Mergers and Acquisitions

BG has successfully represented businesses in which we had already been retained to improve areas of the client’s business. Should a new client join the BG family of clients, we always evaluate for the client the current value of the company from our knowledge of the industry and understanding of the marketplace. Revenue size, revenue mix, revenue consistency, management team, accounts receivable ageing, inventory turns, labor needs, and, of course, profit/EBIDA as adjusted for non-recurring items and other adjustments including Covid & PPP Loan Forgiveness unique to the last 24 to 36 months of operations. If a client wishes to sell their company within the next 2 to 5 years, we will develop a plan to maximize the sale price of the entity. Sometimes a strategic acquisition to enhance revenue and EBITDA will assist this process. Revenue size does matter in maximizing the sale price multiplier of EBITDA, or other profit descriptions, in arriving at a Sales Price. Knowing when a paid Broker is in the best interests of net price after Commissions and other fees is critical. Generally, in-industry private equity firms and brokers seek out our clients’ companies. From those contacts, BG will evaluate which of these suitors may be worth talking to, through a series of screening questions. All clients want 2 or more serious buyers making offers. In the due diligence process, those purchasing companies will review and revalue to determine if the client earnings are real (Quality of Earnings Evaluation), review working capital required, the strength of the management team, and the consistency of customers and revenue by revenue type. In our work with clients, we manage our engagement to produce a maximized profile over two or more years that shows strength of earnings, strength of revenue mix, strength of management and depth where needed, and accuracy of earnings to achieve a minimum acceptable targeted sales price for our client. This two to five year process BG has named “Build to Sell.” It is a strategic plan that BG manages with our clients to achieve the planned sale price-net of costs of BG, attorney assistance, CPA firm and, if needed, a Broker. We also explore potential acquisitions of other strategically positioned companies to increase revenue size and profit, as revenue size does impact the multiples of the various means of defining “Profit” (EBITDA, Variations of EBITDA, pre-tax earnings, etc.). Thus, a good acquisition that enhances the earnings multiplier of a client company, while acquiring the entity at an earnings multiplier substantially smaller than the multiplier after “merging” the Income Statements of the client and the acquisition.

Mergers within an industry don’t require the capital to acquire/purchase another strategic company, as it becomes a “stock swap” for the purpose of gaining size and strategic customer controls which increases the values of the shares of both merging companies. Once commenced, this process can take 5 or more years from the first merger to create the size and history of management and profit execution that allows the substantial increase in value. However, the rewards can be substantially more significant than if the merging companies independently sold themselves without the mergers of other similar companies. Burruano Group represents and manages such engagements in our representation of client companies.