Small businesses have long been the heart and soul of the U.S. economy. According to the U.S. Census Bureau, 61% of the over 7.5 million U.S. business establishments had fewer than 10 employees in 2014. Once upon a time, many individuals dreamed of starting a business that they could pass on to the next generation; however, a recent study on succession planning for U.S. family-owned businesses by PwC found that interest among owners to pass control of the company on to the next generation is waning. In fact, the study found that among family-owned establishments anticipating an ownership change within the next five years, only 52% plan to keep the business in the family — down from 74% of companies surveyed just two years ago. This raises several major concerns for family-owned businesses, most importantly the need for properly establishing value and a plan for transitioning ownership of a business.

 First, do these owners have a firm understanding of their business’s fair market value? Sadly, the answer is usually no. While hard facts are short on this topic, our experience in working with family-owned businesses is that the owner(s) tend to be overly optimistic about value and believe the business is worth far more than it will likely generate in a competitive sale process. This especially holds true for smaller companies (i.e., less than $3 million in annual revenue). Many owners are understandably emotionally attached to a business they developed and that has afforded them a relatively comfortable lifestyle. As such, it can be hard to hear that the business isn’t as valuable or easily transferable as expected.

Second, if a change in ownership is really just five years away, what steps have owners taken to prepare for the divestiture of their interests? Unfortunately, the statistics aren’t overly optimistic. According to PwC survey results, only 23% of firms have a well-documented and robust transition plan in place — down from 27% two years ago — and nearly one-third have no plan at all. Asking a CEO to plan for a future when they aren’t involved in the business can be challenging to say the least. Further complicating matters is the potential that the next generation may not want anything to do with the business and senior leadership may have no desire to own a business.

So where does this leave the business owner(s)? How can strategic consultants and transaction advisors provide guidance on the road to transitioning (or divesting) a family-owned business? By working together, the two sides can create a multi-year plan on how best to maximize value and transition ownership. The process is one that requires a high level of trust and respect, and should be conducted over a sufficiently long period of time in order to fully realize the benefits of this partnership.

We strongly suggest business owners consider the following guidelines:

  • Reach out to several advisors specializing in your industry and local market to learn about their experience working with similar businesses on succession planning and sell-side advisory services. You may find that the company best positioned to provide strategic consulting and succession planning services is different from the company best equipped to value and sell your business. In cases like these, you may need to make a choice between several firms or determine if a hybrid approach is possible.
  • Ask your advisor to provide you with a fair market valuation and operations assessment for your business. You want to understand the value drivers and detractors of the business, as well as the opportunities to maximize the business’s value.
  • Develop and implement a strategic growth and succession planning (or sell-side) initiative several years before you actually intend on transitioning the business to a new owner. Without proper planning, you won’t have enough time to fully realize the benefits of any changes being made to the business. Generally speaking, we like to work with owners three to five years in advance of any transition in ownership to minimize the potential for disruptions, but, depending on the business and its owner(s), longer relationships may prove even more rewarding.

Ultimately, transitioning a business from one generation to the next (or to someone outside of the family) can be a stressful process. Having an advisor that works with you to prepare the business for an eventual transition in ownership, regardless of the party, by identifying and correcting potential areas of concern that could prevent you from realizing your financial and familial objectives is an important step in alleviating at least some of this stress.

However, it is important to choose your advisor wisely and ensure that they have yours and your business’s best interests in mind.

Source: Axial

 

Number of deals at 252 against 253 in the first quarter of last year

Buoyant on the mega Vodafone India-Idea Cellular deal and a strong economic outlook, Indian M&A deals rose 23 per cent to $15.8 billion during the first quarter of the calendar year from the year-ago quarter. However, the number of deals stood at 252, almost the same as 253 deals during the same period last year.

The mega deal - Vodafone India and Idea Cellular for more than $11 billion – accounts for early 74 per cent of the total disclosed deal value in the quarter, barring which the total deal value was $4.4 billion. The diversified industrial products sector led the M&A activity in terms of volume, accounting for 31 deals ($533.4 million), according to an EY report.

“The deal environment looks conducive on the back of a strong economic outlook, and healthy capital markets, accompanied by the Indian Government’s increasing focus on improving infrastructure and expanding digital reach across the country. Though global buyers are expected to be selective, owing to ongoing global geopolitical issues, their interest in Indian businesses will remain alive as they look for growth opportunities outside the US and Europe,” Amit Khandelwal, Partner and National Director, Transaction Advisory Services at EY said.

Outbound investments

“With respect to the outbound investments, cash-rich Indian players will continue looking for opportunistic buys with an aim to seek access to new technology and markets,” he added.

The report, EY’s Transactions Quarterly, also said that the majority of these acquisitions were either domestic or inbound in nature with acquisition targets in the power and electrical equipment and packaging segments. These acquisitions were largely aimed at expanding market share and enhancing product lines.

On the other side, the telecommunications sector dominated in terms of deal value, owing to the announced Vodafone-Idea deal.

In the quarter, domestic activity remained the key contributor to M&A activity in India, accounting for 87 per cent and 67 per cent of the total disclosed deal value and volume, respectively. Domestic deal value increased to $13.8 billion from $5.2 billion recorded in the year-ago quarter, largely on Vodafone-Idea merger.

Barring it, the domestic deal value stood at $2.2 billion. Other sectors that witnessed consolidation include diversified industrial products, technology and retail and consumer products. With expansion to acquire scale becoming a critical element of Indian corporates’ strategy agenda, consolidation deals are likely to gain further prominence across sectors.

Cross-border M&A

Cross-border M&A activity slowed during the quarter, both in deal value and volume terms. While, the deal value declined to $2 billion from $7.7 billion in 1Q16, deal volume weakened to 83 deals from 104 deals.

Within the cross-border market, inbound activity moderated. Deal value decreased by 51 per cent to $539.8 million in 1Q17 and deal volume reduced to 42 inbound deals from 51 deals. The diversified industrial products sector dominated on the inbound front with 10 deals having a cumulative value of $224.3 million.

The outbound activity also recorded a decline. While the first quarter registered 41 outbound deals with a disclosed deal value of $1.4 billion, the year ago quarter had clocked 53 deals totaling $6.6 billion. The technology sector sustained its leadership in terms of deal volume, recording 11 outbound deals.

In terms of value, the automotive sector took the lead owing to the largest outbound deal of the quarter — €571 million acquisition of 93.75 per cent stake in Finland-based PKC Group Oyj by Indian auto parts maker Motherson Sumi Systems. Strong bilateral relationship with the US in terms of M&A continued this quarter as well.

The US was the most preferred cross-border partner to India with 28 deals (12 inbound and 16 outbound) with a total disclosed value of $449.9 million.

Source: The Hindu BusinessLine (by Rajesh Kurup) - Link: http://www.thehindubusinessline.com/economy/indian-ma-deals-surge-23-to-158-bn-in-q1/article9710739.ece

Alibaba's Jack Ma is now China's Richest Man, Surpasses Wanda's Wang Jianlin: ForbesAlibaba's Jack Ma has surpassed Wanda Group Chairman Wang

Jianlin as the richest man in China, according to estimates by Forbes.

The chairman of China's e-commerce giant was worth $30.9 billion compared with Wang's $30.7 billion as of Friday (May 12). So far, Ma's fortune has gained from an over one-third increase in Alibaba's share price. To illustrate, Alibaba's trading fell to just below $70 in 2016, but its stock closed at $120.34 in New York last Friday.

Alibaba also holds the record as the biggest public stock offering in the world for its IPO in 2014 in New York. Its stock gain also benefitted Japanese firm Softbank Group and Yahoo, which hold a 32 per cent and 15 per cent stake respectively, in the company.

China's list of wealth rankings has been topped by either Ma or Wang these past few years. In fact, the real estate tycoon Wang and his son Wang Sicong recently topped the 2017 New Fortune 500 rich list, published last May 9 by New Fortune magazine. Although they remained on top and recorded a personal wealth of $25.99 billion, their fortune slipped by 9.5 per cent from $29 billion in 2016. Ma, on the other hand, increased by 24.3 per cent.

Forbes noted that the list could potentially see another shakeup, after a run-up in the stock price of Tencent Holdings, owner of WeChat messaging platform. As of Friday, Ma Huateng, Tencent's CEO, was worth $29.7billion.

Meanwhile, the development of the capital market in China has boosted the A-share market to become a main rich maker in the mainland. In 2003, nearly half of the rich people's listed companies were listed on overseas stock exchanges, but that figure dropped to nearly half (27 per cent) in 2012. Source: CHINA TOPIX – Photo: Jack Ma, Executive Chairman of Alibaba Group speaks on stage at the closing session of the Clinton Global Initiative 2015 in New York City (Getty Images).

Singtel has enhanced its digital marketing capabilities with the acquisition of marketing technology platform provider Turn. Singtel's Amobee digital marketing arm has acquired Turn to provide the ability to offer an end-to-end advertising and data management platform for marketing companies worldwide. Source: TelecomAsia

Orion, a global IT business solutions firm, today announced their most recent acquisition of New York based Structured Network Solutions, Inc.. This latest transaction is the second acquisition in two weeks and reflects Orion's efforts to identify strategic acquisitions that fit well towards building the future of the company. PRN

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