When I meet Sellers for the first time it is a fascinating experience. In many cases they remind me of someone I know very closely. The person could be my very father. I have sudden charges of empathy and a emotion.
Read MoreUnfortunately most businesses have some kind of debt on the statement. Buyers don’t always know what to do when they see it. When I say statement I mean financial statement and by that I mean balance sheet. Most companies have some sort of loans, liabilities, or other types of contingencies on the balance sheet. It comes with the territory. This is what happens when you own a business. You are almost certainly going to have some liabilities on the balance sheet. But what effect do those liabilities have in a sale of the business? In fact the effect is dramatic and may well interfere with or even break up the deal. So how to buy a business what has debt or what to do when you encounter one?
Read MoreSo I think I will do a few posts on deal criteria because people always ask me about it. In this post I will talk about the range of earnings that a company should have for it to be on my radar. I should point out that I always change this criteria depending on the day of the week, my mood, the stock market, and if I’m having a bad day. However I always come back to the same range. There are times when I go sky high end times when I feel like buying this a store down the street. But we’ll have to come back to reality at some point.
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One of the reasons I stuck with small business buying is that big business buying didn’t make a lot of sense to me. First of all there is competition and the competition comes from big money players in private equity. So these guys are at the top of the food chain and ever since the 1990’s they have grown in numbers like rabbits. So there is more institutional money available to chase deals. They chase deals that are big… usually. Lately they reach down to our level but that won’t get them the return they need.
Read MoreHere is a short video description of what went down in 1988 when a huge deal was bought using a leveraged buyout. This was in the era of junk bonds, Drexel and Mike and they don’t exist much anymore but their spirit lives on. Why would I bother with an old mega-deal decades old? To show that the deals that are done today use the same principals as they did back then. And to prove that even a huge leveraged buyout is similar in structure to a small LBO.
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