More on SPAC activity

2008 Pivotal Year for SPAC Market,
According to SPAC Research Partners '
State of the SPAC' Report

http://www.reuters.com/article/pressRelease/idUS114622+03-Apr-2008+PRN20080403

Fine insights on the status of the SPAC market

More to come!

The Reverse Merger & SPAC Blog

What is a reverse merger?
A reverse merger is an alternative to a traditional initial public offering (IPO) for a company desiring to have its stock become publicly traded. In a reverse merger, the owners of a private company acquire control of a dormant public one, called a “shell,” and complete a business combination with it. When the merger is complete, the private company becomes public and its stock can be publicly traded in its own right.

What is a “public shell”?
A “public shell” or “shell company” is a public company that has no or nominal assets (other than cash) and minimal, if any, day-to-day business operations. It may be the remnant of a bankrupt or sold organization or specially formed for the purpose of combining with a private company.

The Reverse Merger & SPAC Blog: Frequently Asked Questions

More to come

Buyouts, M & A, SPAC, Special Purpose Acquisition Company, Private Equity, Strategic Buyers

Buyouts, M & A, SPAC, Special Purpose Acquisition Company, Private Equity, Strategic Buyers and Management-led buyout firms are competing to find and acquire cash flow businesses. According to M.P. Dumon that competition is cutthroat.

While this web site has devoted much of its content to the plight of the private company owner who faces a buyers market over the next five to seven years, the competition among buyers of privately owned and profitable companies is fierce.

The dramatic difference between the buyers and sellers is that the buyers are proactive while the private company owners remain inactive, or better stated, reactive to the very sophisticated capital market of which they are apprehensive. This behavior gives the advantage to the proactive professional buyers.

As the professional seekers of cash flow turn over the rocks of the private capital markets, only 20% of private companies plan an exit that can take advantage of the buyer’s insatiable need for increasing returns on assets.

On both sides of the transaction, those seeking maximum cash for their assets and those buyers looking to buy cash flow as cheaply as possible, the players could be far more aggressive. That is to say that whether a buyer or a seller, the player must be proactive in seeking their desired end with diligence and specificity.

Once either player knows exactly what they want there is a good chance they will find it. The situation that exists is sellers are so unsophisticated in the realm of the capital market where the liquidity event lives they get frozen in the day to day status quo. On the buy side, while they are sophisticated and experienced, cutthroat competition for abundant cash flow companies is at such a high level new attitudes toward the creation of deal flow must be developed.

The buy side players must change their paradigm for creating deal flow. They cannot share their compelling stories to private company owners who will not listen. The challenge is for these professional buyers of cash flow to find efficiencies in creating quality deal flow. On both the buy and sell sides of an entity seeking a profitable transaction, new and more proactive behavior is needed. Whether you are on the buy or sell side, what can be done differently to create better results?

Buyouts, M & A, SPAC, Special Purpose Acquisition Company, Private Equity, Strategic Buyers and Management-led buyout firms are competing to find and acquire cash flow businesses. According to M.P. Dumon that competition is cutthroat.

Wall Street, Main Street and the Privately held Middle Market Company: All transactions are ad hoc in private capital/company transactions!

Wall Street, Main Street and the Privately held Middle Market Company: All transactions are ad hoc in private capital/company transactions!

While it is tempting, the application of public capital market practices, those one sees reported in the Wall Street Journal (WSJ), is the same as believing that a comparison between an apple and an orange is not a logical fallacy.

Each middle market privately held company that successfully manages to maximize their asset value and sell to a substantive buyer has created an individually attractive market opportunity for that buyer. That is to say, the seller, knowing that there is no standing and ready equitable market in the private capital domain, has determined what is attractive in the marketplace and has committedly recreated his/her company to mirror the buyers needs and desires. In fact, the seller has actually created a market for his or her company which will generate the highest asset value, terms and conditions for the liquidity event.

The aforementioned scenario presumes a proactive stance on the part of the private company owner. The truth of the private business domain is that only 20% of private company owners plan their way to a successful and fulfilling sale. Those that do sell or refinance and take on partners do so as a reaction to the marketplace knocking at their door.

The question is who has the advantage in the buy/sell plot that emerges? The answer is, as always, the one who is proactive, experienced and focused on a self serving maximization of assets, cash, terms and conditions. The advantage goes to the professional buyer.

The professional buyer of private businesses has an additional advantage to his/her expertise, finance creativity and acquisitions focus. That advantage is that twice as many companies, because of the Baby Boom cohort of private company owners, will be coming to the marketplace as is the norm. Yes, a buyers market, riding on the law of supply and demand, is and will continue to drive asset values down.

The only tool available to the private company owner to prevent being caught in the downward spiral of asset values is a strategic exit plan. That private company owner cannot rely on the WSJ for either insight or assistance. The private capital market works transactions one at a time.

Wall Street, Main Street and the Privately held Middle Market Company: All transactions are ad hoc in private capital/company transactions!

Mega Millions Winner? One does not need a lottery ticket! A Valuation and Exit Strategy Plan will bring a Jackpot to the private company owner!

Mega Millions Winner? One does not need a lottery ticket! A Valuation and Exit Strategy Plan will bring a Jackpot to the private company owner! According to a survey, done by The Mass Mutual Financial Group and The Raymond Institute, only 19 percent of family/privately owned companies acknowledge doing any estate planning. Additionally, the report goes on to say that only 62% of the significant stockholders have any knowledge of the senior management/majority owners’ asset transfer or sale intentions. Another fact determined by the study is that 55 percent of private company owners do not acquire regular formal evaluations of the firm. The reader, connecting through the above link, can review the study in its entirety.

While the private company is the backbone of the American economy and the largest employer in the United States (US), only 20% plan their exit from the business. One might say, “so what?” What is the consequence of the absence of exit planning strategies within the private company/private capital segment of the US economy?

As with all circumstances where deductive reasoning can be applied, a clear conclusion can be garnered. When one applies logic to this large percentage of private companies that do not plan their exit and their economic future, their collective lack of action makes no sense, nothing adds up to support this behavior.

Inductive reasoning may hold the answer. That is to say, in the private company/capital domain, where the popular culture character of the rugged individualist lives, logic is not the guiding factor. One possibility may be that an owner believes that without his/her company their identity dissolves. They may subscribe to the emotional idea that without there hands on the helm of a company they will be minimized in some form or fashion. Further, while few in the rugged individualist culture of the US admit it, fear of the unknown may be consciously or subconsciously driving the lack of making the decision to plan an exit. While this author does not have the answer to the question of why so few private company owners strategically plan their exit, he can attest to the consequence of this illogical behavior.

The aftereffect of not planning an exit is that the private company owner will loose asset value. Pure and simple, the marketplace and those who know these statistics professionally prey on these very companies. The word professionally is used because there is a segment of brilliant practitioners whose job is to seek opportunities where the owner of a middle market company will surrender the helm at a reduced value.

The only safety a private company owner has is to accept the idea that exit planning strategies are the only path that will lead to appropriate asset values, terms and conditions when the decision has been made to sell or dramatically refinance.

This author also believes that the rugged individualist private company owner, unlike the Lone Ranger who had Tonto to do his bidding, does not have the professional network to assist in protecting the assets by means of an appropriate and strategic exit plan. The owner needs a Tonto because he/she will have to continue to apply their proven expertise in maintaining and growing the company.

While the question of why private company owners do not plan goes unanswered, one can be sure that as long as this illogical practice continues millions of dollars will be left on the table for both strategic and financial buyers to gouge themselves. The odds of realizing maximum price, terms and conditions in a liquidity event are reduced without the appropriate plan in place. If you have no exit plan, be prepared to forfeit millions of dollars in asset value.

Mega Millions Winner? One does not need a lottery ticket! A Valuation and Exit Strategy Plan will bring a Jackpot to the private company owner!

Obama reminds us of rich wisdom from the past, GOOD SHOW! Grow your business in order to exit with abundant and heretofore unanticipated riches!

While Barack Obama is reminding us of pearls of wisdom spoken and written in the past, a company owner can increase the value of his/her business using tried and true acquisition practices in their exit planning process.

At first glance the aforementioned assertion may seem contradictory. That is to say, if a business owner is contemplating an exit why would they be pondering acquisition opportunities?

While mergers and acquisitions (M & A) in the Public Capital Markets, where billion dollar transactions take place and get Wall Street Journal headlines, often take years to consummate, M & A deals in the lower middle market can take just a few months.

With this short window of time, the possibility exists for the lower middle market company owner to change the total complexion of the business. Acquiring the right company with the right balance sheet can make the private company moving toward exit more profitable and more attractive to the financial or strategic buyer world.

The word “EXIT” is often synonymous with the word “END” in the mind of the private company owner. The exit planning process, while focused at producing an abundant liquidity event is by no means an end. The process of a proper planned exit could take a few months or a few years depending on the “Plan.”

As Obama reminds us of words of wisdom from the past, private company owners should begin thinking of how they would like the future and the value of their company to appear. Set a goal, plan your work and then work your plan. With no goal the private company owner puts control of his/her company valuation future in the hands of the marketplace. Remember, three times as many private companies will be for sale during 2008 as is the norm. The law of supply and demand is merciless!

David Letterman is not the only one with a TOP TEN LIST.

David Letterman is not the only one with a top ten list. The following is the Hamilton Wright top ten list for starting your exit planning NOW:

Ten: Play more golf, tennis and spend more time on your boat and with family

Nine: Create what the market place wants to buy

Eight: Set time lines and transaction proceed ($$$) objectives

Seven: Accurate Valuation as seen through multiple value worlds (who will give you the best deal?)

Six: Business plan into the future

Five: Prepare for market variances so maximum asset value is realized

Four: Satisfy family responsibilities as minor stakeholder/stockholders

Three: Personal financial Goal and action plan (what is your money doing for you)

Two: Minimize tax exposure and take more of your money to YOUR bank and not the US Treasury

ONE: Increase the proceeds of your exit transaction by 2-5 million dollars

While David Letterman may have the most famous Top Ten List, this list, provided by Hamilton Wright, may have more impact on your life, REALLY!!!!