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Free Webinar: “Cracking The Code To M&A Growth”

Join us on July 12th at 1pm for a free webinar. John Bly, Principal and CEO of LBA Haynes Strand, will deliver his signature presentation: “Cracking The Code To M&A Growth.” John has delivered this speech across the globe to rave reviews and even wrote a book on the topic. He is excited to bring it to a webinar platform.

“Cracking The Code To M&A Growth” serves as a guide to effectively find good deals for entrepreneurial businesses in the $1 to $30 million range.  John provides a blueprint for how to tackle such issues as: determining whether the deal is a good fit, due diligence, structuring the deal, tax issues, and how to land the perfect catch.

John will show you ways to find potential spots for rapid growth and accomplish, on a smaller level, what the larger companies do. By breaking down the M&A process into approachable elements, you will find that your entire outlook on the topic will be transformed!

If you would like to meet with John, contact us to schedule a no-cost consultation.

LBA Haynes Strand Launches Capital Advisors Group

We are excited to announce a new division at our firm – LBA Haynes Strand Capital Advisors.

John Bly, Co-Managing Member of LBA Haynes Strand, PLLC, had this to say about the announcement: “Since the firm was established, LBA Haynes Strand has been an active participant in the M&A marketplace. Our firm itself has successfully merged or acquired 11 CPA Firms in 11 years, which has created many new and exciting opportunities for the firm.  Over the past few years our clients have been hiring us to advise on mergers and acquisitions, performing due diligence work and providing advice on the structure of the deal. With our history and given the tidal wave of M&A activity coming over the next 10 years, we felt that this was the perfect time to launch our own Capital Advisors group.”

The new entity will be known as LBA Haynes Strand Capital Advisors, LLC and will be led by Saeed Moghadam. Saeed brings over 17 years of banking experience to the group, as he has enjoyed a successful career working with some of the largest banks in the Charlotte area. Our clients will now benefit from being able to leverage both the CPA knowledge and the Banker knowledge under one roof. LBA Haynes Strand Capital Advisors will offer professional advisory with in house due diligence, providing a seamless experience to our clients. 

New Service Lines under LBA Haynes Strand Capital Advisors include:
  • Capital Raise
  • Buy Side Searches
  • Sell Side Representation
  • Debt Refinance
  • Exit Planning
  • Valuation
  • M&A Advisory

To learn more about our Capital Advisors team and how we can help your business, contact us for your no-cost consultation.

Successful M&A: Internal Growth Must Match External Growth

Traditional entrepreneurial formulas go something like this… “If we have 10 clients, we hire 1 marketing person, adjust their salary according to client growth, and then in 4 to 5 years we could possibly see 10% business growth.”

We have news for you! A merger and acquisition process will grow your business 30% to 100% OVERNIGHT!

When you merge with another business, you are effectively doubling your business in size. That growth equals greater sustainability and greater scalability. You may think that a larger business would be more to handle, but just think about the growth process in general:

  • When your business expands in size, you have the opportunity to expand your client base.
  • The more clients your business has, the more revenue it generates.
  • With a boost in revenue, you are able to hire the appropriate staff to handle the rise in clientele.
  • With the right staff in place, your revenue and your clientele are going to continue increasing significantly.

It’s easy to get stingy about bringing more team members on board. After all, when you experience financial growth, your first reaction is to keep it growing, and hiring staff seems to do the opposite of that. Initially, you may experience a financial dip when you hire your new sales team. However, if their human capital matches your business values, you are undoubtedly going to experience financial growth in the following years.

Remember: When you grow externally, you must grow internally to achieve even more external growth!

Basically, if your clientele grows, your internal team must grow. That does mean a higher payroll, but it also means a higher ROI. You might be looking to hire a sales manager that demands a hefty salary. To ensure a good return, thoroughly analyze what this person brings to the table. Let your decision to hire involve looking back to their work history, but also looking forward to your company’s future. Always look forward! If you don’t see this person contributing to your future growth, look for someone else to fill the position.

If you are expecting rapid growth from your M&A transaction, expect to make the occasional investment. Hiring a team of experts is definitely an investment worth making. The more growth you experience, the more responsibility you gain. When you have an efficient internal team, those responsibilities are not only fulfilled, but they help you grow your bottom line a whole lot quicker.

Interested in learning more about M&A, contact us for your no-cost consultation.

Download Your Free LBA Haynes Strand Smartphone App

LBA Haynes Strand has developed an app to deliver real world accounting solutions to businesses and individuals alike.  Included in the app are:

  • Office Information – addresses, directions, phone numbers, office hours
  • M&A Due Diligence Checklist – Be prepared and make sure your due diligence is done!
  • Tax Questionnaire – Stay organized with this helpful tool!
  • Free Industry Guides
  • A Printable Tax Organizer
  • Subscribe To Our Newsletter
  • Read the most recent LBA Haynes Strand Blog posts
  • Keep up with Firm News
  • Document Submission – Take a photo of your document and send it to our team of CPAs!

In an effort to become the best CPA Firm for our clients and provide them with up to the minute updates, news, and service, we have developed this App with their needs in mind.

To download our app, click the links below:

Apple App Store URL:

https://itunes.apple.com/us/app/lba-haynes-strand/id1016215236?mt=8

Google Play URL:

https://play.google.com/store/apps/details?id=com.app_haynestrand.layout

John Bly Interview – Cracking The Code To Mergers & Acquisitions

John Bly recently sat down with ExitCoachRadio.com for an interview with host Bill Black. During the interview John discusses three important aspects of the M&A marketplace:

  1. What does the current M&A environment look like?
  2. Where is the funding for deals coming from today?
  3. Why would a small business want to acquire other companies?

To listen to the interview from ExitCoachRadio.com, CLICK HERE! Do you have more questions about mergers and acquisitions? Contact John Bly today!

Stock vs. Asset Purchase: How About The Best Of Both?

Most buyers want to buy assets and most sellers want to sell stock. However for our buyers, sometimes the internal contracts of customers and vendors and the ease of buying stock is something they prefer. So, how do we get the accelerated tax benefits of an asset purchase?  Here’s one option called a 338(h)(10) election:

According to the IRS, Section 338(h)(10) permits the buyer and seller of corporations to elect jointly to treat the target corporation as deemed to sell all of its assets and distribute the proceeds in complete liquidation.

To qualify for the 338(h)(10) election, the seller must be either:
  1. A US corporate subsidiary of a selling consolidated group or a parent company.
  2. An S corporation on the acquisition date

When buying a corporation, one of the very first issues that needs to be addressed is whether a section 338(h)(10) election will be made.  This election is made to step-up the tax basis in all of the seller’s assets when the benefit of the step-up to the buyer exceeds the tax cost to the seller.  When the tax cost to the seller exceeds the tax benefit to the buyer, the election is not made.

So what benefits come from a 338(h)(10) election?
  • The taxable gain on the deemed sale of the target subsidiary’s assets may be offset by any losses in or tax attributes of other subsidiaries of the selling group.
  • The proceeds from the liquidation of a subsidiary are tax-free to the subsidiary’s shareholders under IRC Section 332, resulting in a single level of tax.
  • Advantageous in the acquisition of S Corporations because S-Corps are not subject to corporate level tax.

To learn more about this election and other tax benefits that could assist in an M&A transaction contact us for a no-cost consultation!

How To Find A Company To Buy

Our firm receives many questions on M&A, but by far the most common question is: “How do I find a company to buy?” The answer is a simple one… start with Google and search for companies that are currently for sale. The search will most likely lead you to brokers. Within each industry, there lies a group of brokers who focus on mergers and acquisitions.

One very popular business broker firm in the Charlotte area is Viking Mergers and Acquisitions. On Viking’s website, there is a section for people looking to buy a business and another for people looking to sell their business. Under the “Buying A Business” tab, there is a business listing of all their clients who are looking to sell their business. There you go – you have your answer. It’s that simple!

What else can you do besides searching online?

I recommend trying a direct mail piece. To quote Wayne Gretzky, “You miss 100% of the shots you don’t take.”  You may never know that a company is interested in selling if you don’t ask them! Do some market research and look for companies that can add value to your business. 

What else should you look for in a business to buy?
  • Location – Do you want to enter a certain city or geographical area?
  • Lack of a Succession Plan – This one is hard to tell unless you have a dialogue with the owners.
  • Specialized Service/Product – Do you want to offer a new service or a product?
  • Culture – A similar work culture will help the merger or acquisition succeed.

Find a list of companies that fit the profile you are looking for and send them a letter or a postcard. This mailing should address your intentions, show off your background, gauge the interest of the business owner to sell, and be short and to the point. After that, it is up  to you to either follow up or foster the relationship. If you hear back from a business owner, you can fine tune your approach and learn what worked in your mailing or what you should change in order to make it more effective the next time around. You also might learn more about what kind of business owners are interested in selling and you can target similar business owners with your next correspondence.

Interested in learning more about how to find a company to buy?  We will release more blogs on this topic in the near future so stay tuned! In the meantime, feel free to reach out to the team at LBA Haynes Strand for your no cost consultation!

Are We Living In “The Merger and Acquisition Age”?

Could this be a term of our times? Are we really living in The Merger and Acquisition Age? According to recent business trends posted in the Kiplinger Letter, merger activity is on a roll.  Not just in the U.S. but across the globe. Merger activity in the U.S. has hit a 15 year high in the first quarter of this year with consumer-oriented firms leading the action. But that’s not the only industry finding success in mergers and acquisitions. Pharmaceutical, technology, energy, mining, and electric utility companies are also finding success.

What’s So Appealing About Growing Through M&A?

Easy. It is a way to effectively grow or even double your business overnight and the timing could not be better!

The baby boomers have been a driving force in Middle Market M&A in the late 20th and early 21st centuries. The eldest members of the 78 million-strong baby boomer generation turned 68 in 2014. The youngest boomers will turn 66 in 2030. Many baby boomer entrepreneurs will sell the Middle Market businesses they founded, and this factor will remain the driving force in M&A for at least two more decades! To put this into perspective, consider this: Based on recent data supplied by the US Census Bureau, there are just about 1.2 million Middle Market firms with sales of $1 million to $1 billion annually. Collectively these 1.2 million firms had sales totaling $9.8 trillion and carry a conservative market value of $4.9. About 800,000 of these businesses are owned by baby boomers. Between 2014 and 2029 (15 years) an average of 43,000 of these businesses per year will be disposed of… about two-thirds of these by sale. These numbers are huge and unprecedented.

Technology is also playing a large role in today’s Middle Market.  Because of the speed with which new information is being released, Middle Market firms have dramatically shortened business cycles.  New technologies and approaches launched by Middle Market firms routinely disrupt and eclipse other Middle Market firms, even Upper Market firms, and sometimes entire industries.  This has forced business owners to become increasingly proactive and infinitely more responsive to their clients and prospects, impacting not only Middle Market business operations, but also the timing, frequency, and execution of the sale of Middle Market companies.

Business can be described as an ecosystem.  As in all ecosystems the big fish eat the little fish in order to survive.  This is not a new phenomenon in M&A, but it is a more frequent one as the pace of business life continues to change.  Survival of the fittest is not just a Darwinian construct for living creatures.  It is equally applicable to business, especially the “Middle Market Sea”, which is the spawning ground for Upper Markets.

So are we living in The Merger and Acquisition Age? It certainly appears that way and it appears this trend will continue for the next few decades completely reshaping the way that Middle Market companies grow.  If you are not thinking about the M&A marketplace… it’s time to start and LBA Haynes Strand can help you.  Click the button below to download your free report and begin your M&A journey!

Property Management Companies Are Growing Through M&A

Mergers and Acquisitions have become an increasingly popular growth strategy among property management companies. In an earlier blog titled, “What Industries Are Growing Through M&A,” we mentioned property management companies as a top industry for mergers and acquisitions. So let’s dig a little deeper and learn what is being gained by M&A and what trends are driving M&A in the property management marketplace.

What Property Management Companies Are Trying To Gain Through M&A:
  • Size/Proximity to New Locations: In some cases, especially in the Charlotte area, management companies are looking to grow across State lines.  Rather than a Charlotte based management company opening a new location in South Carolina, they will often acquire other established management companies already based in South Carolina.  This is also true within the State as well (Charlotte -> Greensboro, Wilmington, Raleigh, etc.)
  • Economies of Scale: Management companies deal with many different service providers from landscapers and painters, to accountants and attorneys.  As management companies grow and manage additional communities through M&A, they are better able to pass cost savings (via economies of scale) onto their clients.  Doing so, theoretically, makes the management company more attractive in the market place as they are better able to offer attractive rates.
  • Additional Management Offerings: There are many local management companies who specialize in residential communities while others mainly do commercial associations.  Through M&A, management companies may be able to acquire residential work if they didn;t already have it, or vice versa.
What Trends Are Driving M&A In The Industry:
  • Real Estate Brokers Wanting Out: Community management is NOT a glamorous field. In lean times (2008 – 2012) many small/local real estate sales offices turned to property management when they were struggling to sell homes. With real estate “Hot” again, some real estate agents are looking to shed their portfolio of community associations to better focus their efforts on more lucrative selling activities.
  • Lack of Succession Planning: Similar to the CPA industry, some “mom and pop” community management companies simply have no succession plan, while other “younger” management companies are seeing this as a great opportunity for M&A.
  • National Players Coming To Charlotte: Up until 2008, community management in Charlotte was pretty much locally run (i.e. 20 or so management companies throughout the State and SC, perhaps). However, in the past 5 to 7 years, Charlotte has experienced an increase in nationally known management companies who often launch their local office by purchasing a locally-owned community management company.

This may be un-chartered territory for some management companies, and LBA Haynes Strand is here to help. We have a team that understands the needs and the financial issues associated with HOAs and property management companies. If your property management company is looking to grow through M&A, schedule a no-cost consultation with us and we will walk you through the steps for a successful merger or acquisition.

4 Reasons Why Now is a Good Time to Acquire a Company

Are you considering acquisition as a way to begin or expand your business? There are a number of reasons why it is one of the best times to acquire a company:

 1. Supply and Demand

As The Baby Boomers are exiting their companies – there are lots of sellers, but there are not as many buyers as there were 10 years ago – so the selection of businesses is better than in the past.

2. Capital Availability

The Private Equity Groups, Private Investors, and Banks have more money on the sidelines that they want to put to use in the market place than ever before. In addition, interest rates are still at historic lows – so borrowing capital for an acquisition can be done very efficiently.

3. Larger Companies Are Worth More

Acquiring 1 to 3 competitors and building your current company may change the multiple you get on an exit from 4x to 6x of EBITDA. The big difference here is that you may be buying a smaller company for 3x the earnings and later as you combine it with your business and thus resell a larger business in the future, you may be able to get a rate arbitrage on your purchase. Thus, the same business you bought for more than 3x.

4. Strategic Savings

If you already own a company in the given industry and you acquire another one – the savings could be 5-25% on expenses for the combined company. This means you could add more profit and cash flow than the prior owner. There are many different expense categories that would overlap, and when you combine companies you would not have to pay it twice.

M&A Tip: As you look to acquire or buy a business make sure you are doing it for the right reasons. Don’t just say, “I want to get rich.” That line of thinking probably won’t cut it, unfortunately. You need to make sure you have wisdom, passion, and a sound plan for this business. Do your Due Diligence! The timing is right to acquire, it’s just up to you to follow through!

For more information on how LBA Haynes Strand can make your acquisition a successful one, contact our Capital Advisors team!

What Industries Are Growing Through M&A?

In recent years, mergers and acquisitions have seen a rise in popularity as a way to grow a business. Why is this? Much of this can be attributed to the aging of the Baby Boomer generation. Baby Boomer business owners are looking to retire or to cash in on the businesses that they have built. They are looking for opportunities to sell and the marketplace is very aware of this. As Generation X and Y continue to develop and build on their entrepreneurial backgrounds, there are many opportunities to buy businesses and grow businesses exponentially through M&A.

Mergers and acquisitions are not prevalent in every industry. However, there are some industries that are considered very active. These are the industries focused on growth through M&A:

  1. IT/Technology Companies
  2. Construction Companies
  3. Property Management Companies
  4. CPA Firms
IT/ Technology
Why M&A?

Technology companies want to gain access to intellectual property and talent, enhance new product lines (through acquisitions), acquire innovative product lines/technologies, and finally technology companies want to enter new markets. In addition, technology companies realize that these achieving these objectives through in-house operations would be very expensive and time-consuming. M&A gives these companies instant solutions and results.

Trends Driving M&A In The Technology Industry:
  • Cloud Computing
  • Mobile Technology
  • Data Analytics
Construction Companies
Why M&A?

Construction companies want to gain access to an expanded geographical footprint with new markets, a larger workforce, increased financial flexibility, and additional service offerings. Acquisitions have been increasingly popular among construction companies as larger companies are looking to add a specialty service offering. For example, lets say you hire a contractor to come in and install new siding on your house. They do a great job and you are pleased with your decision to use their services. If you find out they just added custom garage door installation to their list of services, you will probably use them again. The increase in service offerings through mergers and acquisitions gives construction companies the ability to sell multiple times to the same client which increases revenue.

Trends Driving M&A In The Construction Industry:
  • Favorable capital market conditions
  • The shale revolution
  • Labor shortages
  • Aging and retiring population of owners
Property Management Companies
Why M&A?

Property Management Companies are using M&A in order to gain: size, proximity to new locations, economies of scale, and additional management offerings. In some cases, especially the Charlotte area, management companies are looking to grow across state lines. Rather than a Charlotte management company opening a new location in South Carolina, they will often times acquire an established management company in South Carolina. This can be seen in the state of North Carolina, when management companies based in Charlotte use this tactic to gain access into new cities, such as Raleigh, Greensboro, etc.

Trends Driving M&A In The Property Management Industry:
  • Real Estate brokers wanting out
  • Lack of succession planning
  • Competition: National players coming to Charlotte
CPA Firms
Why M&A?

Growth through M&A has steadily increased for CPA firms. Firms want to gain access to talent, new marketplaces, and new service offerings. A CPA Firm may lack the time and the talent to grow a certain niche or service offering that they see an opportunity in. The best way to achieve instant entry into the marketplace is often times through a merger or an acquisition of a smaller firm that specializes in that service/nice and has the talent in place to achieve results. These can lead to an INSTANT increase in revenue and a larger footprint.

Trends Driving M&A In The CPA Industry:
  • Aging and retiring population of owners
  • New service offerings
  • Lack or decrease of talent
  • Increase in competition

Growth through M&A is our specialty. If you are in one of these four industries and are interested in exploring how M&A can grow your business, contact us for a no-cost consultation.