Attorneys: What can a valuation expert do for you?

Attorneys typically bring in valuation experts to resolve disputes between shareholders, spouses, and companies. While valuation experts can help settle such disputes by providing an independent opinion of value, valuation experts can assist attorneys and their clients in a plethora of other ways, such as:

Discover Assistance: Parties in a legal proceeding undertake voluminous document discovery and production. Business records become crucial to a number of issues in most cases including disputes and fraud. Valuation experts can assist in finding, understanding, and explaining the information from these documents. Valuation experts can also direct attorneys towards what documents should be requested in the discovery process.

Deposition Assistance: Valuation experts' typically diverse backgrounds spanning across industries and sectors make them ideal to assist in drafting technical questions, not just valuation related questions, for depositions, as well as providing insight and explanation of the answers provided by the technical business people being deposed.

Opposing Expert Review: Valuation experts are often requested to analyze an opposing expert's work, identifying its strengths and weaknesses. Additionally, valuation experts can assist attorneys in drafting technical questions for the deposition of the opposing expert.

Collection and Organization of Business Facts: Valuation experts can research and collect related business information from industry and market sources.

Strategy Development: Valuation experts can provide valuable insight into the best method to approach a business issue in a particular case. Identification of the critical business issues by a third-party expert can result in a unique and fresh view of the business case.

Expert Witness Testimony: Valuation experts commonly provide expert testimony to provide explanation and additional insight into their opinions documented in their valuation or calculation of damages report.

The above is just a sampling of the ways in which valuation and financial professionals can assist attorneys in their various litigation proceedings. Allied Business Group has provided analysis and expert testimony in numerous legal proceedings including shareholder dispute, divorce, fraudulent conveyance, fraud, lost profits claims, economic damage claims, and contract defaults among others. For additional information about Allied Business Group's litigation support services, please contact David Holzman at david@alliedbizgroup.com.

2012 is a 'Window of Opportunity' for Business Sales

Entering 2012, we expect to see a significant increase in middle-market M&A activity as businesses recover from the economic slowdown. For businesses that have successfully rebounded, or are in the process of rebounding, 2012 could be an ideal time to sell.

While there is still some uncertainty surrounding the current macroeconomic environment, we know for certain that private equity groups and ‘strategic’ buyers have large amounts of cash on hand, and will aggressively seek acquisition candidates to meet their investment and growth requirements. In fact, strategic buyers in the United States have increased the amount of cash on their balance sheets by 18% over the last year to $673 billion, while private equity funds have more than $500 billion in available capital. Banks and lending institutions are beginning to lend money again, and many companies are focused on future growth rather than recovery.

Another factor expected to drive M&A activity in 2012 is the likely expiration of the Bush Tax Cuts at the end of the year. Business owners that choose to sell before December 31, 2012 will take advantage of significant tax savings, as the long-term capital gains tax rate is expected to increase at least 5% in 2013.

Allied Business Group provides M&A advisory, as well as business valuation services to business owners and their advisors for a variety of purposes, including exit planning and transactions, estate and gift taxes, litigation and financial reporting. To learn more about us, please visit our website at www.AlliedBizGroup.com.

Business Valuation and 2011/2012 Gifting Opportunities

As the 2011 year comes to an end, we are reminded of the increased federal estate and gift tax exemption, which is set to expire after 2012. This increased exemption presents an opportunity for individuals to gift a portion of their estate, whether in the form of cash, real property or privately held business interests. Nearly every gift of a business interest requires an independent valuation from a qualified appraiser. A qualified appraiser (as specified by the IRS) is an individual that has earned a designation from a recognized professional appraisal organization and regularly prepares appraisals for which he or she is paid.

Beyond the IRS specifying that the valuation of the gifted interest be performed by a qualified appraiser, it is important to use a qualified appraiser that has extensive experience and an understanding of the discounts that are commonly involved in the valuation of minority business interests. Most notably, these discounts include the discount for lack of control and discount for lack of marketability, which reduce the ultimate value of the gifted interest.

Allied Business Group provides consulting and independent valuation services to business owners and their advisors for a variety of purposes including estate and gift taxes, exit planning and transactions, litigation, and financial reporting. To learn more about us, please visit our website at www.AlliedBizGroup.com.

Case Study: Sleepcair and Spectrum Medical Equipment

Overview

The owners of Spectrum Medical Equipment, a rental distributor and retailer of home healthcare equipment, desired to sell the business due to changes in the industry with regard to Medicare reimbursements. Recent cuts in Medicare reimbursements require distributors of home healthcare equipment to compete on service. These cuts created a competitive bidding environment, requiring companies to compete for Medicare reimbursement contract. Even though Spectrum acquired three of these contracts, Medicare cuts were so drastic that the owners still felt they needed to sell in order to stay competitive. Allied Business Group conducted a directed search for strategic buyers that led to Sleepcair, a local competitor of Spectrum's in the durable medical equipment industry. Sleepcair acquired Spectrum because of the strategic fit between the two companies, as well as its need to acquire the competitive bid contracts awarded to Spectrum.

Client Objective

Spectrum Medical Equipment had four owners, three of which were not active in the company. The fourth active owner knew that because of drastic cuts in Medicare reimbursements, the company would have to expand in order to stay competitive with its two largest national competitors, Apria and Lincare. Therefore, merging with a similar company was the logical step. The owner also wanted to find a buyer who would be willing to retain his 15 former employees.

Solution

Allied Business Group began its sale process by reviewing the client's objectives, particularly those associated with finding a buyer that fit Spectrum's qualitative expectations. We developed a detailed offering memorandum and performed a directed search for strategic buyers, focusing primarily on durable medical companies both in and around Spectrum's geographic area. While there were multiple buyers interested, Sleepcair was not only a qualified strategic buyer, but it also fit the qualitative criteria Spectrum desired.

Result

Allied Business Group completed the sale of 100% of the company to Sleepciar in April of 2011, achieving a 20% premium over fair market value. The acquisition of Spectrum's stock allowed Sleepcair to be reimbursed by Medicare for certain products and services provided in the Kansas City area. This not only gave Sleepcair a strong competitive advantage, but it also made it one of the largest independently owned durable medical equipment players in the Kansas City market.

Company Info

About Spectrum Medical Equipment

Founded in 2000 as a nonprofit agency, Spectrum Home Health Agency branched off to form Spectrum Medical Equipment in 2006. Spectrum is a rental distributor and retailer of home healthcare equipment, including: oxygen compressors and concentrators, portable oxygen systems, BiPAP and CPAPs, humidifiers, nebulizers, home diagnostic equipment, specialty mattresses, hospital beds, wheelchairs, walking aids, and bariatric home medical equipment.

About Sleepcair

Locally owned, Sleepcair is Kansas City's largest provider of CPAP and oxygen products. With locations in Lenexa, North Kansas City, and Lee's Summit, it offers a large variety of home medical equipment.

Local roofing company sells to out-of-state buyer
Jeremy Simmons with Allied Business Group announces deal complete

LEAWOOD, Kan.- Allied Business Group has announced that Mesler Roofing Company, based in Lawrence, Kansas, has a new owner. A former Texas sales representative at a Fortune 500 company recently bought Mesler Roofing, a high-end contractor serving commercial and residential buildings throughout Lawrence and the Kansas City area.

Former owner Scott Mesler first met Jeremy Simmons more than a year ago. After a few conversations on how Allied could help Scott reach his retirement goals, the two begin preparing the business for market.

“It was important for me to find an agent who knew what I wanted with the sale of this business,” says Mesler. “Jeremy and I spent countless hours on the phone discussing options and meeting with multiple buyers.”

Gregg Davidson, the new owner, expects to continue growing the company by offering a variety of roofing solutions with a high level of service.

Lawrence resident Scott Mesler established Mesler Roofing Company 25 years ago. Since then, the company has established a reputation for providing high-end roofing jobs for commercial and residential building throughout the Kansas City area.

For more information, please visit http://www.alliedbizgroup.com/.

Selling a Business? - Beware of "Seminar" Merger and Acquisition Advisory Firms

It’s a lure that’s hard to resist. A free seminar and the promise of “premium buyers” ready to scoop up your business. But if you’re serious about selling, be aware that those seminar merger and acquisition firms are not what they appear to be, nor are the services they provide. This article is meant to help business owners become aware of these firms’ deceptive practices.

In the next 10 to 15 years, many business owners will reach retirement. Some will transition their business to their children and (or) an existing manager. However, many business owners will find themselves without a clear succession plan, either because their children are disinterested in the business, or because their existing managers don’t have the financial resources to complete the transaction. In these situations, business owners will likely sell to an outside buyer.

Business owners may attempt to sell their business themselves or hire a professional advisor to assist. Such advisors are often referred to as business brokers, merger and acquisition intermediaries or investment bankers – all terms used to describe the “dealmaker” who helps connect business buyers and sellers. While many advisors provide valuable resources, a handful of “seminar” firms employ deceptive practices to lure clients into engagements with steep up-front fees.

These so-called merger and acquisition firms regularly conduct free all-day seminars for business owners who want to learn more about selling their company. Most attendees are small, private business owners with companies that generate $1 million to $25 million in annual revenue. During the seminar, attendees are enticed by how their business could be purchased by a large international company, U.S. company or private equity group for an extraordinary amount of money. These seminars suggest that the fundamental principals of business valuation somehow do not apply with their "premium buyers".

So what's the catch? These firms won't sell a vast majority of the businesses they engage, let alone for the values suggested in the seminar. Rather, they make most of their money in up-front fees, typically $37,500 to $50,000. And of course, clearly stated in their contract, they make no representations or warranties that they can sell the business at all.

The originator of this deceptive seminar model was Irvine, California-based The Geneva Companies. But their seminar program ended when Jeoffrey L. Robinson, attorney at Robinson, Calcagnie & Robinson (http://www.orangecountylaw.com/) led an unfair business practices class action against The Geneva Companies, in which he litigated a 45 million dollar recovery against the company. Unfortunately, other seminar companies are still out there making false promises, wasting business owners’ time and resources.

But there is good news. There are many professional and reputable dealmakers across the country who work hard to sell businesses. They range from the sole practitioner broker who focuses on smaller "mom and pop" businesses, to larger investment banks that specialize in a particular industry. Many of these firms do charge modest up-front fees for performing a business valuation and (or) initiation of a marketing campaign. However, the difference is that a reputable firm earns most of their fee as a commission after successfully completing a sale.

So how do you differentiate the good from the bad? Ask the firm what their success record is. How many engagements did they take last year and what percentage did they successfully sell? Ask for a list of references from past clients. Rely on your trusted advisors (attorneys, accountants and bankers) to recommend a firm to you.

And, above all, remember if what you're hearing sounds too good to be true, it probably is.

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