About Patrick Murtha

Patrick is a partner and mergers and acquisitions analyst with Murtha & Murtha Mergers and Acquisitions.

Middle Market M&A: Finding the right Advisors for your Company

Who are the best M&A advisors for your company?

Ultimately, M&A advisors do two things. They help companies grow through merging with or acquiring other companies. M&A advisors also help business owners formulate exit strategies. While these services appear to be the same regardless of the market, the reality is different intermediaries service different markets. There are a few key aspects to look for when picking an M&A advisor in the middle market. But first, how does Murtha & Murtha Mergers and Acquisitions define the middle market?

We define the middle market as:

  • Companies with sales between from $5m to $250m.
  • Businesses that are privately held.
  • Companies with 10 to 200 employees.

The middle market differs from both the micro-cap and large-cap markets.

Micro-Cap Market

The micro-cap market ($500,000-$5,000,000 in sales) is generally handled by intermediaries called “business brokers”. Business brokers work with buyers and sellers similar to the way commercial real estate companies do. Most of the time their “listings” are advertised through a multiple listing service (MLS). Unlike M&A advisors, who most commonly use a financial services agreement (FSA), business brokers work through a listing agreement. Business brokers in the micro-cap world sell their listings through web advertising and networking with other brokers.

Mid-Cap (Middle) Market

The definition of the middle market varies from advising firm to advising firm. On the broad side, the middle market is any business operating with gross sales from $5 million to $1 billion. Murtha & Murtha focuses on the bottom quartile of this group. The $5 to $250 million group includes the majority of the businesses operating in the middle market. Firms working with middle market companies frequently refer to themselves as M&A advisors, financial consultants, and even investment bankers. While most firms use […]

By | November 17th, 2014|M&A Blog|0 Comments

Timing is Everything!

Selling your Business: Personal, Business, and Market Timing

Managing the Timing Aspects of Selling

When selling your business, there is more to your business’s value than profitability. Cash flow is, of course, the primary subject of interest to investors–but how can you get the most out of what you have created? There are three ‘pillars’ of  timing to consider–personal timing, business timing, and market timing. When a business owner is able to line all three of these timing goals together, business value and transferability is maximized. Below we will discuss some steps you can take to maximize all three timing conditions and get the most out of your sale.

Personal Timing

Personal timing is very important, and most business owners fail to consider this. In order to achieve perfect personal timing, the owner should be prepared to sell, but not under any compulsion to sell. Further, the owner should be at a point in time that makes sense to sell with clear goals for the future. Many owners make a decision to sell due to being burnt out, but maybe all they need is a vacation!

Many steps can be taken to put the personal aspects of your business in good transferable form. Here are some adjustments that an owner can make to enhance their personal timing:

  1. Limit dependence of the owner. The owner should transition away from being central to the major operations of the business. An opportunity that requires as little as possible from the owner will be of higher value to investors than a business that requires 50-hour work weeks. In order to achieve this goal, the owner should consider raising lower and middle management to the upper level. Additionally, the owner may consider bringing outside management. Ultimately, the […]
By | November 11th, 2014|M&A Blog|0 Comments

Non Disclosure Agreements in Mergers and Acquisitions

Why do we use non disclosure agreements?

Confidentiality is a common concern in business transactions, and to an extent commercial real estate. This holds opposite when it comes to the sale of residential property, rental properties, and most other high-end goods and services. Why is this? First, let’s explore some aspects of a typical residential real estate sale versus a typical business offering.

Residential real estate fundamentally cannot be advertised confidentially. Imagine a real estate listing that reads, “$350,000 house in the Tampa Bay area. Sellers wish to keep the location a secret. Please sign a non disclosure agreement to learn more.” Would anyone respond to this? The answer is no! The reason is that there are literally thousands of other available residential listings in the Tampa Bay area that are easy to locate and do not require any degree of confidentiality to explore.

The M&A world is quite a bit different, however. You may have visited some popular business sales websites such as www.bizbuysell.com or www.bizquest.com. These websites have business listings, but they are almost always very limited in what the user is able to see. In almost all cases, you will need to contact a broker or M&A consultant that the seller has hired just to take a look at some basic financial information. If the consultant you speak with is worth his or her salt, he or she will require a signed non disclosure agreement along with a personal financial statement. This may seem like a lot of information for a buyer to provide, but those who are unwilling are not serious buyers.

Obviously, there are serious implications of disclosing the sale of your business and accompanying financial and proprietary information. Without a solid non disclosure […]

By | October 20th, 2014|M&A Blog|0 Comments

Business Valuations: What are they and why would I need one?

Business Valuation: the What and the Why

Whether you own a business or commercial real estate, it is a certainty that you will require a business valuation or property appraisal at some point.

Pretty much everyone has heard of a property appraiser–an individual or company licensed and skilled in performing appraisals on commercial or residential real estate. The vast majority, however, is unaware that there are also companies who are licensed experts in valuing business interests. Tom Murtha of Murtha & Murtha Mergers and Acquisitions is a NACVA  licensed valuation analyst. Tom has performed over 100 valuations ranging from the small to mid market ($50-200 cap). Our experience ranges from distribution, service companies, recreation (golf courses and marinas), and manufacturing.

There are many purposes that business owners need business valuations.

  • Litigation
  • Mergers and acquisitions due diligence
  • Bank loans
  • Employee Stock Ownership Plans (ESOPs)
  • Estate taxation
  • Gift taxation
  • Buy-sell agreements

Many business owner are familiar with “rule-of-thumb” methods when it comes to estimating the value of their business. While rule-of-thumb principles are often a good ballpark estimate, they do not take into consideration the full picture of your company. Rule-of-thumb analysis is not forward looking, which means it does not ask these important questions:

  1. What about the strategic value inherent in mergers and acquisitions deals? 
  2. What if your business is on the cusp of astronomical growth from a successful new project?
  3. What if you are valuing a partial interest rather than a 100% ownership interest?

These are just a few flaws inherent in rule-of-thumb techniques. To arrive at a concrete and mathematically sound figure, you will need to hire a valuation analyst. The fees for this service are dependent on the complexity and time required to perform such a […]

By | September 19th, 2014|M&A Blog|0 Comments

3 Steps to Prepare your Business for Sale

3 Steps to Prepare for your Business Sale

Business owners frequently ask us what they can do to prepare the business for sale. Appropriately preparing the business for sale will result in a less bumpy path to closing–and possibly a better price. There are many variables involved in a sale, and each industry has its own special considerations. Let’s discuss three major steps that virtually all business owners should take to prepare for a business transfer.

Minimize your role

Do you depend on your business, or does your business depend on you? Businesses in which the owner is able to let operations run on “auto pilot” are very attractive to buyers. Not only does this provide a lower-risk scenario, but it also provides the buyer a more stress-free transition of ownership. Here are a couple of ways to lessen your role:

  • Bring up higher-level management from within, or bring in an upper level manager from the outside. Depending on the cost, spending this additional money will often add value rather than decrease it.
  •  If you are often “in the field”, try to reduce your responsibilities to the office by distributing the work load to your field employees.

The point is to try to make your role completely management based. Buyers and investors are usually management and sales people–not plumbers.

Clean up the accounting

Many, if not most businesses, need to do a little housekeeping when it comes to accounting. When you begin to contemplate selling the business, it is worth getting together with your CPA to discuss this. There are a number of considerations to make while preparing your bookkeeping for a business sale:

  • Ensure that all sales (yes, even cash sales) are recorded.
  • Take pains to separate personal expenses from the business. Although […]
By | September 11th, 2014|M&A Blog|0 Comments

Can I Auction my Business?

Can you Auction a Business?

The “Auction” Process of Negotiation in Mergers and Acquisitions.

In today’s world, we are very familiar with the auction method of selling. Practically every type of asset imaginable can be purchased at auction. This includes consumer goods, real estate, and business/commercial assets. Websites like eBay allow people from every corner of the globe to interact with a highly liquid market. People buy cars, collectibles, and even real estate through eBay. Unfortunately, aside from liquidation auctions, there is no such service for business owners.

Private business interest is one of the few assets that are not available at public auction. The reason for this is obvious: confidentiality. Publicly auctioning a private business interest would mean sharing with the world that ownership is changing. This means customers, employees, and competitors  will be privy to your decision–most assuredly a destructive path for any business. The fact remains that the auction platform is the best means to drive price when selling any asset, so how can we apply this to M&A?

The Negotiated Auction Process. Murtha & Murtha employs a process that borrows from the archetypal auction and combines it with M&A principles. By working with a select group of parties, all of whom have agreed to confidentiality, we are able to initiate a negotiated auction. This process drives value as an auction would, but in this scenario, buying parties are unaware of each other’s identity. They only receive information about the prices and terms that are on the table. This process maximizes the odds that you will receive your idea price and terms, potentially adding significant value of other methods of negotiation.

As with all things, there are pros and cons to this process:
Negotiated Auction Pros

  • Provides the best chances […]
By | June 5th, 2014|M&A Blog|0 Comments

Hiring a Business Broker

6 Reasons Hiring a Business Broker is Right for You

It’s  time for the obligatory “Why Should I Hire a Business Broker?” post. Many resources across the internet discuss the benefits of hiring a business broker. Here we will discuss a few benefits we believe our clients enjoy by hiring Murtha & Murtha Mergers and Acquisitions.

  1. Hiring a business broker provides multiple avenues of advertising:

    Hiring a business broker, specifically Murtha & Murtha, comes with the benefit of advertising with exclusive networks, listing service, websites, and more. Many of our advertising services are very costly, and only really make financial sense for people and companies who are advertising many businesses for sale at once. Murtha & Murtha also puts a tremendous amount of effort into traditional marketing techniques such as direct mail, web and print newspapers, periodicals, trade magazines, and even telemarketing when appropriate. Advertising our clients’ businesses is the most time consuming service that our firm provides. Between originating marketing materials and working with buyer prospects, we can have some pretty long days. How much free time do you have to sufficiently market your business on your own?

  2. Hiring a business broker brings expert negotiation to your side of the table:

    Many business owners “leave money on the table” by having the wrong approach to negotiation. Negotiation is a very delicate matter. Hiring a business broker, especially the right business broker, remedies this situation. Murtha & Murtha has decades of combined experience in all matters of business negotiation. We know how to provide creative solutions to maximize the value of a deal to both our buy-side and sell-side clients. We are not comfortable with putting together an unfair deal. We know that for many of […]

By | August 23rd, 2013|M&A Blog|0 Comments