Talking Turkey about Networking, Outside Investors, & Education

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By Jim Fried

November 2014

This month our show had some awesome guests.

Ivan Misner, the Founder and Chairman of BNI – the world’s largest networking organization – was fascinating. He’s often called the father of modern networking.

We discussed mindfulness and networking – being present while you are meeting someone in a networking situation. I sometimes have jitters when I am anticipating an important event. The jitters melt away when I shake the first hand. Ivan mentioned that this is common and that many people have a problem focusing during networking. Their eyes jump around the room looking for the next person to meet. I find myself doing that and simply apologize to the person I am speaking with.

Ivan also mention that it’s a good idea to make sure the back of your card is easy for people to write on. He likes to take notes on the back of the business card as soon as he meets somebody. I do the same thing. Ivan had some other great networking tips as well. You may want to check out his interview on my website.

Another great guest this month was James Cassel. He is the chairman and co-founder of Screen Shot 2014-12-08 at 6.23.03 PMCassel Salpeter & Co. a Miami-based mid-market investment banking firm.

We discussed how to fund of the growth of your midsize company. There are many businesses based in Miami that are family run that need outside growth capital. James discussed what outside investors are looking for and what the business owners could expect when they took their company to market. Solid historic cash flow and the ability to execute a business plan going forward are two of the keys.

Our discussion also touched on the current state of the financial markets as it relates to bank financing for closely held mid-size companies. Cassel said lending is still tight, but community banks are leading the way in trying to loosen things up.

I round out this month’s review with Dr. Joe Glover, who is the provost at the University of Florida. That makes him second-in-command at the state’s flagship university.

We talked about the University of Florida’s preeminence campaign. It is focused on raising dollars to take the University of Florida to the top of the public university field. Joe started out as a mathematics professor and worked his way up to Provost. As the world becomes more competitive it becomes increasingly important for Florida to have a university that’s ranked at the top. The Florida Legislature recognizes this and is funding an intensive Preeminence program for UF as it races to the top.

Joe and his team are enhancing programs ranging from the impact of big data to creative writing. Joe was fascinating but what’s going on at UF is even more interesting.

It was truly a month of great interviews.

 

James Cassel: Business Capital Options

James Cassel, co-founder and chairman of investment banking firm Cassel Salpeter & Co., LLC, recently met with columnist and radio host Jim Fried to talk about how mid-sized companies can locate and access capital to grow their businesses. The taped segment was featured on Miami radio station 880 AM “The Biz” and can be listened to by clicking the media player below.

IPO’s: To go public or not to go public, that is the question

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By James S. Cassel

Special to the Miami Herald

October 19, 2014

James Cassel

James Cassel

Everyone knows initial public offerings can flood company coffers with cash, make people wealthy, and based on my experience in investment banking, I often get asked the following question by middle-market and growth-company business owners: “Should I take my company public?”

Fact is, in recent years being public has become much tougher as a result of increased regulations requiring tremendous disclosure and compliance with the Sarbanes-Oxley Act as well as other rules and regulations. For public companies, keeping up with compliance requirements alone can cost hundreds of thousands of dollars per year. Moreover, the required disclosure could give information to your competitors that you might not want them to have. So, as you would do with any major business decision, you should carefully weigh the pros and cons to make sure this is the right step for you as well as your company.

Here is some general advice I have found to help business owners as they begin to navigate these important questions.

Although the decision-making process that precipitates a business going public is thorough and multifaceted, it can generally be boiled down to one or more of these four considerations: to raise cash for general or specific business purposes to spur growth; to have a public currency for acquisitions; to provide liquidity for current shareholders; and to use the public currency and options to recruit, incentivize and retain employees.

There also are other intangible but equally valuable benefits, such as credibility.

A successful public offering is considered a major milestone and achievement for a company. It can create a sense of corporate stability and strength. An IPO, particularly if it gets positive media coverage, also can create good “conversational capital” for companies in terms of putting them in the limelight and making them more top-of-mind among key audiences. Depending on the type of company you own, this could be very good for your business.

A Deloitte survey conducted by OnResearch, a market research firm, polled 509 executives from March through April 2014 at U.S. mid-sized companies about their expectations and plans for becoming more competitive in today’s economic environment. Of these, 8 percent said they were likely to go public in the next 12 months (twice the number recorded in the fall) and cited the following reasons for doing so: broader exposure for their brands and products (36 percent); the cost-effectiveness of equity capital (35 percent); the desire to provide liquidity for owners (34 percent); and the need for capital to fuel growth (33 percent).

According to the survey, the most common reason private companies would want to stay privately owned is the need to control or have greater flexibility in spending, which was cited by almost three-quarters of the respondents. Other reasons for wanting to stay privately owned include: the size of the organization (too small to consider an IPO); the desire to keep financial information private; and concerns about compliance with the strict regulatory requirements of being public.

How do companies go public? Though there are other avenues, companies go public primarily through an IPO or by merging with an existing company in a reverse merger. In some cases, this can be accomplished through a shell company that may or may not have cash, although that may not be the preferred way to go depending on the circumstances. Every situation is different, so it’s up to the parties to confirm whether they are getting the value they are looking for and whether there is a liquid market for stock of the company.

Bear in mind, there are all sizes of underwriters, and not every business goes public through firms like Goldman Sachs or Citigroup. Many notable middle-market investment banking firms have similar expertise for smaller offerings, such as Ladenburg Thalmann, with headquarters in Miami, Noble Investments in Boca Raton, and Maxim or Aegis Capital Corp. in New York City, to name a few.

Each might look at different size offerings and each may have a different industry focus.

While the costs of going public are as voluminous and complex as the reasons, a few stand out as unavoidable and considerable expenses. Chief among those are legal expenses, accounting fees and investment banking fees as well as the internal costs of manpower. Many of these costs are ongoing. So in addition to the upfront costs of going public, there are costs of staying public that businesses incur when they make this transition. The rigors of the IPO regulatory process require tremendous disclosure and require much time and attention. The costs of staying in compliance can easily run from several hundred thousand to more than a million dollars per year in additional expenses.

With this in mind, it’s crucial that companies approach going public with a clear picture and realistic expectations. In an ideal world, companies should spend time working with a financial advisor with experience in public offerings to evaluate the offering options that might be available as well as the most appropriate parties to consider working with. There is no linear path to a public offering, but intelligent planning and forethought can make navigating the process more manageable for companies of any size and help ensure they minimize the obstacles and maximize the benefits.

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. He can be reached at jcassel@casselsalpeter.com and www.casselsalpeter.com

The Certainty Cash M&A Offers in a Volatile Market

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By Robert Barba

October 16, 2014 

Last week’s conservatism can become this week’s wise move in bank M&A. Take Greater Sacramento Bancorp, the holding company of the $468 million-asset Bank of Sacramento, which on Wednesday announced plans to sell itself to AmericanWest Bancorp in Spokane, Wash., for $60 million — in cash.

“Cash looks far better right now. Stocks go back and forth and our board made the decision that it was of the attitude that ‘cash is cash,'” William Martin, president and chief executive of Greater Sacramento, said Thursday, the most intense day of a weeklong stock market slide. “You know what you’re getting.”

That attitude had become passé until recently. So much of the M&A activity of the past couple of years has been predicated on the market’s treatment of bank stocks. Sellers could be sold on the upside potential of taking another bank’s supposedly undervalued stock as a consolation for a low premium. As the rally matured, banks with high-flying stock multiples had the type of currency where they could offer sellers a decent price without incurring too much dilution.

But the recent market volatility is a reminder that cash offers, despite their lack of potential upside and real tax implications, can provide a sense of certainty that stock deals cannot.

The Greater Sacramento deal has been in the works for more than a year, long before the market falloff of the past week, but persistent volatility contributed to the company’s decision to take a cash offer, Martin said. Bank stocks rose roughly 40% last year and the board just could not buy into the idea that there was still more room for them to go up.

“We had a couple of stock offers, but we were very nervous in some of the stock that was offered,” Martin said. “They were high-flying and we wondered how much can it continue to go up? It can’t happen forever.”

More sellers may start to share that view, says James Cassel, chairman and co-founder of Miami investment banking firm Cassel Salpeter.

“It all depends on how you perceive the buyer. Is its stock undervalued, fairly valued or overvalued?” Cassel said. “You might have a great opportunity if it is undervalued or fairly valued, but some of the bank stocks that we thought maybe had some upside have shown us recently that maybe they didn’t.”

AmericanWest is paying Greater Sacramento shareholders 152% of the seller’s tangible book value, or $22.05 per share. The price is high — the average price paid in the third quarter was 128% — but worth it, said Scott Kisting, the CEO of AmericanWest. The deal fleshes out the company’s presence in northern California, where it currently encircles Sacramento. It will also push the bank’s assets to roughly $4.5 billion, with $1 billion in northern California.

The above-average premium “is what it took to do the deal,” Kisting said in an interview on Wednesday. “But we expect it be accretive in the first year — very accretive — and will cover our one-time merger costs.”

AmericanWest is the bank unit of SKBHC Holdings, a private-equity-backed entity formed in 2010 with $750 million in capital; SKBHC bought AmericanWest in a bankruptcy auction. Since then, the company has announced eight other acquisitions, including the Sacramento deal, and has tapped $485 million of the capital. Its last deal, for the $1.2 billion-asset PremierWest in Medford, Ore., was completed in April 2013.

The company took some time away from M&A to focus on the PremierWest deal, but Kisting said he returned to a much more difficult M&A environment. The company has been on the prowl but has been beaten out on several occasions by buyers with rich stock premiums.

“We’ve been looking, but as a cash buyer it is harder,” Kisting said.

His comments echo the problem several of the roll-up vehicles around the country are experiencing. The number of bank failures did not live up to expectations, and healthy sellers have often favored stock. Even those companies that have gone public are struggling to do deals because their stocks are not trading at the same multiple as more established buyers.

But Kisting returns to the idea that when the market gets topsy-turvy, cash suddenly looks better.

“When volatility goes up and down the certainty of cash has a huge advantage,” he said.

 

Florida’s Investment Market: The Money’s There

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New technologies propel middle-market business growth

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By James Cassel
September 21, 2014

James Cassel

James Cassel

Technological innovations are enhancing the way that middle-market companies do business and creating significant opportunities for growth.

Recent data from Deloitte’s 2014 second-annual mid-market technology survey show that middle-market businesses are increasingly recognizing the pivotal role that technology can play. Cloud-based solutions and business analytics tools that provide “large corporation solutions” are credited for their ability to enhance operational capabilities, boost productivity, and provide competitive insights, according to the survey results. The continuing reductions in cost have made them more affordable to the middle market and have been a great catalyst in adoption rates.

Key survey findings include:
▪ 50% of the executives surveyed say their companies are currently using or migrating to cloud-based solutions
▪ 41% say their leadership now perceives technology as a “critical differentiator and key to growth,” and an additional 38 percent view it as “a strategic investment”
▪ 58% say their company is spending more or significantly more on technology in 2014, compared to 45% in 2013 (signs of a growing economy)
▪ 36% are allocating at least half of their IT budgets to new technology rather than maintaining current systems
▪ More companies are using data analytics to better understand their business metrics and to improve marketing to customers

A growing number of businesses – particularly those controlled by young entrepreneurs and startups – are leading the pack in embracing the new solutions and technologies. However, many businesses run by older individuals, who may not be as familiar or comfortable with some of these technologies or who might be more resistant to change, are still hesitating to adopt them. If you own a middle-market business, it would be wise to keep a close pulse on new technologies that will enhance your company’s profitability or output.

Accounting, for example, has been revolutionized by simple software. Everything from basic programs like QuickBooks to more complex enterprise-scale solutions means fewer labor hours, fewer mistakes, and more effective cash flow management and management reports.

Customer relationship management technologies such as SalesForce have made it easier to track, tag and manage contacts, leads, customers, vendors, and other relevant business relationships. Many of these platforms have opened up third-party application marketplaces to accommodate thousands of integrative technologies so businesses can manage and measure data from a plethora of sources.

Perhaps most noticeably, Web presence has been greatly enhanced, particularly for the middle market. Much more than the boring, pixelated internet brochures or online catalogues of yesteryear, websites are now capable of acting as central hubs for businesses’ information as well as e-commerce. It’s easier than ever to interface with customers, manage customer support, automated marketing, ordering, invoicing, shipping and much more.

I remember when a robust website could easily cost more than $10 million dollars. Today you can build that same website in a fraction of the time at a fraction of the cost.

Technological solutions for operational logistics have pushed productivity and efficiency to new heights as vendors like FedEx and UPS and even the US Postal Service offer systems to optimize global supply chains. These logistics also address hidden demons like customs, compliance and shipment monitoring.

Further, the device revolution has yielded an app for virtually everything. Medical professionals use tablets to chart notes and access patient records. Sales representatives and insurance agents can now process orders and claims in real-time. And processes including invoicing, security and marketing can be managed with the push of just a few buttons. I can even control my home air-conditioner from my iPhone, thanks to Nest.

Finally, scalable human resources and employee-management solutions like Paychex and ADP have freed business operators, enabling them to dedicate more time to running their businesses and spend fewer hours processing payroll, negotiating benefits packages, or investing in complicated customized HR dashboards.

But implementing technology to scale growth is not without its challenges and must be done strategically to ensure success and maximize return on investment with the least amount of interference. There are many technological solutions and vendors on the market, and it’s important to wade through the hype to determine what technologies will best support the needs of your business.

It’s no secret that technology, particularly web technology, carries the threat of security breaches. It seems that every week a new leak, hack or virus is plaguing businesses and creating crises of compromised – and sensitive – data.

Look at the recent problems of Target and Home Depot. According to the Deloitte survey, approximately one-third of respondents are concerned about the security of the data and services provided by cloud-based solutions. Clearly, no business needs a security scandal. Before you implement any solutions, conduct a thorough audit of what information you will be exposing to or through the technology, and what security you have in place.

Next, you should decide if you will use off-the-shelf solutions or a custom system built from the ground-up specifically for your business needs. Although custom solutions can be costly, it’s important to keep in mind that using solutions that do not entirely meet your needs could be costlier in the long run. The best solution may be an off-the-shelf solution that you customize to your specific needs.

Without a doubt, it is no small task to identify where and how you might benefit the most from these new solutions, or who the best providers would be for your particular needs. According to the Deloitte survey, 25% of executives agree it’s hard to keep up with the rapidly changing technology landscape.

Rather than trying to tackle something that might not be within your expertise, get advice from consultants who keep abreast of the latest innovations and have the knowledge and experience to assess your business needs. This can help ensure that you chart the best course for your business and put it in the strongest position for continued growth. Like most business initiatives, this takes a commitment of time, money and resources.

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

James S. Cassel: The time to begin succession planning is now

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By James S. Cassel

August 17, 2014

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James S. Cassel

Death and taxes are not the only certainties in life: Like it or not, at some point, you will have to leave your business. Hopefully, you will do so when and how you want, and with the benefit of an appropriate succession plan to help ensure the best-possible outcome.

Although most people don’t dispute the benefits of succession plans, they don’t pay enough attention to this important aspect of business ownership. Most of us would love to think that we will leave our businesses when we are good and ready, but we must be prepared for unforeseen circumstances that may lead to our sudden departures. The trouble with unexpected events is that they occur unexpectedly. So, when is the right time to begin planning? Simply put: “Now.” In my experience, I have seen many businesses suffer serious consequences, including everything from divisive family feuds among potential heirs to dissolution of the businesses, simply because the owners had failed to develop the necessary succession plans with appropriate documentation.

Here are some key considerations and tips to help ensure you are on the right track. First, it’s important to think about how you would like to leave your business. Will you step away all at once, abruptly, or will you do so gradually, transitioning slowly? Part of your transition plan can include extracting yourself from the day-to-day logistics and moving to a more advisory or consulting role.

Among the many considerations when planning a succession, exit or transition in a business, you will have to ask yourself if and how your family will play a role going forward. First, are family members involved or do any want to be involved? Do they have the skills, experience, wherewithal and drive to be responsible stewards of the company’s interests and the family’s assets? Perhaps a family member who initially wasn’t interested in playing a role in the company becomes interested over time.

Consider the age of your successors. If you’re approaching retirement, anointing a sibling or near relative of comparable age may be counterintuitive, depending on your age. In that case, ask yourself how you will integrate the next generation into the business. In some cases, this can include bringing in a daughter-in-law or son-in-law. Another consideration to keep in mind is that sometimes the best successors are not family members but rather long-time employees. How all of this differs from bringing in blood relatives is ultimately up to you, but in any case it’s always wise to speak with qualified consultants to afford yourself certain protections and, above all, peace of mind.

Failure to establish a clear succession plan can cause complications later as familial involvement in the business expands. For example, I worked with two families that owned a business together. The grandfathers had started the business, and when their sons, the second generation, inherited the business, the company continued to grow and prosper and the successors got along great. However, the third generation did not get along professionally or personally. The combination of unsolvable issues cost them the entire business. Everything that everyone had worked so hard to build was eventually destroyed, and they lost it all.

Could this have been avoided? Absolutely, if the second generation had established a clear plan for familial succession with appropriate agreements and provisions in the event of problems.

Remember, though, that family members are not the only stakeholders you’ll have to consider when you’re planning your exit. If you went into business with a non-family partner, ask yourself how you will navigate the channels of exiting if you want to sell and your partner doesn’t. This is particularly problematic when business partners are of disparate ages.

The matter can become even more complicated with multiple partners. For instance, two of the three partners of a successful firm I know were ready to retire last year, but the third wanted to stay and continue building the business. It took months of planning and preparation and going back and forth, and ultimately the best they were able to manage was to allow one of the partners to retire while the other had to wait longer before exiting. The business simply couldn’t absorb the transition of two of three stakeholders at the same time from both an operational and financial sense.

Finally, we are always subject to the unexpected. Passing away without planning the succession of your business can be logistically disastrous for your company and financially stressful for your family and legal heirs. No matter your industry, number of stakeholders or types of stakeholders, your company’s longevity is best served by spending time planning for succession. This plan should be drafted with the guidance and input of experienced lawyers, accountants, insurance professionals as well as other appropriate consultants and should provide for the possibility of disability, in the event that you may not be able to participate in traditional operations. Sometimes selling the business is a better option.

Although planning for the inevitable is not always pleasant, the consequences of unforeseen events may be mitigated by thoughtful preparation. Similarly, the discomforts of retiring from a company you have run for years can be ameliorated by the knowledge that you are taking the right steps to protect your legacy.

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. He can be reached at jcassel@casselsalpeter.com and www.casselsalpeter.com.

Practical tips for growing small businesses into middle-market businesses

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By James S. Cassel

July 20, 2014

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It’s a common question for small-business owners: “How can I take my company to the next level and become a middle-market business?” Although at Cassel Salpeter we focus on working with middle-market businesses, I often run into small-business owners in the community who ask for some practical tips.

I define the middle market as any business with $10 million to $250 million in enterprise value. Although there are more than 27 million businesses in the United States according to the last census, only about 300,000 have more than $5 million in revenues. So, becoming a middle-market business clearly is not easy. However, in many cases it may be attained with hard work and the right strategy (and a little luck does not hurt).

No matter how you position your business for growth into the middle market, you will have to prepare your business strategy.

First, evaluate the size of the market for your product or service and your position within the market. Is it saturated with competitors? Is it a stagnant market or are there growth prospects? Are you in a unique position to capitalize on growth opportunities? There’s more than one way to expand: you can expand organically by opening additional locations or by buying a competitor or similar business in your current market or a new market. You might market or advertise more or hire additional sales people.

When looking to grow, find out if there’s room for innovation with your products or services. Do you make standard nuts and bolts with little room for improvement, or can you innovate and expand your product line? It’s always great to survey your current and potential customers or clients and determine what would most interest them.

Furthermore, do you have adequate capital for growth? Again, you have multiple options. You can pursue a Small Business Administration loan or identify a Small Business Investment Company to provide a loan or invest in your organization. Alternatively, you can decrease your distributions and instead retain earnings to build up your equity base. You might get additional vendor financing. For the right plan, capital should be available.

Sometimes a simple policy change can help. Take inventory of your current policies and determine if they are aiding or impeding your growth. For example, online retailer Zappos instituted a 365-day return policy, a sharp departure from the then industry standard of 30 days. Zappos figured out that customers would feel more comfortable buying more items knowing they could return them without hassles. Although counter intuitive, its return rates actually dropped. This helped propel Zappos toward explosive growth.

Next, you’ll need to evaluate your distribution model and channels. Generally, the more distribution channels you have, the more opportunities you will have to move product. Before the advent of online shopping and commerce, brick and mortar stores were the primary means for purchasing goods along with catalogs. Remember the Sears catalog? Catalogs and mail order shopping expanded in popularity over time, vastly expanding the reach of businesses like Victoria’s Secret and other consumer and apparel outlets. But now there are a wide variety of multichannel distribution options. Potential consumers search for items, they receive emails and notifications about new products and specials, they walk past storefronts, and their friends share content about brands on social media channels. To maximize growth, make sure you are present and easily accessible wherever your customers and referral sources are, and keep a close pulse on which channels are working best for you and why.

Growing your business also means hiring and retaining the right talent. Turnover is costly; pay good people fairly and incentivize them to stay.

Finally, a primary external factor you will contend with is the economy. In a growing economy, retailers grow; in a slowing economy, those same retailers shrink. Ensure you have the capital and systems to weather a downturn so you can capitalize on the peaks. You must look at the trends as sometimes things shift, i.e. from the store to the web. Other external factors can play a role such as governmental regulation at the municipal, state, or federal levels, and a changing market. It is always a good idea to keep an eye on what your competitors are doing.

It’s important to have a sound business plan in place and update it several times a year to ensure you are on track for the goals you set for your business. Even if you are not ready to expand right now, conduct an evaluation and ask yourself how you would tackle each of your challenges. Identifying how you will overcome these standard growth obstacles early on will aid you in forming the long-term strategic thinking and planning you’ll need to propel your business to middle-market status. Moreover, it’s always a smart idea to consult qualified advisors with experience handling these issues who can help ensure that you are on the right path.

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. He can be reached at jcassel@casselsalpeter.com and www.casselsalpeter.com

Cassel Salpeter & Co. represents DynaVox in section 363 sale

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June 19, 2014

Cassel Salpeter & Co. represented DynaVox Inc., debtor-in-possession, in connection with a Section 363 sale transaction approved by the Delaware Bankruptcy Court to Tobii Technology AB, a Swedish technology company with offices worldwide.  In a competitive auction on May 21, Tobii was the successful bidder for substantially all of the operating assets of DynaVox with its $18 million bid.  The transaction closed on May 23.

Tobii expects the purchase of DynaVox to solidify the position of its assistive technology division as the international leader in the augmentative and alternative communication and accessibility markets.  DynaVox, with headquarters in Pittsburgh, provides speech-generating devices and symbol-adapted special education software to help people overcome speech, language, and learning challenges.

Cassel Salpeter advised DynaVox in completing the sale in an expedited three-week time frame and provided assistance throughout all phases of the sales process, due diligence, and auction.

“We are pleased to have successfully represented our client in this complex sale in a tight timeframe,” said James Cassel, co-founder and chairman of Cassel Salpeter, who led the assignment along with Philip Cassel, an associate with the firm.

Added DynaVox’s bankruptcy counsel Paul J. Battista:  “The sale was a great success in that it assures all creditors will be paid in full and money will be available to be distributed to shareholders.  Jim and his team jumped into the process, came up to speed quickly and were invaluable in helping generate this great result.”

Tobii is noted as a global market leader in eye tracking and a pioneer in gaze interaction. Its products are widely used for communications by people with disabilities. They are also used within the scientific community and in commercial market research and usability studies.

The debtors were represented by Paul Battista and Heather Harmon, partners with Genovese Joblove & Battista, P.A., and William Chipman, Jr., partner, and Mark Olivere, counsel, with Cousins Chipman & Brown, LLP.

Cassel Salpeter & Co. is an independent investment banking firm that provides advice to middle-market and emerging growth companies in the U.S. and worldwide. Together, the firm’s professionals have more than 50 years of experience providing private and public companies with a broad spectrum of investment banking and financial advisory services, including: mergers and acquisitions; equity and debt capital raises; fairness and solvency opinions; valuations; and restructurings, such as 363 sales and plans of reorganization.

For older business owners, knowing when to sell the business is critical

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By James S. Cassel

June 15, 2014

I was recently introduced to a successful entrepreneur business owner in his 90s who is considering selling one of his businesses. After our first meeting, his question became one that puzzles many older business owners: “Should I sell my business while I’m still alive Untitledor let my family sell it after I’m gone?”

In the weeks following our meeting, he has continued to ponder this question, as he wants to make sure that his decision will be in the best interests of his family and the business.

His financial advisors are encouraging him to wait to sell until after he has passed away. What they are suggesting, which is not a novel concept, seems to make perfect financial and tax sense on paper. Their recommendation is based on the assumption that by waiting to sell after his death, his estate can enjoy significant tax benefits from a “step-up in basis” (a readjustment of the value of an asset when it is inherited).

In simple terms, here’s how this generally works: Let’s assume you own a $50 million business and your tax basis in it is $5 million. If you sell the business during your life for $50 million, you will pay capital gains tax on $45 million; after you pass away, your family will pay an estate tax on the net remaining monies.

However, if the business is sold after your death for $50 million, the basis is recalculated. Your heirs would pay the estate tax on the $50 million but wouldn’t owe any capital gains taxes. The logic here is that you are mathematically better off retaining your business and having it sold after your death to greatly reduce the amount of taxes due.

Here are some of the flaws in that line of thinking: His advisors are neglecting to take into consideration the fact that the value of the business might drop after the owner — who has been the heart and soul of the business for decades — is no longer part of the business’ daily operations. Indeed, business valuations tend to suffer after the individuals who were the primary business drivers die.

Moreover, the course of action recommended by his advisors would put the burden of selling the business on his wife and brother in his 80s, who might not be the best-qualified person to handle the process under the emotional duress that is likely to follow his death.

This business owner should consider other key issues, such as the effects of his passing on the employees, customers, lenders, management and suppliers, to name a few. For example, if customers become concerned about the future operation and stability of the business and decide to explore other suppliers, this decrease in business could adversely affect the business’s value. Even with ample preparation, this business owner would have very little control over how his death will affect the valuation, or how a divestiture would affect his family as well as the business.

What did this gentleman decide to do? The jury is still out, as he is still evaluating the options. One of the reasons he probably likes the suggestion of his advisors is that it would enable him to continue working in a business that has been part of his persona for more than 50 years. Like other business owners in his position, he might feel sentimentally attached to his business. The danger in sentimental attachment is that decisions are often made for emotional reasons and not based on what may be in the best interest of the company and its stakeholders.

Based on my experience helping business owners navigate these complex issues, I am confident that he and his family will be better off if he sold the business while he is still alive. During our meeting, I explained to him that there are a wide variety of alternatives to selling outright at this time, if he wishes to continue working at his business as long as possible. Finding a partner to whom he can sell part of the business now and then sell the remainder after he has died could make sense under the right circumstances for the business and his family.

Although finding an appropriate partner can be a challenge that requires help from qualified advisors, it can be well worth it in the long run. For example, this approach could ease some of his business tax burdens and create a clearer succession path for the business. The best alternative might, in fact, be to sell the business to a strategic buyer who might pay the maximum amount and put in place an employment agreement if the owner wants to remain involved.

Without a doubt, letting go of a business that you have owned and nurtured for years is no easy task. When it comes to finding the right time to sell, there are no cookie-cutter approaches or crystal balls. It is crucial to consult with qualified advisors, including investment bankers, who can provide the necessary strategic counsel and perspectives to help protect your best interest.

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. He can be reached at jcassel@casselsalpeter.com and www.casselsalpeter.com