Cvg Sale Of Business 3 21 12 Webinar Final

Impact Resource ManagementBliss

Maximizing Value in Selling a Business

Pre-Transactional and Transactional Considerations

Alexander B. Kasdan, Founding Partner and President,

Convergence Capital Partners, LLC

Jim Baer, Esq., Principal and Founding Partner, Baer & Troff

LLP

©2012 Convergence Capital Partners, LLCOrganizer and host:

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Presenters

Anna Spektor, Founder / Trusted Marketing Advisor

•Founded in 2004 by Alexander B. Kasdan

•Private middle-market advisory investment banking firm

•Big firm expertise and capabilities for the middle market

•Proven track record and commitment to client service

•Collective expertise: mergers and acquisitions, corporate

finance, restructuring, law, real estate

•“Senior Advisors for Senior Transactions”

Convergence Capital Partners, LLC Summary

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Industry Coverage• Staffing

• Retail and Supermarkets

• Branded Consumer Products

• Apparel

• Business Services

• Food

• Building Products

• Industrial Manufacturing

• Media and Telecommunications

• Petrochemicals

• Healthcare

• Real Estate

• Gaming and Lodging

• Technology

• Vitamins and Supplements

• Publishing

• Distribution

• Construction

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Baer & Troff LLP• Baer & Troff, LLP specializes in corporate law and business litigation

matters. Our corporate practice includes restructuring transactions and corporate securities issues, venture capital and other financing transactions, joint ventures, licensing and corporate formation and governance. Our litigation practice encompasses all areas of state and federal litigation, including arbitrations, mediations and appellate work. Baer & Troff, LLP emphasizes corporate, real estate, general business, unfair competition and construction litigation.

• Baer & Troff, LLP was formed by partners of major law firms to provide the highest quality corporate, litigation and other legal services to existing, emerging growth and mid-market companies at reasonable rates. In addition to our transactional and litigation practice, we regularly provide general counsel to a wide range of clients and mediate complex business disputes.

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You have decided to sell your business.

This is likely to be the largest and most important

transaction of your life – do it the right way!

Obtain the Best Deal Possible! 5

Objectives for the Sale - Roadmap

• Money, liquidity, cashing out of investment

• Personal Succession planning

Family

Changed circumstances – health, marriage, divorce, other

Are owners essential to running the business?

• Strategic growth Need for greater management depth

Strategic partnership

Investment capital

Business expansion

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Pre-Transactional Planning• Operational

Selling on the “uptick”

Are operations in light with historical?

Streamlining the business

• Management Is there management in place?

Are owners essential to running the business?

• Financial Are financial statements audited? For how many years? Accurate?

Outstanding indebtedness

Real estate owned or leased

• Personal What is motivating the sale?

Time horizon?

Personal financial, tax and estate planning.

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Assembling the Working Group

• Investment Banker Pre-engagement diligence – solid financials, reputation, etc.

Desirability of client – our reputation and time are on the line

Selling on the “uptick”

Identify all appropriate add-backs and adjustments to EBITDA

Recast historical financials

Projections and pro-forma adjustments

Knowledge of marketplace and process

Due diligence issues

Management issues

Investment banking fees – exclusivity, retainer, success fees

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Assembling the Working Group

• Transaction Counsel Familiarity with M&A issues

Knowledge of various deal structures

Confidentiality of the sale process

Non-compete agreements

Stock sale v. asset sale

Employment and/or consulting agreements

Board and minority shareholder/passive investor issues

Legal fees

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Assembling the Working Group

• CPA Financial statements and operating condition of the business

Are financial statements audited or reviewed by independent accountants?

Due diligence accessibility

Proper tax accounting methodology

Revenue recognition

Inventory valuation issues

Personal transactional tax implications

Due diligence issues

• Other “Trusted Advisors” Sell-side due diligence advisors prior to the sale – identify problems and

issues

Real Estate

Trusts & Estates Planning

Insurance

Pensions10

Illustrative Sale Process – Steps and Timeline

Company Preparation

Marketing the

Company

Receive Proposals

Due Diligence and

LOI

Negotiations and Closing

5-7 weeks 6-12 weeks 3-4 weeks 4-6 weeks 4-8 weeks

•Information gathering•Prepare Company Summary•Prepare Information Memorandum (IM)•Finalize list of targets

•Contact targets

•Execute CAs

•Distribute

IMs•Organize Virtual Data Room•Address any other issues

•Receive written indications of interest•Select “short list”•Management Presentations•Initial due diligence

•Solicit final bids (LOIs)•Distribute draft agreements•Receive final offers

•Evaluate LOIs•Negotiate with final bidders•Coordinate working group (counsel, accountants, other advisors)

•Final due diligence

•Closing

Total Time =

22–37 Weeks

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The main responsibility of selling business owners and management is to continue running the

business – need to meet all projections and forecasts

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Types of Potential Acquirers

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Strategic Financial

Likely price premium

Geographic considerations

Product line and distribution

Employment/consulting

agreements

Potentially know the business

Abundance of private equity

capital

Eager for acquisitions

Platform or add-on

Greater management concern

Acquisition finance issues

Deal structure flexibility

Advisory/board opportunities

“Second Bite at the Apple”

Selected Recent Transactions

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• 2010 - toughest market environment in decades• Sale to an East Coast-based strategic acquirer at above-market 7.5x EBITDA• Employment contract and incentive package for seller-owner• Owner continues to run the business for HowardBerger Company

Selected Recent Transactions

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• Sale to a strategic buyer• Owner continued to run the business for SelectRemedy• “Happy to serve as client reference in a win-win strategic acquisition.”

Patty DeDominicFounder and CEO of PDQ Personnel

Selected Recent Transactions

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• Distressed company sale to a private equity financial buyer• Strategic deal• Section 363 bankruptcy sale• Transaction completed in record time – 3 months

Potential Issues with Real Estate

• Is corporate real estate owned or leased?

• If owned, is it in the name of the Company or a

separate entity?

• Is the Company lease above market?

• Is there real estate debt?

• Does the owner want to sell or keep the real estate?

• If keep the real estate, lease needs to be brought to

market?

• Sale-leaseback?

• Real estate may trade at a higher multiple than the

business.

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The Closing!!!

“The Closing” by Jimmy Dyer

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Post-Transaction Considerations

• Trusts and estates planning

• Insurance planning

• Pension planning

• Money management and investments

• Board advisory

• Starting a new business?

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Alexander B. Kasdan is a Founding Partner of Convergence Capital Partners, LLC and its predecessor company, ABKC.  He has more than twenty years of investment banking, real estate, corporate law and corporate strategy experience. Since 1988, Mr. Kasdan has executed over 100 domestic and cross-border transactions totaling more than $10 billion in overall volume in a variety of industries. Prior to founding Alexander B. Kasdan Company Limited, Mr. Kasdan was an investment banker at Barrington Associates in Los Angeles, where he headed the restructuring group, Peter J. Solomon Company, Credit Suisse First Boston and Merrill Lynch.

Mr. Kasdan practiced law with O’Melveny & Myers LLP (formerly O’Sullivan Graev & Karabell LLP) and Paul, Hastings, Janofsky & Walker LLP (formerly Battle Fowler LLP), where he specialized in mergers and acquisitions, private equity and corporate finance transactions.  In addition, Mr. Kasdan served as Corporate Counsel in charge of business development at Schlumberger Ltd., a global oilfield and information services company.

Mr. Kasdan graduated magna cum laude from Middlebury College with a B.A. degree in Economics and Italian and was elected to Phi Beta Kappa during his junior year. In addition, he holds a J.D. degree from Columbia University Law School and has studied at the University of Florence in Italy. Mr. Kasdan was admitted to the Bar in the State of New York in 1995.

Mr. Kasdan is a Senior Advisor to Governance and Transactions LLC, an advisory firm established in 2003 by Mr. James L. Gunderson, former Secretary and General Counsel of Schlumberger Limited, to assist boards, management and owners with corporate governance, compliance, structuring and strategic transactions.

Mr. Kasdan is a frequent speaker on the subject of mergers and acquisitions, corporate finance and restructuring, including as organizer of the Conference at the Anderson School at UCLA on "Buying and Selling a Company in a Tough Economy - How to Optimize Price and Liquidity in a Buyers’ Market." Mr. Kasdan has published articles on the subjects of mergers and acquisitions and corporate finance.

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Contact InformationAlexander B. Kasdan

Convergence Capital Partners, LLC

614 Palisades Drive

Pacific Palisades, CA 90272

1.310.770.1327 phone

1.310.496.2434 fax

www.cvgpartners.com

[email protected]

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Jim Baer is a principal and founding partner of Baer and Troff, LLP. His legal practice experience includes serving as outside general counsel and business advisor to numerous companies and individuals, including as strategic advisor for managing and settling of complex business litigation. His legal practice also includes venture capital financings for both venture capital firms and portfolio companies, and advising business entities, boards of directors and individuals on general corporate matters, loan transactions, mergers and acquisitions, restructuring transactions and corporate securities issues.

A member of the American Bar Association and the Los Angeles County Bar Association, Mr. Baer is also a past member of the Corporations Committee for the Business Law Section of the State Bar of California and is a current member of the Los Angeles County Bar Executive Committee. In addition to his legal practice, Jim Baer has served as an executive officer and a business advisor for various companies in a variety of industries.

Mr. Baer also has expertise as a mediator in a wide variety of matters. He is currently President of CMBG Advisors, Inc., a firm specializing in business restructuring and Assignments for the Benefit of Creditors (ABCs).

Mr. Baer was head of the Corporate Department in the Los Angeles office of Katten, Muchin & Zavis, a Chicago-based firm. Previous to that, he practiced with Gibson, Dunn & Crutcher, LLP, a Los Angeles-based firm.

Mr. Baer received his Juris Doctorate law degree from Loyola Law School in Los Angeles in 1983. He was admitted to the State Bar of California in 1983.

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Contact Information

Jim Baer, Esq.

Baer & Troff, LLP

1221 Ocean Ave. Ste 508

Santa Monica, CA 90401

t: 310/802-4200

[email protected]

www.btllp.com

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Anna Spektor is a Founder and Trusted Marketing Advisor of Expert Presence, LLC, a consulting and professional advisory firm located in Los Angeles, CA.

Founded on a thought leadership approach, Expert Presence provides strategic growth consulting and access to potential clients to attorneys, CPAs, financial advisors, real estate professionals and many other professional service providers throughout the United States.

Prior to founding Expert Presence, Ms. Spektor served as Director of Business Development with Smart Marketing, Inc, an attorney and financial services marketing firm, and Director of Business Development and Community Relations for Wachbrit & Associates, PC., a Southern California estate planning firm, where she spearheaded marketing, business development and public relations.

Ms. Spektor also held a position of Business Development / Commercial Lending Officer with National Bank of California.

Ms. Spektor has a Bachelor’s Degree in Economics from California State University-Northridge.

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Contact Information

Anna Spektor – Trusted Marketing Advisor

1999 Avenue of The Stars, Suite 1100

Los Angeles, CA 90067

Phone: 310-995-6579

[email protected]

www.expertpresence.com

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