A little flirting now and then doesn’t hurt, does it? Well, yes, it can, and I’m not talking about sexual harassment lawsuits. The flirting I’m concerned with is the teasing attention that is often paid to successful human-owned business by suitors claiming an interest in buying such companies. Lawyers typically refer to the practice of buying and selling companies as M&A, Mergers and Acquisitions (though true mergers are pretty rare.)
M&A flirting happens because folks are, generally, flattered by the attention, but businesses that regularly accept the flirting of possible buyers are, at best, wasting their time, and the gossip and potential disclosure of sensitive information that accompanies flirting could easily harm the business. If you seriously want to consider a sale of your business, don’t flirt, get a D.A.T.E.
Non-Disclosure Agreement. The first step is to keep everything confidential, even the existence of discussions. A non-disclosure agreement (NDA) between you and a possible suitor does that while protecting the sensitive or confidential information that has to be disclosed in the course of any deal. An NDA can also be used to keep an unrequited suitor from luring away the key employees of the business. NDAs can be staged to offer increasing protections as discussions move from preliminary to serious. Competitors among list of prospective buyers may warrant special precautions in their NDAs.
Appraisal. How can you discuss the sale of your business if you don’t have a realistic and independent estimate of its value? Investment bankers and valuation experts that understand the M&A marketplace are good sources for a valuation; investment bankers often credit the cost the appraisal back against their sales commission if you choose to hire them. Starting the M&A process with an appraisal also allows your transaction team to answer the seller’s most critical M&A question: Will the after-tax proceeds be enough for me to retire in the style I desire (or to achieve whatever other goal the seller has for the deal)?
Team. Unless you are a serial entrepreneur who has bought and sold several companies, you have no idea what you are about to get into (and if you are a serial entrepreneur, then you know what lies ahead). You need a transaction team to assist you. Good teams produce transaction ROIs of several multiples or more in greater purchase prices, lower liability exposures, and less stress on the business owners. The team typically includes your accountant, a business transaction lawyer, and an investment banker, business broker or other transaction specialist, but can include other professionals as circumstances dictate.
Expressions of interest. No more flirting or fishing expeditions. Your transaction team will work with the prospective buyers you know, and likely many you haven’t considered, to make expressions of interest (EOI) the next step in the M&A mating game. EOIs are relatively simple, nonbinding indications of the type of transaction and price the buyer is interested in pursuing, but they help to separate the mere flirts from groups that are genuinely interested and capable of buying your company. With the field of suitors winnowed down, things get more serious. Your team can continue orchestrating the competitive auction process among the remaining buyers with the goal of reaching a letter of intent (nonbinding like the EOI, but much more detailed) with a single buyer. Assuming everything checks out in the buyer’s due diligence process and the parties are able to agree on the other important terms that go into the deal documents, the transaction leaves behind the dating process in favor of that all important M&A status: closed.
Wednesday, June 30, 2010
Tuesday, June 22, 2010
The Colorado Children’s Chorale
All the world's a stage,
And all the men and women merely players
But children who learn to find joy in themselves and elicit it in others will be more than mere players; they can be stars in whatever roles life brings them. That simple idea is at the core of the work of the Colorado Children’s Chorale. The Chorale trains children’s choirs to perform as professionals in concerts, with orchestras, with opera companies, and, in the process, enables those children to realize that excellence and artistry are choices they can make in every aspect of life.
It has been my honor to serve as President of the Board of the Chorale for the past two years. I joined the Board five years ago, inspired by my daughter’s experience as a Chorale member; I stayed with the Board and served as its President, even after my child graduated, because I am inspired by what the Chorale does for Colorado’s children.
400 children from second to eight grades in over 180 schools, primarily from metro Denver, but from as far as Limon and Vail, form five graduated choirs in the Chorale’s professional performance program. Hundreds more come together in school and community-based Chorale programs, so that annually over 1000 children share unforgettable Chorale experiences
The Chorale was born in 1974 when Colorado’s Central City Opera needed a professionally trained children’s chorus for its performances. Founding Artistic Director Duain Wolfe and that first group of kids didn’t know it, but they were creating more than beautiful music; a children’s choir that was not part of a school or church, but supported by a broad community in order to collaborate with the community’s top performing arts organizations was a new idea. The Chorale’s performance schedule has since added regular collaborations with Colorado Symphony Orchestra, Opera Colorado, Aspen Music Festival, and National Repertory Orchestra, and countless shows with other entertainers from superstars, like John Denver, Celine Dion and Bobbie McFerrin, to elementary and middle school choirs across the country, whose students experience the joy of being superstars themselves.
Superstardom comes in many flavors, of course. Kids in sports programs dream of joining the pros; Chorale kids dream of Carnegie Hall and Broadway. Chorale grads in the spotlight recently include Sierra Boggess, who originated the roles of Ariel in Disney’s Little Mermaid on Broadway and Christine Daae’ in Andrew Lloyd Webber’s Phantom-sequel Love Never Dies in London, and David Miller, member of the international pop opera super group Il Divo.
While some will achieve the dream of a professional performing arts career, many more graduates will use skills honed in Chorale, such as confidence, focus, and teamwork, to be successful in other walks of life. The Chorale knows the personal growth experienced by a child challenged to give his or her utmost in a chorus of peers. The value of that experience is so great that current Artistic Director Deborah DeSantis added a layer to the Chorale’s mission with four non-auditioned community choirs and a series of partnerships with music educators in under-resourced schools to bring the benefits of a rigorous choral program directly to hundreds of additional children every year.
The choral music education group Chorus America recently completed a study on the impact of choirs that included polling of teachers and parents. Among their findings:
Being President has been a true pleasure, but as my term winds-up, I am particularly proud that the Chorale’s 36 year tradition of accepting singers without regard to ability to pay survived the worst economy of modern times unblemished. You can be part of that tradition by making a tax deductible gift to the Chorale here.
And all the men and women merely players
But children who learn to find joy in themselves and elicit it in others will be more than mere players; they can be stars in whatever roles life brings them. That simple idea is at the core of the work of the Colorado Children’s Chorale. The Chorale trains children’s choirs to perform as professionals in concerts, with orchestras, with opera companies, and, in the process, enables those children to realize that excellence and artistry are choices they can make in every aspect of life.
 |
| Joy at a season's first show, Vail |
The Colorado Children’s Chorale presents professional choral concerts and educational programs that entertain, inspire and bring joy to audiences and communities. Children of all ethnicities and socio-economic backgrounds thrive in an engaging, disciplined and nurturing environment in which they receive outstanding performance and music training as well as the skills, experiences, and confidence to succeed wherever their lives may take them.
400 children from second to eight grades in over 180 schools, primarily from metro Denver, but from as far as Limon and Vail, form five graduated choirs in the Chorale’s professional performance program. Hundreds more come together in school and community-based Chorale programs, so that annually over 1000 children share unforgettable Chorale experiences
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| Prep Choir is the beginning of the performance program |
The Chorale was born in 1974 when Colorado’s Central City Opera needed a professionally trained children’s chorus for its performances. Founding Artistic Director Duain Wolfe and that first group of kids didn’t know it, but they were creating more than beautiful music; a children’s choir that was not part of a school or church, but supported by a broad community in order to collaborate with the community’s top performing arts organizations was a new idea. The Chorale’s performance schedule has since added regular collaborations with Colorado Symphony Orchestra, Opera Colorado, Aspen Music Festival, and National Repertory Orchestra, and countless shows with other entertainers from superstars, like John Denver, Celine Dion and Bobbie McFerrin, to elementary and middle school choirs across the country, whose students experience the joy of being superstars themselves.
 |
| Tour choir completes the performance program at 8th grade |
Superstardom comes in many flavors, of course. Kids in sports programs dream of joining the pros; Chorale kids dream of Carnegie Hall and Broadway. Chorale grads in the spotlight recently include Sierra Boggess, who originated the roles of Ariel in Disney’s Little Mermaid on Broadway and Christine Daae’ in Andrew Lloyd Webber’s Phantom-sequel Love Never Dies in London, and David Miller, member of the international pop opera super group Il Divo.
 |
| A new choir this year, Transitions, for graduates through 10th grade |
While some will achieve the dream of a professional performing arts career, many more graduates will use skills honed in Chorale, such as confidence, focus, and teamwork, to be successful in other walks of life. The Chorale knows the personal growth experienced by a child challenged to give his or her utmost in a chorus of peers. The value of that experience is so great that current Artistic Director Deborah DeSantis added a layer to the Chorale’s mission with four non-auditioned community choirs and a series of partnerships with music educators in under-resourced schools to bring the benefits of a rigorous choral program directly to hundreds of additional children every year.
 |
| Rehearsing for the Chorale's Community Choir Festival |
The choral music education group Chorus America recently completed a study on the impact of choirs that included polling of teachers and parents. Among their findings:
•The majority of parents surveyed believe multiple skills increased after their child joined a chorus. Seventy-one percent say their child has become more self-confident, 70% say their child's self-discipline has improved, and 69% state their child's memory skills have improved.
• More than 80% of educators surveyed—across multiple academic disciplines—agree with parent assessments that choir participation can enhance numerous aspects of a child's social development and academic success. Educators also observe that children who sing are better participants in group activities, have better emotional expression, and exhibit better emotional management.But as important as these life skills are, my pride and joy in watching them is a huge reason for my service to these children. A top notch children’s choir surpasses every activity I know for creating beauty and hope for human advancement simultaneous with laughter and solid dose of fun (for example, the title photo of this blog is from a Chorale 70s-style celebration).
Being President has been a true pleasure, but as my term winds-up, I am particularly proud that the Chorale’s 36 year tradition of accepting singers without regard to ability to pay survived the worst economy of modern times unblemished. You can be part of that tradition by making a tax deductible gift to the Chorale here.
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| Laughter and tears at the end of a national tour. |
I hope you enjoyed this post and my photographs (click on them to see them better), but to really understand the Chorale, you’ve got to see these kids in performance. It truly is an unforgettable experience. Check the Chorale website later this summer for more information on next season’s performances.
If you haven't had enough, here’s a link to a story about one of my first duties as Chorale President at the Democratic National Convention. A slide show including audio of the kids’ performing the National Anthem at the DNC is included in my Memorial Day post.
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| At the Democratic National Convention |
Thursday, June 10, 2010
A Window of Opportunity for Maximizing the Sale of Your Business?
No Funny Lawyers is pleased to present an article by guest contributor Ned Minor, my partner in our law firm, Minor & Brown. Ned has a particular gift for communicating with business owners on one of the most important questions they will ever face: Should I sell my business? Let me know if you would like a complementary copy of Ned's book, Deciding to Sell Your Business: The Key to Wealth and Freedom; I'll bet I can even get it autographed for you.
Mergers and Acquisitions (M&A) activity for privately owned companies track the economy. In the best economic times, middle-market privately-owned companies are gobbled up for frothy multiples. When the economy is down, i.e. this current recession, buyers are plentiful but sellers are few. In 2000 (the height of the dot com bubble), approximately 11,000 public and private companies were sold for approximately $1.3 trillion dollars. At the bottom of the ensuing recession (2002), 7400 companies were sold for a total of $441 billion dollars. In 2006, at the height of the residential real estate bubble 11,750 companies were sold for $1.5 trillion dollars. Everyone knows what has happened to business valuations starting in the fourth quarter of 2008 and continuing through today.
For the past 18 months, owners of companies hit hardest by the recession have been asking me whether they should sell, knowing that the company’s enterprise value is at an all-time low. These owners are tired, acknowledge that they missed previous windows of opportunity and never want to experience another serious recession. My response has been in the form of two questions: When the economy returns will your sector bounce back? When your sector returns, will your company’s revenue and earnings return to historical levels? If the answer to both questions is “Yes”, then do whatever it takes to weather the storm. Many of these owners are now starting to see definite signs of improvement and are putting their companies on the market. Does this sound familiar?
How long will this window of opportunity remain open?
At a gathering of business owners in Denver on September 29, 2009, Brian Beaulieu, noted economist and nationwide speaker extraordinaire stated, “Sell your business during 2011 and 2012, not during 2013 and 2014. Start preparing now for inflation in 2013 and thereafter, which will trigger layoffs.” Strategic buyers and well-funded private equity groups are seeking acquisitions and are plentiful. Financing for these acquisitions is starting to loosen up as lenders seek to get back into the game. Buyers are paying multiples between 4 to 6 times EBITDA on a recast basis. The greater the EBITDA (Earnings Before Interest, Taxes Depreciation and Amortization) the higher the multiple. Transactions are taking between eight to 12 months to close. This time frame affords a potential seller additional time to demonstrate a consistent growth pattern.
On January 1, 2011, federal capital gains will increase from 15 to 20 percent and on January 1, 2013, to 23.8 percent. This is in addition to state capital gains rates if applicable. If you have not already started the sales transaction process, it is probably too late to close a transaction during 2010 and take advantage of the current rate. If you are just starting to contemplate a sale, keep Brian’s time frame in mind. His projections are historically very accurate. In 2005, he stated, “The economy will click along nicely through 2008. In 2009/10, the economic downturn will be nasty. There are two courses of action for you to take. Sell your business before 2008 or figure out ways to recession-proof your revenues and profits between now and then.” Many former owners took Brian’s advice and are extremely thankful they did.
For ninety-five percent of all business owners, their business is their largest asset. Although these owners enjoy a nice lifestyle, they will not achieve their definition of wealth and financial independence until they sell their business. Every owner will someday leave his/her business. They can go out feet first on a stretcher or sipping champagne celebrating the biggest deal of their lives, the sale of their business. If today’s valuations and market opportunities will deliver your definition of wealth and financial independence, are you emotionally prepared to sell? If you are not ready to sell during this window of opportunity for any reason whatsoever then at least commit to defining, designing and implementing your long/short term exit strategy. If you run your business with your financial end game in mind, wealth creation, you will be well prepared to maximize its value during any window of opportunity.
Mergers and Acquisitions (M&A) activity for privately owned companies track the economy. In the best economic times, middle-market privately-owned companies are gobbled up for frothy multiples. When the economy is down, i.e. this current recession, buyers are plentiful but sellers are few. In 2000 (the height of the dot com bubble), approximately 11,000 public and private companies were sold for approximately $1.3 trillion dollars. At the bottom of the ensuing recession (2002), 7400 companies were sold for a total of $441 billion dollars. In 2006, at the height of the residential real estate bubble 11,750 companies were sold for $1.5 trillion dollars. Everyone knows what has happened to business valuations starting in the fourth quarter of 2008 and continuing through today.
For the past 18 months, owners of companies hit hardest by the recession have been asking me whether they should sell, knowing that the company’s enterprise value is at an all-time low. These owners are tired, acknowledge that they missed previous windows of opportunity and never want to experience another serious recession. My response has been in the form of two questions: When the economy returns will your sector bounce back? When your sector returns, will your company’s revenue and earnings return to historical levels? If the answer to both questions is “Yes”, then do whatever it takes to weather the storm. Many of these owners are now starting to see definite signs of improvement and are putting their companies on the market. Does this sound familiar?
How long will this window of opportunity remain open?
At a gathering of business owners in Denver on September 29, 2009, Brian Beaulieu, noted economist and nationwide speaker extraordinaire stated, “Sell your business during 2011 and 2012, not during 2013 and 2014. Start preparing now for inflation in 2013 and thereafter, which will trigger layoffs.” Strategic buyers and well-funded private equity groups are seeking acquisitions and are plentiful. Financing for these acquisitions is starting to loosen up as lenders seek to get back into the game. Buyers are paying multiples between 4 to 6 times EBITDA on a recast basis. The greater the EBITDA (Earnings Before Interest, Taxes Depreciation and Amortization) the higher the multiple. Transactions are taking between eight to 12 months to close. This time frame affords a potential seller additional time to demonstrate a consistent growth pattern.
On January 1, 2011, federal capital gains will increase from 15 to 20 percent and on January 1, 2013, to 23.8 percent. This is in addition to state capital gains rates if applicable. If you have not already started the sales transaction process, it is probably too late to close a transaction during 2010 and take advantage of the current rate. If you are just starting to contemplate a sale, keep Brian’s time frame in mind. His projections are historically very accurate. In 2005, he stated, “The economy will click along nicely through 2008. In 2009/10, the economic downturn will be nasty. There are two courses of action for you to take. Sell your business before 2008 or figure out ways to recession-proof your revenues and profits between now and then.” Many former owners took Brian’s advice and are extremely thankful they did.
For ninety-five percent of all business owners, their business is their largest asset. Although these owners enjoy a nice lifestyle, they will not achieve their definition of wealth and financial independence until they sell their business. Every owner will someday leave his/her business. They can go out feet first on a stretcher or sipping champagne celebrating the biggest deal of their lives, the sale of their business. If today’s valuations and market opportunities will deliver your definition of wealth and financial independence, are you emotionally prepared to sell? If you are not ready to sell during this window of opportunity for any reason whatsoever then at least commit to defining, designing and implementing your long/short term exit strategy. If you run your business with your financial end game in mind, wealth creation, you will be well prepared to maximize its value during any window of opportunity.
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