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Investment Banker Deal

How and When to Hire an Investment Banker

When is the right time to consult with an investment banker? For Sellers (Corporate and Entrepreneurial)

As soon as business owners open the doors of their business, they should begin planning their exit strategy. One of the key components of such a plan is remaining aware of the potential market value of their business, the acquisition/consolidation activities taking place in their industry, and their business’ relative attractiveness to third-party buyers and/or investors. Periodic discussions with investment bankers/mergers and acquisitions (M&A) professionals are one way to remain current and up to date on such issues, even if there is no short-term need to engage a consultant.

Many business owners wait too long to educate themselves about their various exit strategy options including, but not limited to: (1) a sale of the business to a third party; (2) pursuing an internal buyout [either by straight management buyout (MBO), or by an MBO with a private equity fund]; (3) implementing an Employee Stock Ownership Plan (ESOP); (4) divesting of part of their equity in a business via a Recapitalization (Recap); or (5) facilitating a transition to the next generation management team. Then, when the need to choose an exit strategy is thrust upon them due to illness, death, divorce, business reversal, or if the timing of their exit strategy coincides with an economic downturn, those business owners wind up with a limited number of options and/or a low transaction value.

Minimally, when a business owner eventually begins to consider the prospect of a sale of their business as a plausible idea, other than just early Monday morning, it is necessary for them to begin educating themselves. The best time to sell is when there is no time pressure. Accordingly, at least 1 or 2 years before the business owner wants to exit the business, he/she should begin interviewing and selecting the firm they would like to engage. Assuming the business owner has begun the process early enough, the investment banker can often provide suggestions as to strategies for improving the business to make it more attractive to potential buyers and maximize its ultimate value. Further, to the extent a transfer to the current management team, or the next generation of family members, is desired, a multi-year process is often necessary to produce the best result for the current owner.

Even if the owner does not take these steps before their need, or desire, to exit becomes imminent, at an absolute minimum, they should at least make sure they contact an investment banker before they: (1) share the fact they are considering a sale with anyone who is not an equity owner in the business, or one of its professional advisors; or (2) respond to any buyer inquiry, especially before sharing any information with them about the business, particularly if the potential suitors are competitors. In no event should a business owner begin soliciting offers from buyers before they have assembled their professional team and: (1) committed themselves to the divestiture process; (2) developed a clear understanding of how buyers are likely to value their business and the tax implications such a divestiture may have; (3) determined how to protect confidential and proprietary information; and (4) developed a detailed list of their financial, employment, real estate, and other goals.

For Corporate Buyers

To some extent, the best time for a corporate buyer relates to how aggressive the acquisition program is and the importance of its timetable. If acquisitions are merely being considered as one of several parallel strategies to attain the business plan and are viewed as attractive only when opportunistic (ie. low price, attractive terms, a large company divesting itself of a non-core business, death/disability of key management team members that render the business unattractive to other buyers), it may not be necessary for a buyer to prioritize consulting with an investment banker. Generally, such buyers will employ a passive approach that occasionally results in an acquisition. Typically, this approach involves some combination of: (1) responding to direct investment banker solicitations; (2) alerting their professional advisors, lenders, and suppliers that they are interested in exploring acquisitions; (3) attending industry functions; and (4) calling up their friendly competitors. These passive approaches typically result in senior management time being wasted on unattractive candidates, and rarely develop compelling acquisition targets. However, at least consulting with an investment banker periodically can surface precisely the type of opportunistic acquisitions, which such buyers find the most desirable, but, assuming the seller is represented by a competent investment banker, at a higher price.

If, however, the principal determinant(s) of the near and long term success of the company’s business plan is/are: (1) near term acceleration of financial performance growth; (2) expansion of the business’ distribution channels and/or product offerings; (3) the need to absorb excess overhead; (4) significantly increasing the business’s capabilities and skilled personnel; or (5) access to certain cutting edge technologies/processes, which are not a part of the current business, but are needed to enhance its competitive posture, a buyer should immediately consult with an investment banker. Ideally, that consultation should take place in the early stages of the development of the buyer’s acquisition criteria. The investment banker’s knowledge of prevailing pricing, deal structuring techniques, and financing trends, coupled with the buyer’s operating and marketing knowledge will typically result in a more realistic assessment of suitable acquisition candidate availability and financial results.

For Entrepreneurial/Private Individual Buyers

Most entrepreneurial buyers that are interested in acquiring a business adopt a passive approach similar to the one that is often employed by corporate buyers. These buyers typically employ a combination of aggressive networking with their professional advisors, lenders, and former co-workers, and direct contact with a large number of business brokers and/or investment bankers. Many such buyers spend most of their time responding to advertisements in the Business Opportunities section of their local newspaper. Further, they typically develop only the most generic acquisition criteria and the most rudimentary business valuation metrics. Consequently, many of these buyers wade through a tremendous number of businesses that: (1) have little or no documentation available to support the seller’s assertions; (2) are ridiculously overpriced; (3) are not even close to the type of business they would like to acquire; (4) are rapidly self-destructing; (5) require financial resources well in excess of the buyer’s means; or (6) require specialized knowledge/skills the buyer does not possess.

Depending on the time frame in which the buyer will be able to mobilize its financial resources and begin working in the business, it may be best to engage an investment banker to: (1) assist the buyer with acquisition criteria development; (2) provide insight into the potential size and financial and operational characteristics of acquisitions the buyer may explore; (3) develop a list of specific companies to be approached on buyer’s behalf and approach them to explore the possibility of a divestiture; (4) gather information on those candidates which the buyer selects; and (5) assist with opportunity analysis, offer development and negotiation.

How to locate an Investment Banker?

There is a wide variety of potential channels through which a seller or buyer can locate an investment banker. The following are just a few of the potential ways in which one can locate an investment banker:

  1. Referral – Often, a seller or buyer’s professional advisors, financial institutions, or friends who are active in the business community can refer them to an investment banker. Also, Chambers of Commerce, Manufacturing Associations, and quasi-governmental economic development groups will frequently be aware of skilled investment banking firms in the area. The referral source should have had specific experience with the recommended firm and will be familiar with its resources, industry and size focus (if any), and past performance. Referrals are the best way to locate qualified investment banking resources because referral sources are usually well connected in the business community and familiar with the scope and relative quality of services provided by the various firms in the area.
  2. Direct Solicitation – Most businesses with Revenues over one million dollars will be contacted at one point or another by one or more investment bankers or business brokers. While many of those contacts may be “fishing trips” designed to provide an opportunity for the investment banker to convince the business to engage them, some of these contacts will be actual timely situations in which the investment banker is engaged by a specific buyer to perform a targeted search on their behalf. As always, one of the real challenges is selecting the most appropriate firm for the assignment. Obviously, third party resources who can independently vouch for a particular firm’s ethics and competence can assist with the evaluation process.
  3. Professional Associations – There are a variety of professional associations to which many of the top investment banking firms tend to gravitate. The following are just a few examples of such organizations: Association for Corporate Growth (ACG), Association of Mergers and Acquisitions Advisors (AMAA), Institute of Mergers and Acquisitions Professionals (IMAP), and M&A International (MAI). Typically, these organizations can provide interested parties with a list of potential advisors. Often, these associations will maintain websites that will allow interested parties to locate investment bankers in their geographic area. Even if an association does not have such online search capacity, it will have programming staff who can direct interested parties to appropriate firms. In most cases, these organizations (as well as others like them) do not have particular standards for membership. Accordingly, membership in one or more of the aforementioned associations is not a guarantee of competence. However, such associations may provide a target rich environment for interviewing potential advisors.
  4. Yellow Pages and Internet – Although most of the top investment banking firms rely primarily on their reputation and past successes to generate new clients, most will have a website and at least a small listing in the Yellow Pages. The only problem with this type of ground zero research is that it generally does not provide even a minimal level of qualitative information regarding the firm’s capabilities and appropriateness for the particular assignment. However, assuming a business owner has had extensive experience in, and has had success with, interviewing and engaging professional advisors, they may very well be able to develop the requisite comfort level through the interview process.

How to decide which investment banking firm is best for you?

  1. Trust – Do not engage a firm unless you trust them to protect your best interests and to advise you accordingly, even if that advice is in conflict with the investment banking firm’s interest in earning its fee (this is an important issue for both sellers and buyers).
  2. Client Advocacy – In addition to engaging a firm that will protect your interests and help you to avoid the pitfalls in the mergers and acquisitions process, the right investment banker for you is the one who will fight “tooth and nail” to get you the best deal. Since your investment banker’s job is to promote your interests and negotiate on your behalf to secure a superior transaction, even when those interest are diametrically opposed to those of the other party, finding an investment banker who is aggressive, confident and firm, without being obnoxious or arrogant, is likely to enhance your chances of securing a transaction that will meet, or exceed, your expectations.
  3. Industry or Business Type Familiarity – Some investment bankers specialize in specific industries, others specialize by business size, and still others take whatever businesses they can get. Obviously, the latter type of firm is not the one you want. It is not necessary that your investment banker have specific experience with your type of business, but, at a minimum, they, or someone in their firm, should have had experience with similar types of businesses. For example, a firm with experience in representing a variety of manufacturing businesses, but no specific experience with plastic product manufacturers, could very well be more than competent to represent a business which manufactures injection molded products. Conversely, firms that specialize in one particular may be a bit less likely to push the horizon and explore buyer candidates outside of the business’ immediate industry. Often, optimal prices and deal structures will be secured from firms who are not already in the business’ industry, but, by adding the targeted business to their business, will be able to achieve results well in excess of what either business could independently achieve.
  4. Location – In today’s world of international mergers and acquisitions and increased connectivity, it is certainly not a requirement that your investment banker be located near your business. However, there is a reason why most investment bankers tend to find their clients within an hour or two drive time from their offices. Quite frankly, it is easier to service a client’s account when it is within a reasonable drive time. Further, especially with respect to businesses that are likely to sell for under $10MM and would thus be candidates for entrepreneurial buyers, it is important that the investment banker have contacts with entrepreneurial buyers located near (within 1-2 hours) the business. Also, since almost all business divestitures and acquisitions require some form of third party financing, the investment banker, especially on a financing under $10MM, will typically be in a position to recommend local and/or regional commercial lenders who can “fast track” a deal. Commercial lenders generally tend to follow their buyer relationships wherever they go for larger financing needs.
  5. Size – It is important to make sure that the intermediary’s familiarity with transactions of a particular size and their negotiating style align themselves well with the parties involved in the transaction. Although there is little difference between a $5MM transaction and a $30MM one, once the transaction size gets much above $50MM, specialized expertise is required. There is a difference in the sophistication on both sides of the transaction that lends itself to a different approach and negotiating style. In addition, there are different regulatory requirements and often public company issues with which it is important that the intermediary be familiar. Conversely, an investment banking firm which does the bulk of its work in the $50MM+ arena, may be unqualified, or at least unsuited, to handling a $5MM transaction because of the unique issues which arise in smaller transactions.
  6. Compensation – Fees are always an issue for consideration.
    1. Guaranteed vs. Contingent: How much of the total fee is contingent on performance/success as opposed to how much is guaranteed in the form of retainers, etc. can be an indication of the investment banking firm’s confidence in their abilities to negotiate and close an acceptable transaction. However, sellers and buyers should be wary of firms who work solely on a contingency basis. Often, these firms take shortcuts and skip the important initial steps that are required to prepare properly and to locate the optimal buyer (or seller) because they are not being compensated to do such work. Further, these firms will typically focus on a warehouse concept wherein their business model is based on entering fee agreements with as many businesses as possible knowing only a small percentage of their engagements will be successful. The preferable approach is to engage a firm who is more of a boutique that focuses on a few assignments it aggressively pursues on its clients’ behalves.
    2. Magnitude and Structure: In addition to modest retainers (which may be billed in lump sum, monthly, or quarterly), it is typical that the intermediary’s fee be based primarily on achieving a successful transaction for the client. This fee is typically expressed as a percentage of the economic benefit to the client from a transaction. It is common for the fee percentage on incremental millions of dollars of economic benefit to decline as the transaction size increases. Often, people focus on the potential amount of the total fees when they engage an investment banker and forget that, since they have the ultimate right to accept or reject any offer and would only do so after factoring in the fees and their taxes, every investment banker needs to negotiate a transaction for their client that exceeds, or at least meets, their client’s expectations after deducting fees and taxes. Thus, whether or not an intermediary’s fees average 4% or 40%, they know they will have to get a buyer to pay enough for the business to cover their fees, the seller’s taxes and still leave enough economic benefit for the client to be satisfied.
  7. Acquisition or Divestiture Focus – Some investment bankers only handle seller or buyer assignments and approach those assignments in a particular fashion that might not be appropriate to the other side of the table. Accordingly, it is important to match an intermediary’s experience to the client’s objectives. Obviously, no intermediary can adequately represent both sides’ best interests in the same deal. However, there are firms who represent sellers and buyers, but never both sides in the same transaction. These firms are experienced on both sides of the table and, as a result of that experience, can often anticipate and more easily resolve conflicting interests and hidden concerns on both sides of the table. It is also important to note that there are also firms who refer to themselves as “transaction brokers” that function similarly to a dating service, merely providing an introduction of one party to the other, who seek fees from both sides of a transaction. Interestingly enough, transaction brokers often charge fees similar to those of a full service investment banking firm, even though the level of service is substantially less.
  8. Team – Regardless of which firm you want to engage, it is important to know which of their employees will be assigned to your project. Buying or selling business is no time for amateur hour, especially when, as it is for most sellers, it is a once in a lifetime chance to maximize the family’s financial security. Accordingly, one of the most important aspects of the process is establishing a comfort level with abilities and ethics of the individuals who will be specifically assigned to represent your interests. With larger firms, there can be a tendency to assign junior level associates to smaller assignments. This is the last thing you want to have happen to you when it is your business that is being sold. If your business is at the lower end of a firm’s stated target client market, you should be especially concerned about this issue because that is precisely the situation in which a junior associate, or senior level analyst is most likely to be your assigned representative.
  9. Longevity – Although the number of years a firm, or a particular dealmaker, has been in the M&A Field is not conclusive evidence of competence, firms with little or no history/track record of success should be scrutinized even more carefully than normal. One reason for the enhanced level of scrutiny is the depth of the firm’s buyer database. Simply as a result of being active in the M&A Field for a period of time, a firm will become familiar with the criteria and identity of a wide variety of buyers. Firms who have not developed extensive proprietary databases and personal relationships with high level executives of potential buyers start the divestiture process at a substantial disadvantage. These are only some of the issues a business owner/executive faces when deciding which investment banking firm to engage. Others include the process the firm employs, the manner in which it protects confidentiality, international reach, etc. The key factors in maximizing the results of any M&A process are: the right team, the right plan, and the right prospects. Choosing the right investment banker is a key first step in determining and defining these key factors.
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Michael J. Zoglio

Senior Associate

B.S., Business Administration, Providence College; Certified Business Intermediary (CBI).  Mr. Zoglio is a successful entrepreneur, intermediary and management consultant with over 30 years’ experience founding, managing, buying, and selling businesses.  As the former owner of Eastern Data Graphics, Inc. – a leader in specialty label printing and data processing services to the oil and chemicals industries, Mike operated, grew and eventually sold EDG in 1996 to Graphic Technologies Inc. of Kansas City, a U.S. subsidiary of publicly traded Nitto Denko of Osaka, Japan.  Since then, Mr. Zoglio has provided M&A advisory and intermediary services to middle-market businesses for sale throughout the Delaware Valley, providing: (a) sale, merger, and acquisition advisory services; (b) value-enhancement consulting; (c) market valuations; and (d) exit planning consulting. Mike also serves on the board of directors of Team Capital Bank, a regional community bank with branches in Pennsylvania and New Jersey.  His community involvement includes serving on the boards of directors of the Central Bucks Chamber of Commerce, the Bucks County Opportunity Council (where he spear-headed Business Development), and the Bucks County Historical Society (where he served as president of the board and chaired the society’s 1996 Capital Campaign).  Mike joined RLS Associates after 10 years of providing M&A services as principal of Tower Hill Advisors Inc. Having earlier grown and sold his own business, and having worked with numerous business owners, he brings a unique perspective to what works when positioning middle market companies for sale at their highest value. 

Adam Wishkovsky

Adam Wishkovsky

Senior Associate

BS in Management & Finance and MBA in Marketing and International Management from University of Buffalo, NY, and a BA in Social Studies & Labor Management from Tel Aviv University, Israel.Mr. Wishkovsky is a successful sales and marketing top executive and the divisions’ manager for both private and public companies. He has a proven ability to grow annual revenue by improving market share and profit and expanding sales in the Hardware, Home Improvement, Industrial Supply, Rental, Material Handling and related markets. In 1994, he established PRODUCT EDGE LLC as a Sales & Management Advisory Company, providing services to small & medium sized companies nationally & internationally. Today, PRODUCT EDGE LLC provides a wide range of services including general business development, coaching, sales team management etc. primarily to manufacturing companies who sell through distribution channels. Additionally, Mr. Wishkovsky recently was a Business Advisor and Consultant at The Alternative Board (TAB) of Northeast/ Philadelphia.

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Paul J. Weaver, CPA

Senior Associate

B.A. Accounting, Minor Russian, Magna cum Laude, Rutgers University. Mr. Weaver is a global financial executive with a background in manufacturing and service companies in several industries. He has led finance, strategic planning, operations, IT and distribution functions for global divisions of public companies, has been the CFO for small private and public companies, and has provided business consulting services to the Surface Warfare Enterprise of the US Navy. Paul has developed and managed consumer products, aviation services, packaging & photonics businesses in the US and 20 other countries, including 2 years in the Hong Kong toy industry working for companies such as Tyco Toys, Arthur Andersen, Ogden Aviation, SupplyOne, Thomas Group and Dynasil Corporation. Mr. Weaver spent 22 years with Tyco Toys, where he was a member of the executive committee that took the company public and grew it organically, as well as through acquisition, into a Fortune 500 company. As a result of that growth, Tyco Toys became the third largest toy company in the world. Throughout his career, Paul has participated in multiple domestic and international acquisitions, divestitures & joint ventures, and brings to RLS the inside perspective on such transactions, including post acquisition transition, integration, and assessment. A significant part of Paul’s activity has also been on the operations side with a multinational division with manufacturing and distribution operations in 5 countries reporting directly to him. In addition to his M&A activity with RLS, through his private consulting business Mr. Weaver provides part time and interim CFO services, including strategic planning, budgeting, forecasting, and financial analysis enabling his small and middle market clients to better manage profitability. Paul has been a guest lecturer in international business at the Rutgers University School of Business and is a board member for an emerging nonprofit bringing clean drinking water to the developing world.

John Ralston

John A. Ralston


B.E. with honors, Tau Beta Pi, Yale University; Marketing Management Executive Program, Harvard Business School. Mr. Ralston has had an extensive career as a corporate executive and entrepreneur. Progressing through technical, marketing and general management positions in several publicly held companies, his corporate career culminated as President of a major subsidiary of a NYSE-listed corporation. His experience included instrumentation, process control and industrial automation, computer peripherals, electrical products, and power supplies. Leaving the corporate world, he acquired and operated a manufacturer of custom transformers for over a decade, until selling its operating assets and focusing on software development for manufacturing applications. Mr. Ralston joined RLS Associates in 2003, bringing the perspective of his experience as a member of corporate M&A teams, as well as that of an entrepreneurial buyer, to assisting sellers of mid-market companies.

Rob Rae

Rob Rae


B.S. Electrical Engineering, Johns Hopkins University (1988) and Ex M.S.E. Engineering Management, University of Pennsylvania (1997).  Mr. Rae’s career has expanded across product development, marketing, sales and general management within related technology sectors including semiconductors, electronic components, software and telecommunications.  During his career he has led product development teams, developed business development programs and launched the European headquarters for a US-based electronics component manufacturer.  Mr. Rae brings unique perspective to deals at RLS Associates based on the background of a mid-market executive with a global view, Intellectual Property and M&A experiences to advise on deals across a number of technology sectors.

Anthony Piovosso

Anthony J. Piovoso


B.S. Electrical Engineering, University of Delaware; Master of Business Administration in Management from Fairleigh Dickinson University. In addition to owning and operating a small business, Mr. Piovoso has served as a Senior Systems Analyst with a Fortune 500 corporation (Bendix) where he oversaw developing new business systems. Mr. Piovoso has worked in the private mergers and acquisitions industry since 1986, is a licensed real estate agent in Delaware, and has been a member of the RLS team since the company’s inception, becoming a principal in the firm in 1999.

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Shlomo Peter

Senior Associate

Practical Engineering degree from the Tel Aviv University in 1980, Shlomo brings with him 33 years of experience in R&D, Technical Sales, Marketing, Products Management and Distribution of Systems, Components and S/W. Prior of founding Semix Engineering & Marketing Ltd. in 2003, from 1999 to 2003, Shlomo managed the Israeli branch of Memec, a Global Components Distribution Company, prior to Memec, Shlomo managed the Telecom & Analog product lines in Gallium Electronics. Previously Shlomo had R&D positions in Israeli Hi-Tech companies, like Telrad (Telecom Systems) and Bitronics (Energy Management Systems). During his career Shlomo gained extensive knowledge of the Israeli High-Tech Market and maintains excellent personal relations at the Executive and R&D Management levels in leading Israeli, US and European High-Tech companies. Shlomo speaks fluent Hebrew and English.

16 Hamelacha Street Dagem Building, Afek Industrial Park Rosh Ha’ain 48091 Israel

Keith Monley

Keith S. Monley


B.S. Electrical Engineering, Santa Clara University; Master of Business Administration from Harvard Business School. Mr. Monley has extensive experience with Fortune 500 companies (Ford Motor, Microdot/Northwest Industries, Public Service Electric & Gas) in strategic planning, corporate development, mergers and acquisitions, market and competitive analysis, new business development, and financial planning and forecasting. As Director of Planning for a manufacturing firm with multiple profit centers, he led a wide variety of business evaluations and merger and acquisition activities. He has been active in a variety of industry sectors, including automotive, diversified manufacturing/industrial, consumer durables, utility, energy, services, technology/electronics, marketing/communications, consumer services, and distribution. Since joining RLS, Mr. Monley has also been recognized for his volunteer leadership at the Harvard Business School Club of Philadelphia, including the Presidents Breakfast Club leadership speaker programs.

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Anthony Minissale

Senior Associate

B.S Finance and Master of Business Administration (MBA) degrees from LaSalle University. Mr. Minissale has over 30 years in derivatives trading, management of financial services and fin-tech firms, and business consulting and advisory. He has guided several companies through their life cycles – from start-up and growth to successful exits.  Anthony also has over a decade of experience managing the development of a multi-asset trading and risk management platforms. He is the founder of AJM Partners which provides business consulting and advisory services as well as designing, implementing, and trading multi asset class quantitative models.

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Beni Kovalsky

Senior Associate

Electrical Engineering from the Tel-Aviv University. Beni brings with him over 26 years of experience in technical sales, marketing and distribution of RF & Microwave/Telecom semiconductors and systems and possesses excellent product and market knowledge. Prior of founding Semix Engineering & Marketing Ltd. in 2003, Beni was the RF& Wireless division director at Avnet-Israel (former Gallium Electronics) and was responsible for the sales and marketing of leading companies like, M/A-COM, Agilent, Motorola, Philips, CEL/NEC, CSR and Powerwave. Beni has an excellent semiconductor & system product and market knowledge. During his career he gained extensive knowledge of the Israeli High-Tech market and maintains excellent personal connections at the executive management levels in leading Israeli, US and European High-Tech companies. Beni speaks fluent Hebrew, English, and German.

16 Hamelacha Street Dagem Building, Afek Industrial Park Rosh Ha’ain 48091 Israel

Barry R. Ketner


B.S. Engineering Concentration, U. S. Naval Academy; Master of Business Administration in Marketing, Wharton Graduate School of Business. Mr. Ketner has had over 19 years of corporate experience in business planning, marketing, new product, and business development with a variety of manufacturing, distribution and service companies, many of whom were in the plastics or powder coatings industries. Mr. Ketner has also owned and operated several businesses, including a commercial printing company, which he recently divested with the assistance of RLS. Mr. Ketner has been recognized as the New Castle County Chamber of Commerce (NCCCC) Small Businessperson of the Year, and has also served as Vice Chair of NCCCC’s Board of Directors and as Chair of its Communications Committee.

Douglas A. Karan


B.A. with Cum Laude distinction, with majors in both Economics and Political Science from Colgate University. Mr. Karan has experience in project management, finance, manufacturing, and marketing as a result of his successful career at Lockheed Martin where he implemented and managed core business systems for multiple business units. He began his mergers and acquisitions career as Chief Operating Officer at Skylight Systems (an accounting and distribution software development company) looking at strategic options for Skylight. Eventually, he helped to transform Skylight into a technology consulting business called Chariot Solutions in conjunction with angel investors. After leaving Chariot, he entered the business brokerage business with another firm prior to joining RLS to focus on mid-market business owners in sale or acquisition transactions. Mr. Karan is also a Graduate of GE’s Financial Management Program; has completed the Production Management Certification Program at Rowan University and became APICS (The Association for Operations Management) Certified.

Dave Barton

David Barton

Senior Associate

B.S. in Electrical Engineering from Bucknell University with participation in executive management training at Honeywell, Arizona State University, and Management Centre Europe.  Mr. Barton has over 40 years of experience at the executive level in operations, marketing, and sales with major corporations as well as small family-owned businesses.  As President of a US subsidiary of a UK company, he successfully turned the company around and led the effort for a strategic sale of the assets.  While working in Milan as Managing Director of the Middle East business unit of a process control and instrumentation company, he increased revenue by a factor of five in 4 years.  He led the internal presentation team in the strategic sale of a business unit by an Italian corporation.  Mr. Barton has significant international experience and holds dual citizenship, US & Italian.

Business Plan

Maximizing the result of your exit strategy

Avoiding the pitfalls of the mergers and acquisitions process and maximizing the business value at the time of exit is a combination of partnering, planning, packaging, and process.

A. Assemble the Professional Team and Develop a Divestiture Strategy

I don’t know which management guru said it, but he was right when he said, “If you fail to plan, you plan to fail.” Business owners should start planning for their exit strategy the day they open their doors. It takes time, often as much as six to eighteen months, to sell a business when the goal is to search for a buyer that will pay the maximum price. Accordingly, once a business owner begins thinking about the possibility of a sale, they should begin taking preliminary steps in furtherance of their goal.

The first step in the process is assembling a team of professionals who have the expertise to address the myriad issues that will arise. This is, indeed, the most crucial single step. The wrong team can cost sellers millions of dollars and months or years of wasted effort. Just as most people should not represent themselves in a legal matter, most owners should not represent themselves in a mergers and acquisitions (M&A) transaction. They should retain a combination of experienced M&A, legal, and accounting professionals, to guide them through the process. The M&A professional’s knowledge and skills will be important in developing the divestiture plan, preparing for presentations to prospects, soliciting and marketing the business to these prospects, and conducting the negotiations. A well-chosen M&A firm will expand the range of prospects, ease the burden of screening them, manage the time-consuming chore of soliciting them and prevent negotiations from breaking down.

The business owner should be careful to establish team members’ expertise within their assigned roles. Business divestiture is not the time for amateur hour. Whether or not a professional is new to you, or your best friend, inquire about the number and type of transactions they have handled in the past few years and their role in those transactions. Just because an advisor is excellent in the real estate field, does not mean they are the best choice to represent a business owner in a divestiture. Also, especially if a professional advisor is new to the business owner, they should request references, relevant coursework, and credentials. The team is only effective if it works as one cohesive unit. One key to this is to have a high level of communication between team members and to provide each with clearly defined responsibilities.

Typical team members include an experienced transaction lawyer, an M&A professional, and an accountant with experience in tax planning and purchase price allocation. Potential focus areas for team members include:

  1. Valuing the Business – Determining the potential market value range of the business is a function that is typically performed by the M&A Firm and reviewed with the client and his/her accountant. It is essential to get an objective perception of the potential market valuation range for the business from someone who is familiar with actual business transaction prices, not merely with abstract valuation methodology. By taking this initial step, the owners will save themselves time and money by verifying that their price expectation is reasonable and limiting the disclosure of the business’ “Confidential Information” to a select group of highly qualified prospects. Central to the valuation process is the recasting of the business’ historical financial statements to highlight the business’ true profitability for a potential buyer. Getting a third party assessment of value will also enable the professional team to better anticipate the valuation issues and analyses that are likely to be surfaced by the buyer’s team.
  2. Preparing Marketing Documentation – It is essential that the documentation presents the business in a favorable light, highlighting the strategic and synergistic opportunities it presents to a buyer, while simultaneously providing full disclosure of all material facts and be prepared in a fashion that is easily understood by buyers. Due to the fact that they spend so much time working with buyers and sellers, M&A firms are the best suited to handle this phase of the process and will often have established templates for the various levels of documentation. When prepared correctly, these marketing materials will “pre-sell” a buyer on the opportunity and value of the business before the seller and his advisors waste a lot of time on them. To preserve confidentiality, the marketing materials should be drafted to provide increasing levels of detail as merited by the buyer’s decision making stage in the process. Prior to release to potential buyers, the seller and their other professional advisors should review the documents for accuracy.
  3. Locating and Qualifying Multiple High Quality Buyers While Maintaining Confidentiality – Qualifying buyers before providing them with any information, other than the most generic descriptive information, will help avoid wasting time on “low ball” offers from poorly capitalized buyers. It is essential to make sure one is negotiating with the ultimate decision maker in the buyer’s organization, or at least the individual(s) who is/are in a position to act as the acquisition’s champion within the buyer’s organization. Understanding a buyer’s motivation to buy and the value drivers they are seeking will assist the seller and their advisors to extract the maximum value from the buyer during the negotiation phase of the process. Several of the key questions to ask about the buyer include: (1) Does the buyer have the financial and operational ability to buy the business? (2) What strategic or operational benefit will the buyer receive from buying the business? (3) Have they ever bought a business before, and, if so, what was the deal like?; and (4) What is the buyer’s approach to valuation? There are a multitude of other key questions to ask, but these few will at least help to understand the buyer’s value equation. The importance of confidentiality cannot be overstated. Any knowledge of the fact a seller is considering the possibility of a sale can erode the value of even the strongest business at light speed. An M&A firm will typically be experienced in exposing the business to a broad array of potential buyers, without endangering its value due to premature disclosure of the sale. Also, they will have techniques and processes in place to minimize the danger of information that is disclosed to even the most qualified buyers.
  4. Handling the Dissemination of Information to the Buyers, Scheduling Meetings and Responding to Information Requests – This is the most time consuming part of the entire process and, as such, has caused many a seller to take their eyes off the importance of running their business. The end result of that type of distraction is typically either a sales decline or a decrease in profitability, or both, none of which bodes well for achieving the maximum price for the business. Often, the business’ outside advisors can be excellent conduits for such information to avoid alerting the business’ employees. It is important to note that, just because a buyer asks for certain information, does not mean it is appropriate for them to receive it at that particular stage in the process. It is important for someone to play the role of traffic cop and make sure the buyer is not receiving information which is injurious to the business at an inappropriate time. Advisors who are experienced in the process will often have alternative ways of helping the buyer achieve the comfort level they need to proceed to the next stage, without exposing the business to an unacceptable level of risk from the disclosure.
  5. Soliciting Offers, Analyzing Offers and Negotiating the Economics of the Transaction – Obviously, this is one of the most critical stages of the process. The economics of any proposed offer need to be subjected to a thorough analysis. A skilled, experienced and professional negotiator will always outperform someone who does not negotiate these types of deals on a regular basis. Many business owners, as a result of having successfully negotiated many contracts, view themselves as superb negotiators. However, because they generally have so much at stake, they tend to get emotionally involved in the process and take hard line postures on issues that can otherwise be resolved in their favor. A negotiating team headed by an experienced M&A professional, leaving ultimate decision-making authority with the seller is ideal. The M&A professional is experienced in structuring and closing deals and, assuming the seller remains outside of the fray, she/he can smooth things over, if necessary. Further, all of the steps in the process should be designed to support and reinforce the negotiating strategy. The skilled M&A professional is always conscious of the impact that even the most innocuous seeming comment made during a two minute phone call can have on the buyer’s responses during negotiation and on the ultimate value achieved. Another one of the keys to achieving the highest value for the business in the negotiating process is to have multiple, highly qualified buyers interested in the business at the same time so they will put their best offers forward for the business. Often, the mere involvement of a competent M&A firm will cause buyers to realize that they are competing with others and make them “sharpen their pencils”.
  6. Tax Implications and Deal Structuring – The process of examining the tax implications and structuring the deal to be most beneficial to the Seller, of all of the phases of the process, is the one wherein collaboration between all of the team members is most essential. Apparently small differences in deal structures can save, or create, millions of dollars in unnecessary taxes. The synthesis of the combined experiences of the M&A professional, the accountant and the lawyer consistently result in a superior after tax result for the seller. The M&A Professional’s focus should be on structuring the economics of the transaction, but, throughout that process, he/she should be working closely with the tax professionals to structure the transaction to maximize the after tax results. While the ultimate responsibility for the tax implications part of this phase should rest with the accountant and/or tax attorney, but a collaborative effort of the team members typically produces the best results.
  7. Document Preparation and Review – The preparation and review of all of the legal documents is a critical role in the process. Regardless of the experience possessed by a seller, accountant or M&A professional, a seller who executes any document without the advice of an experienced M&A lawyer is taking an incredible risk. Tens of thousands of dollars of fees spent on an experienced lawyer while the transaction is in process can save hundreds of thousands, or millions, spent on lawsuits after the transaction takes place. This is not an area for amateurs. Make sure your lawyer is truly an expert in M&A. Using an experienced professional typically reduces the portion of the billable hours spent on document creation and allows the lawyer to focus their valuable time on issue spotting, client protection and problem solving.
  8. Due Diligence – Regardless of the type and size of the business, a buyer is likely to insist on the right to verify that what they have been told by the seller and his/her advisors is accurate. This process is typically known as “due diligence”. The business’ outside accountant, legal counsel and owners are typically the ones with the primary responsibility for this phase of the process. In certain instances, it may become necessary to involve non-owner senior management team members of the buyer in this process. If such a need arises, each of those managers should be made a party to a confidentiality agreement that protects the business. Other consultants and/or employees who may participate in the process may include: (1) environmental; (2) intellectual property; (3) integration management; (4) human resources; or (5) information technology.

B. Preparing the Business for Sale

In addition to hiring the right advisors, there are a variety of steps a business owner can begin taking before they begin the sale process to maximize their end result. The following are a few of the more common ones, but, be advised, each business has its own unique risk factors and opportunities, each of which can affect how a buyer values that business.

  1. Clean up the business’s finances – Since buyers focus primarily on the profitability a business will generate when they determine its value to them and their shareholders, it is essential to make sure the business is positioned well financially for a sale. The following are just a few of the steps a business owner can take to get the business’s finances in order for a divestiture:

Choose the right time to divest – The best time to sell a business is when it is in a mature/multi-year growth trend, hopefully with steady or improving profitability, not when it is in a downturn. Also, it is best to divest a business when its owner is vital and healthy enough to facilitate an orderly and efficient transition to the buyer’s operating team.

Unwind tax-advantaged strategies – Unlike public companies, closely-held businesses, in order to minimize the tax liabilities and maximize the after-tax financial benefits of its principals, will choose accounting methods and/or business practices that actually serve to understate profitability. Whereas, when one tries to sell a business, the goal is to maximize the profitability of the business due to the business owner’s desire to maximize the value they receive for their business. Examples of typical adjustments include:

  • A. Normalizing salaries, compensation and executive perks for shareholders and their family members to fair market value levels that are reflective of the economic value of the individual’s services to the business, regardless of his/her ownership interest. In other words, the amount you would have to pay a similarly skilled and experienced non-shareholder to perform the individual’s duties.
  • B. Adjusting for non-core/discretionary expenses that occur more as a result of the business owner’s lifestyle than because they are essential business expenses that almost any owner of the business would incur.
  • C. Reexamine the business’ capitalization policies to make sure that capital asset purchases are being capitalized on the balance sheet, with only the useful life depreciation being expensed on the income statements, rather than expensing the entire purchase through the balance sheet in the year the asset is acquired.
  • D. Adjusting for non-recurring expenses that are not expected to be incurred by the business on an ongoing basis. One time inventory write offs, professional fees due to drafting of an employee handbook, etc.

Tighten accounting controls – Improving the collection policies for Accounts Receivable and devoting a concerted effort to improving collection history can be a major plus for financial performance. Also, improved tracking of inventory turns by SKU and writing off obsolete inventory well in advance of a sale can help to: (1) Allay buyer’s suspicions; and (2) help to highlight the business’ true profitability in the periods that are closest in time to the marketing phase.

Documenting Internal Transfer Payments – Formalize intra-company payment mechanisms and accounting systems for transactions between related entities and ensure that such payments are at fair market rates.

Remove Excluded Assets – Some business owners carry assets on the books of their businesses that are not necessary for the ongoing operations, which the owners intend to retain following a sale. Typical examples include personal vehicles, computers, and office equipment in a home office, real estate, marketable securities, family heirlooms, etc.

  1. Diversifying the Business’ Client Base – One of a buyer’s key concerns when buying a business, especially one in which the clients loyalty and/or interface relies heavily on the seller(s), is the retention of its core business. Where there is a large concentration of sales dollars with a few key accounts, buyers will either: (1) discount the price they will be willing to pay for the business, or (2) have a substantial portion of the purchase price paid only if the business continues to achieve certain financial benchmarks under the new management team. In some cases, a buyer will take both approaches to minimize the risk they perceive from the client concentration. This transfers much of the risk back to the seller. To avoid these issues, the seller’s goal should be to have less than 40% of Sales with the business’ top five customers and less than 20%-25% of Sales with any one account. Despite the foregoing, it is perfectly acceptable to have a little higher percentage of Sales with one account for a limited period of time, if it is higher margin business and the incremental profits from those sales are reinvested into developing additional new clients. Other situations in which higher concentration levels with certain accounts may be justified are when it occurs pursuant to a multi-year supplier agreement, or if the business is the sole source to the client for a proprietary product/technology.
  2. Develop Additional Management Depth – One of the key issues a buyer takes into account when buying a business is the management talent of the employees that will be remaining active in the business following the sale. Most buyers realize that providing a business owner with a meaningful financial incentive to maximize the business’s profits can be difficult once they have received a multi-million dollar purchase price. Often a buyer will try and structure part of the purchase price into a contingency based formula to account for the potential risk they perceive from the owner(s) losing their strong financial ties to the business. To minimize this risk to the buyer, sellers should begin focusing on the development and professional growth of a second and third tier management team by delegating more responsibility to non-owner employees. Conversely, to avoid any one employee being in a position to hold the divestiture hostage, or capture some of the value a buyer would otherwise pay to the owner(s), it is typically a good idea to try and limit the percentage of the business’s primary sales relationships that are concentrated with any one employee. Wherever possible, it is desirable to maintain multiple points of client contact within the firm.
  3. Formalize Contractual Relationships – Another area of concern for buyers is informal business arrangements for critical business functions/operating assets that could possibly come to an end when the owner(s) leave the business. Often closely-held businesses fail to develop some of the formal contractual relationships into which a larger company would typically enter, relying on the owner(s) personal ties/relationships to provide the key resources the business requires. Sellers can formalize, and provide for the right to assign, favorable and/or critical agreements and relationships, including: (a) Facility leases – These should be benchmarked to reasonable fair market value commercial rates; (b) Vendor and customer contracts and relationships; (c) Various Personnel Matters. Some of the key personnel matters to consider include entering into Employment, Non Competition and Confidentiality Agreements with key employees, where necessary and formalizing job descriptions and reporting authority. This is especially important in closely held family businesses. Also, to the extent a business has such relationships, it is vital to formalize Marketing Representative and Distribution Agreements with non-employees who represent the business in dealing with customers and providing for the seller’s right to assign those agreements.
  4. Organize and Disseminate Confidential and Proprietary Business Know How and Intellectual Property – Often, businesses develop a substantial amount of knowledge/techniques in their workforces that never becomes part of a formal process or operations manual. The business’s owner(s) should work to institutionalize/formalize informal business technological know-how and disseminate the knowledge more broadly throughout the business by cross-training and in-house seminars. Also, where it can be patented or registered, but well in advance of entering into a divestiture process, the business owner(s) should file to protect the business’s proprietary technological expertise and intellectual property.
  5. Spruce Up the Premises – Cleaning up the basic physical appearance of the facility and its equipment/machinery, including lighting, floors, windows and general business appearance can help leave a positive impression with the buyer. Also, remove broken or idle machinery and excess inventory from the shop floor or yard also helps to provide a buyer with a more favorable first impression of the business.
Business Value

How to get the most for your business

Meet Mr. And Mrs. Business Owner

Meet George and his wife, Georgia, typical entrepreneurs. George has: (1) served his country with distinction in a war or peacetime military; (2) received some college education on the G.I. Bill; and (3) has either grown the business from Ground Zero, or inherited a business that has been in his family for generations. Typically, George is a strong operations person, often with a love for the technology and/or details of his business’ day-to-day operations, and one of its best salespersons. Predictably, George and/or Georgia, are the driving force(s) behind the business and have built a company that is such a reflection of their personalities that it is virtually inseparable from them.

Like many business owners, George and Georgia have spent most of their lives building their business, with most of their time spent on tactical concerns. The limited amount of time they have available for strategic thinking/planning has been focused on growth initiatives, and, in possibly as much as a third of the cases, they have planned for succession in the event of their demise. Interestingly enough, according to a recent study by the Family Firm Institute (“FFI”), almost 20% of senior family business shareholders are not confident of the next generation’s commitment to, or ability to run their business, yet 25% have not completed any estate planning other than writing a Will. FFI’s study also stated that, in the next five years, over 39% of all closely-held and/or family-owned businesses will lose their primary owner to death or retirement. With this lack of planning, is it any wonder that, while more than 30% of all family businesses survive into the second generation, only 3% survive past the third generation.

Having reached the time in their lives when they want to begin enjoying the fruits of their labors and reduce their day-to-day involvement, George and Georgia, who have planned every day of their business lives down to the second, find themselves looking at divesting themselves of an asset that probably represents more than two-thirds of the value of their total net worth, and, for the first time in their lives, they have no plan. Accustomed to success in business, George and Georgia begin to make decisions about their exit strategy, in many cases without consulting with any of their professional advisors. Interestingly, the same business owners who would not consider running the risk of an Internal Revenue Service audit by doing their own tax planning and possibly owing tens of thousands of dollars of additional taxes, confidently move forward as ‘do it yourself’ mergers and acquisitions candidates’ where millions of dollars are at stake. Without experienced professionals who have been through the process enough times to develop the expertise to avoid the pitfalls, George and Georgia begin to make mistakes.

Here are some examples of classic mistakes business owners make when trying to go it alone:

  1. Selling their business for far less than it is really worth, or on terms that are extremely unfavorable.
  2. Failing to highlight the true, recast profitability of the business for the buyer.
  3. Releasing confidential financial and operating information, including client lists, to current or would-be competitors that those entities can subsequently use to the seller’s disadvantage in the marketplace.
  4. Negotiating with buyers who do not have the financial or operating ability to acquire and run their business.
  5. Taking their eye off running their business and allowing its value to erode, while they are entertaining a sale.

Surprisingly enough, even in today’s age of highly educated business owners and professional advisors, such mistakes are fairly typical, as well as countless others.

David K. Bernstein


B.A. Economics, with a concentration in Finance from Rutgers College; Juris Doctor (J.D.) and Master of Business Administration (MBA) degrees from Widener University. Mr. Bernstein has worked in the private sector mergers and acquisitions field since 1988. As a result, he has extensive experience in executing targeted assignments for seller and buyer clients, assisting companies in need of additional capital, and in performing business valuations, and serving as an expert witness in business valuations-related matters. In 1988, Mr. Bernstein became a team member of RLS, and then became a principal/owner of the firm in 1999. Mr. Bernstein has also been involved as a private equity investor in businesses. Although never actively engaged in practicing law, Mr. Bernstein was admitted to practice law in New Jersey and Pennsylvania. Mr. Bernstein is a member of the Association for Corporate Growth, has served on several of its committees, and was formerly a co-host of American Industrial Leaders Radio, a weekly program that interviews leaders of the Delaware Valley’s industrial community. In addition, he has been a guest lecturer and speaker in several different forums, including the DVIRC, University of Delaware, Goldey Beacom University, SBDC Family Business Center, and at Villanova University. Mr. Bernstein also serves on various for-profit and non-profit boards of directors and is the recipient of several community service awards.

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