Author: Sullivan Consulting

Valuation Considerations under COVID-19

Most small and medium size enterprises have experienced a significant deterioration in their business as a result of the unprecedented impact of COVID-19. While some of this deterioration may be tied to temporary factors, in most cases the economic damages are long-lasting or even permanent.  Given the gloomy outlook, SMEs must reevaluate and validate their business Read More

Earn-outs in M&A Transactions

Valuation and deal structure represent a critical step in executing M&A transactions.  Setting realistic expectations between the buyer and seller can improve the chance of getting the deal done. An earn-out is a risk allocation tool used in M&A transactions whereby a portion of the purchase price is deferred over a specific period of time and Read More

Recapitalization

At some point, most founders and owners face financial constraints and consider whether they should sell their business. What most of them don’t know is that there is an option to sell the business and still have the opportunity to participate in its future growth. Recapitalization allows owners to sell part of their shares and cash-out Read More

Carve-outs

A carve-out represents the sale of a business unit, division or a part of an enterprise. Over the past few years, divestitures have accounted for a rapidly increasing portion of M&A activity.  The rationale behind carve-outs is to getting rid of business units or subsidiaries which don’t play a key role in the business and are Read More

Letter of Intent (LOI)

A letter of intent (LOI) is a written document that outlines the intentions of the buyer and the seller during a potential transaction.  Among other things, the LOI includes the purchase price and payment terms in addition to other key considerations to the transaction.  The main purpose of the letter of intent is to ensure there Read More

Exit Planning

Exit planning is a critical yet underestimated financial planning task. For most entrepreneurs and business owners, the value of business is at least 50% of the owner’s net worth; in many cases it is up to 80-90% of the total net worth.  Exit planning focus on maximizing enterprise value. Why exit planning? 2/3 of the US Read More

Capital Raising

Raising capital is a serious task and often requires serious dedication, determination and patience.  It is a fundamental process that requires the business to be well organized and ready for new funding.  Capital can be raised in the form of debt, through a financial institution, or equity, through a financial backer whether it is an angel Read More

Term Sheet

A term sheet is a non-binding document which outlines the key financial terms and conditions of a proposed investment. that lays out the proposed terms and conditions under which an investor will make an equity investment in a company.  Essentially, a term sheet sets out the key points of a potential deal – a framework for Read More

Pre-Money vs Post-Money Valuation

The value of a business in a transaction starts with determining the pre-money and post-money valuation. This valuation will be used to determine how many shares will be issued to the new investor and what percentage of ownership (after dilution) will the owners keep.  The pre-money valuation is the value attributed to the business before any Read More

M&A as part of your Growth Strategy

Mergers and acquisitions make perfect sense in a variety of situations. For example, maybe an opportunity presents itself that requires fast, decisive action. Or maybe a competitive threat compels a defensive move to get bigger, faster. Here are five situations in which mergers and acquisitions have proven useful as a growth strategy: 1 – Fills critical gaps Read More