buying and recapitalizing the business.

Something else that invariably surprises people: It takes much longer to find and buy a business than they imagined. We know people who have $5 million to $10 million cash to invest and want to move to Miami and buy a business, but they haven’t been successful after more than two years of searching.

So how can you do it? You roll up your sleeves and you network, call attorneys and accountants, search databases, and subscribe to receive e-alerts from websites that post business-for-sale opportunities. If you’re looking locally, you get involved in the community. If you’re more industry-specific, then you build a database of companies in that space. Attend trade shows. There’s no way around it: Finding a business to buy requires a lot of blocking, tackling and making phone calls every three months to the same people because you have to catch people when they are considering selling or try to pique their interest. Usually, that happens for a reason: when someone is sick, for instance, getting divorced or getting ready to retire. You must have your bait in the water when the fish are ready to bite.

• The best advice for finding the right business to buy: Match your skills and interests. Pick industries that you know or have experience with. South Florida has a lot of solid industries — cruise-related, real estate services (everything from construction to management to products), and import-export businesses like flowers and electronics, as well as all the usual industries like food, healthcare, distribution, logistics and transportation. A few key questions to ask yourself: Which of your skills would best translate to the potential new business? What sectors interest you and match up well with your skills? Do you need any special licenses or other qualifications to run the business?

• Narrow your target. The more you focus on specific criteria, the greater the chance you’ll find what’s right for you. When possible, get a good advisor to help you, especially if you’re coming from another country.

• Understand your finances. What can you realistically afford? Are you putting up all the money or will you need to find an equity partner or a lender? Be honest about your price range. A few key questions to ask yourself: How much can you spend on the business, how much collateral can you use, and how much income do you need to receive? Do you have good enough credit to secure financing from a bank or other lender?

• Know your motivations. Why do you want to buy the business? Are you doing it for the income or the lifestyle opportunities? For example, we know people who purchased yacht brokerage businesses because they like yachts.

• Consider the potential impacts on your lifestyle and your family. What types of hours do you want to work? Will you need to drive long distances or relocate?

• Be proactive. Network, talk to people, get some good advisors to help you.

• Be patient. Keep in mind that most sellers have likely been approached many times by potential buyers, so understand that you might not get every bit of information you need immediately. Buying a business takes time, sometimes months or years.

So, here’s the good news and the bad news: There are some good opportunities today and plenty of money available to leverage them — but there are lots of individuals, private equity firms and strategic buyers searching for those same opportunities. To succeed, you need a healthy balance of strategy, perseverance and, above all, patience.

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.


Florida Trend: Deal Making

To view original article click here.

By Rochelle Broder-Singer

James Cassel and Scott Salpeter are two of south Florida’s best-known investment bankers. Their Miami-based Cassel Salpeter & Co. specializes in midmarket firms.

Florida Trend: Is it harder for you to make the connections you need to private equity buyers or financing for deals because you’re not based in New York?

Scott Salpeter: We used to have to go to New York to have relationships with these potential buyers that were in New York. (But) in today’s environment, there are many sources of capital that are outside the money centers like New York … and plenty of private equity/hedge funds throughout the United States. An example: We’re selling a firm in Florida right now. It’s selling to a private equity firm that’s in Tennessee.

James Cassel: There is a growing community in Florida of financial firms. Today, we have a growing number of private equity firms that don’t just have offices here, but have headquarters here. Two big examples are HIG and Sun Capital. Orlando and Tampa have growing private equity communities. And you look at Raymond James — a major firm — headquartered in Florida.

FT: Do firms from elsewhere come to you?

Cassel: November through April, there is the pilgrimage of private equity people who come from (up north) to visit us on Thursday afternoons and Friday mornings. I’m up in New York at least once a month. Scott’s traveling about the same, whether it’s to Tampa or Philadelphia or Delaware — wherever we have relationships.

FT: What kind of M&A activity are you seeing from your Florida-based clients?

Salpeter: Anecdotally, we think that there’s probably more activity than there was two years ago, but there’s probably less activity than there was five years ago.

Cassel: There’s no gold rush going on. People are holding their businesses. For the most part, we’re not hearing from people that they’re desperate like they were two years ago. We’re hearing business is OK.

FT: Is this a good time to sell a business?

Salpeter: This is a good time to sell because the financial community has a lot of capital to deploy. (But) we’re hearing high (valuation) numbers for healthy companies, and we’re hearing low numbers for unhealthy or low-growth companies.

Cassel: I think there’s plenty of bank money out there. The banks are making spreads that I don’t think they have ever made because their cost of money is so low.

Business owners need to move beyond state of uncertainty

To view original article click here.

By James Cassel

Companies have been known to postpone making major decisions as they wait to see what happens with elections and the economy.

MIAMI, Florida, October 22, 2012 -For many middle-market business owners, the American Dream of selling their businesses for financial security or turning them over or selling them to their children before retiring seems more distant today than it did 20-plus years ago.

A recent study by The Wall Street Journal and Vistage International shows that almost half of the 799 small-business owners surveyed plan to retire after age 65, with 38 percent saying they plan to retire later than they expected five years ago. For some, it’s a matter of choice, for others, it’s simply not possible to give up the cash flow.

Whatever the case, many business owners today are locked in a state of “analysis-paralysis” — not making any major business decisions related to transitions as they wait to see what happens with the elections, the economy and their businesses. Why aren’t they looking to sell now? This is what we’re hearing:

Uncertainty about the future. Although the Federal Reserve has promised to stimulate the economy if it doesn’t show significant improvement, the inconsistency of the recovery, combined with uncertainty about key issues like the tax laws, has many business owners feeling skittish and opting to postpone transition plans. Although many think business is OK now, they feel they might get better valuations in the future as the economy improves.

Low expectations of returns on investments. Fact is, while 20 years ago you didn’t question a financial advisor who said that you could expect to average 10 percent per annum on your investments, today you don’t believe that same advisor who says you can get five or six percent return per annum over a 10-year period. The past 10 years have been flat. You cannot price a business based on the income you need to live on or replace your income with the proceeds of the sale. Often, the choice boils down to either having to sell for much less than you think you deserve or having to make the decision to continue running the business in an ownership position.

Income needed to survive. Many business owners don’t want to part with their businesses because they still need the income to fund their lifestyles. As I’ve mentioned, you will never be able to replace the income of your business with the proceeds of its sale. The fact that people are living longer these days — well into their 70s and 80s — is contributing to the trend as they simply have a different approach to life and need the money to continue to enjoy themselves.

Others think their businesses are doing well, and they feel no urgent need to sell at present. According to the Wall Street Journal and Vistage study, more than half those surveyed say the lion’s share of their net worth is wrapped up in their businesses, so they don’t think selling and retiring is in the cards any time soon, mainly because they will not have enough income. Instead of retiring, some are now considering hiring someone to operate their businesses for them so they can retain their current lifestyles and cash flow while relinquishing some of their responsibilities and freeing up more of their time. However, this has inherent risks. For starters, you’re putting your biggest asset in someone else’s hands.

In the old days, most people looked forward to retiring in their late 50s and enjoying the final chapters of their lives with the equivalent of 60 percent of their income upon retirement. These days, with most people living longer and enjoying healthier, more active lifestyles, they’re lucky if they can retire in their 60s or 70s, and they also need the equivalent of 100 percent of their current income upon retirement to continue living their current lifestyle.

What many business owners are failing to see, however, is the bigger picture. While we should always keep an eye on the specific political, economic and legislative issues of the day, we must maintain a close pulse on the potential threats and opportunities and be prepared to take action when needed. It’s also critical to continue to adhere to the basic principles of “good business” that are relevant no matter who is in office or what type of economic cycle we’re in.

History is ripe with examples of companies that suffered major losses because they didn’t take the right steps to identify potential issues and seize opportunities that came their way.

Look at what happened to Polaroid: There are no more Polaroid cameras. Blackberry is going through something similar now, and some say the company should have been sold a long time ago. Same may go for Yahoo!, which didn’t sell when it had the chance at what in hindsight looks like a very favorable price.

Furthermore, while most business owners will agree that losing their biggest client could be devastating, many don’t take the right steps to prepare for this. I know of a local business owner who turned down a significant offer from a potential buyer, only to regret it about six months later when he lost his biggest customer and eventually went out of business.

Another topic to consider: Is the industry consolidating? If so, survival could require becoming bigger. Sometimes, you only get one shot to sell to the consolidator — and if you don’t seize the opportunity, it’s gone forever. It can change the competitive landscape.

Without doubt, you must always be prepared to seize any strategic opportunities that come along. The following advice is always good to keep in mind:

Plan ahead: Work with qualified legal and financial advisors to develop appropriate written agreements, such as shareholder or partnership agreements that include succession plans and buy-sell provisions. That way, you’ll be more prepared to act quickly when the need arises. Too often, opportunities are missed and/or these matters end up in court because people failed to plan in advance.

Establish an effective board of directors: Appoint members with the right mix of experience, knowledge and contacts who can bring good value to your board and won’t be mere yes men. Particularly for family businesses, it’s always good to add independent members who can help handle the important, potentially divisive, decisions.

Build relationships: Don’t underestimate the power of relationships, introductions and good advice from those in the business, like lawyers and investment bankers.

Be realistic: Whether you’re thinking of buying, selling, or staying put, don’t make rash decisions. Be realistic about your business, the valuation of your company and the amount you seek. Also, be realistic about the timing, as it will take longer than you imagine.

Indeed, new threats and opportunities will always present themselves no matter what’s happening with politics, the law, or the economy — and often, it happens when it’s least expected. The current “analysis-paralysis” that many business owners are stuck in can be a dangerous proposition if they’re not ready to react when needed.

If you’re one of those businesspeople choosing to take the “wait and see” approach, remember that not making a major business decision is a major business decision.

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.

When Working with Relatives, Plan for the Unexpected

By: James Cassel
To view original article click here.

Family members can be great assets in a business, but to make it work, you need to face some harsh realities.

Family owned businesses, when run correctly by the right family members, can be wildly successful. But when they’re dysfunctional, family businesses can be a real nightmare for everyone involved – and even destroy families and their financial well being.

There’s no question that our own flesh and blood can offer a level of loyalty, trust, commitment and vested interest in the business’ long-term success that’s not usually given by those who aren’t our family. On the flip side, things can quickly get ugly with family members who feel jealousy, resentment, entitlement, greed and other emotions that can get in the way of sound business judgment. When problems occur, the more family members involved, the worse things can get. Moreover, family businesses can also chase away great non-family talent if they are not sensitive to their needs.

While family owned businesses are the backbone of the U.S. economy, many family businesses fail or are sold before the next generation has taken the reins. I watched firsthand the third generation of two families kill a business. It could have been avoided if they had been more rational or had proper legal documents in place.

Having spent decades counseling owners of family businesses in all sorts of industries, not to mention having worked very successfully in several businesses with my own family members, including at Cassel Salpeter, I’ve pretty much seen it all. Here are a few important things I’ve learned that are critical for those who want to sustain healthy family owned businesses and healthy family relationships:

1. Plan ahead. Simply put, you have to put in place the equivalent of a “business pre-nup.” Work with qualified legal and financial advisors to develop appropriate written agreements such as shareholder or partnership agreements that include succession plans and buy-sell provisions. We all know couples that have built fabulous businesses together – only to see those businesses fall apart at tremendous financial and emotional expense when they divorce. Same goes for siblings who fight turf wars after the parent who owned the family business passes away or retires, and one sibling wants to run the business while the others want to sell or take out money. Too often, these matters end up in court because people failed to plan in advance. It’s important to have plans in place when dealing with family so everyone knows where they stand and agrees in advance to what can and cannot be done.

2. Communicate. In fact, over-communicate. Most families don’t do this very well or often enough. It becomes difficult to handle issues because the family members don’t know how to discuss their opinions, reach consensus and make decisions efficiently. So talk it out. Lack of communication is one of the main causes of litigation and failure in family businesses.

Need help? There are plenty of business psychologists and coaches who specialize in helping family businesses. Don’t wait until things go wrong to consult professionals.

Years ago, a couple contacted me for advice regarding their plans to sell their business. Although they had spent years grooming their very capable son to eventually take over the business and he was doing a great job, they decided to begin entertaining buyout offers without consulting him.

I reminded them that if they sold the business without their son’s involvement or consent, they might burn their relationship with him and his wife and never get to see their grandchildren. I recommended they discuss their plans upfront with their son, bring him into the process and, if they still wanted to sell the business, offer to sell it to him first rather than anyone else. A few weeks later, they sent me a bottle of champagne and a note that read: “Thank you. You saved our family and our business.”

3. Be picky. Recognize that not everyone is good for the business or should be in the business. Yes, even family members must understand that the “there’s always a place for you here” school of thought may not be in everyone’s best interest. Some companies are populated by next-generation members who failed in other businesses or spent the early part of their careers as aspiring athletes, artists, ormusicians before ascending to leadership positions as unprepared 40-somethings – clearly not a good business model. Finding the right positions for the right people is crucial. Not everyone is CEO material.

4. Implement safety measures. Require training and implement a screening process for new family hires and promotions. When possible, ensure that new family hires have obtained solid industry experience before they join the business. This will help ensure that only dedicated, qualified relatives join and lead the firm. I know families who “traded” their children to get experience at other businesses before the children joined their own families’ businesses.

Additionally, some family run businesses appoint independent members to the board of directors along with family members and/or a family council, which functions like a board of directors and handles the important, potentially divisive decisions. Some have lawyers develop proper succession plans for use after retirement, death or disability. Measures like these can help prevent many of the common headaches that occur when it comes time for the second or third generations to take the reins.

5. Think creatively. Many family businesses are run for decades by the same leaders, often making it difficult to implement creative solutions or necessary changes like new technologies, business models and schools of thought. Don’t let this be the case for you. Young family members may have great ideas.

Years ago, I watched a business owner successfully devise a clever escape route from a touchy family situation. One sibling had taken over the family business and grown it to unprecedented levels. Thinking they needed extra support after sales skyrocketed, they invited another sibling to assume a leadership role. They soon learned this was a big mistake, as everything this new sibling touched turned to ashes. Rather than cause more turmoil by booting out the problem child, they offered to double his salary in exchange for staying home. He wisely accepted, and the business got back on track.

Most important, don’t be afraid to say “no” or terminate problematic or unhappy family members. No matter how tricky or delicate the situation might seem, it can be in everyone’s best interest. Having done this personally, I can tell you firsthand how hard it can be. Many family businesses suffer unnecessarily because they over-extend their resources to accommodate every family member who wants a piece of the pie. By putting the right systems in place, you can minimize the potential for trouble and maximize the potential for success while retaining everyone’s priceless peace of mind.

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.

Growing Your Business Through Acquisition

To view original article click here.

By: James Cassel

MIAMI, Florida, March 18, 2012 – Now is an interesting time to consider acquisitions. Baby boomers are beginning to retire, and their children may not have interest in the family business. As a result, plenty of opportunities will arise in the next few years as businesses change hands. This year may present additional opportunities because of uncertainty about tax increases on capital gains.

Many investment bankers and business brokers are working with businesses that are for sale. However, finding a business to buy — one that’s not already on the market for an exit — is a major challenge. There are ways to find these opportunities, such as talking to your competitors or your accountant, but this is like finding a needle in a haystack. Engaging an intermediary such as a mergers and acquisition attorney may be a wise choice.

Managing the risks involved in an acquisition can be equally complicated. Acquisitions might provide business owners with a way to grow and strengthen their companies, but they can also present unique challenges.

For a smooth acquisition process, get your strategy in place now.

Know why acquisition as a growth strategy makes sense for your business. You might think buying a business is only for large corporations, but this is not the case. An acquisition can jumpstart growth — buying an existing enterprise means the foundation is already in place. For example, the firm may have employees with talent and experience as well as a hard-to-replicate customer base. By finding a business with a good track record or a desired geographic footprint, you can improve your own company.

Stick to what you know. Looking for a business to acquire so you can expand? Choose wisely. While buying direct competitors is one way to approach acquisitions, you can also consider similar companies in different geographic areas or complementary companies for cross-selling purposes.

Don’t bet the farm. Be sure you have the financial resources available for the acquisition, which include integration costs and working capital. Be realistic about estimated costs and the time investment required to complete the deal. You cannot take your eye off your existing business or starve it for capital for the sake of an acquisition. Even the cost of lawyers, accountants, and other professionals who will assist during the due diligence phase can be a significant expense, and you don’t want to cut corners when it comes to professional guidance.

In most cases, it is not worth “betting the farm” — taking on too much debt or using all of your capital— to purchase another company. If it turns out that the deal isn’t as good as expected, your existing business may be threatened. And considering many business owners have the majority of their net worth in their business, excessive risk can threaten your financial security.

Research in advance. Acquiring companies can be a shortcut to growth, but there is risk involved. Before contacting the company you want to buy, get as much information as possible. Some of the best opportunities might be competitors you have known for years who are ready to sell. You may have an advantage over other rivals if you know the families and have an existing relationship.

Don’t rationalize buying a business. Be objective regarding what you arereally getting and what it is worth. A team of experts can help you analyze your potential purchase, its value and its fair price so you do not overpay. Be careful not to get caught up in a deal simply for the sake of the deal. Many times it is better to just walk away, because the opportunity may reappear later on more favorable terms. A deal can be like a train – one might leave the station, but generally it will be followed by another train.

Plan your approach. As enthusiastic as you might be to expand, many small business owners feel threatened during initial contact. Even if you and your representatives experience a lukewarm reception, keep in mind you can see results in the future. Playing your cards right means you could be contacted in six months, one year, or later. It is important to stay in touch. Sellers generally need a reason to sell, such as illness, divorce, or retirement. Since they generally cannot replace their income with the proceeds of a sale, they need a triggering event.

Prepare an employee transition plan. Employees make up a significant part of a company’s value, so make sure they are on board with the transaction. Keep them informed and engaged to avoid hostility, anxiety or demoralization. Not only is a communications policy extremely important, but so is face-to-face interaction. Never underestimate the value of employees.

Know how you are going to pay for the business. Can you borrow? Do you have excess capital? If you don’t have the capital to fund an acquisition, you can also look at the assets or cash flow of the company you’re acquiring. The appropriate mix of equity and debt is deal-specific. Many times, sellers will be part of the solution by taking back seller financing. Creativity is a plus. Banks are eager to lend, but only in the right circumstances.

Plan the integration of your new business up front. Many companies don’t plan their post-acquisition integration strategy with enough foresight to anticipate changes in company culture. Without proper execution, the strategic advantages that attracted you to the deal in the first place may disappear. A poor integration plan can minimize the value of the acquired business as well as your own.

Let’s say that you’re not looking for acquisition opportunities at this time. Establishing relationships with businesses that you could acquire in the future will keep you informed about how you can leverage your business in your industry, and how certain geographic locations might be acquisition targets. You might also discover opportunities to buy a division or product line of a company.

Although companies are not always available when you are looking, sometimes you just need to be opportunistic. Don’t let them pass you by.