IBBA Reveals Business Owners Value Employees, Fast Exits, and Legacies


International Business Brokers Association
Image: ibba.org

Linn Crader, the president of Business Transaction Services, Inc., and Murphy Business Northwest, Inc., relies on his more than 25 years of experience in the M&A industry to assist customers. Active within the professional community, Linn Crader belongs to several organizations, including the International Business Brokers Association (IBBA).

In May 2017, results from the Q1 2017 Market Pulse Report were published. This report was created through the collaboration of the Pepperdine Private Capital Market Project, M&A Source, and the IBBA, the largest nonprofit for business brokerage and M&A professionals. This report compares the conditions for businesses being sold in both lower middle and main street markets. More than 300 business brokers and M&A advisors from 37 states responded to the Q1 2017 survey.

According to the Q1 2017 report, employees are one of the top considerations when business owners look to sell their company. Roughly 70 percent of all respondents stated that taking care of their employees plays a huge role in deciding between potential buyers, and some individuals have seen business owners agree to less money to protect employees’ jobs and workplace culture.

In addition to that, the report found that deal structure was an important factor in the negotiation of transactions for 77 percent of respondents. Negotiations over closing date followed as the next most important factor, along with non-compete contracts or employment contracts for sellers.

The Q1 2017 Market Pulse Report also revealed that business owners place a great deal of value on leaving a legacy once they sell their company and exiting their business quickly.

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The Five Types of Mergers

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Image: investopedia.com

For more than three decades, Linn Crader has been working in the mergers and acquisitions (M&A) industry. Committed to helping customers reach their long-term goals, Linn Crader offers personalized services to assist clients in their M&A transactions.

Mergers are divided into five types based on their economic function, the relationship between the companies, and the purpose of the transaction. These five types are briefly described below:

1. Horizontal. These mergers take place between companies operating in the same industry and are most common in highly competitive industries.

2. Vertical. Used for improving margins, cost efficiency, and operational efficiency, vertical mergers take place between companies that produce different goods used in a single product. The companies operate at different levels within a single supply chain.

3. Conglomerate. There are two types of conglomerate mergers: mixed and pure. Mixed mergers occur between two companies seeking market or product extensions, while pure mergers take place between companies that have nothing in common.

4. Market extension. These mergers, which help increase the size of the client base or market, occur between companies that serve different markets with the same products.

5. Product extension. Similar to market extension mergers, product extension mergers involve companies that operate within the same market and sell products that are similar but different. These mergers increase the number of products offered by a company and target a larger consumer base.

Forecast for Technology Mergers and Acquisitions in 2016

Linn Crader serves as president of Business Transition Services, Inc. (BTSI). Drawing on experience helping clients successfully structure deals, Linn Crader has assisted companies in a number of mergers and acquisitions (M&A).

When it comes to M&A, 2015 was a busy year, and some expect that 2016 will be even more so, with a larger number of mega-deals. For the technology sector, analysts see activity peaking in 2016.

However, some tech sectors will be busier than others. For example, since cloud technology is quickly becoming commoditized, it is expected that tech giants like HP, IBM, and Microsoft will acquire cloud-security vendors. Virtual-reality tech companies will also be posting for-sale signs, with eyes on companies like Electronic Arts.

On the other hand, analysts project enterprise software transactions between such companies as Oracle and SAP will slow, as organizations will move away from offering expensive products and services. Many also envision Twitter and Yahoo finding buyers in 2016.