The M&A Source Podcast

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In this episode, Shelia Darby, Managing Director of Bizworth, discusses the importance of accurate business valuations in M&A transactions, the different valuation methodologies, challenges in valuations, best practices and ethical considerations, and the value of partnering with valuation professionals.

• Aswath Damodaran resources on valuation and corporate finance: https://pages.stern.nyu.edu/~adamodar/
• Business Reference Guide: https://businessreferenceguide.com/
• Vertical IQ: https://verticaliq.com/
• Deal Stats: https://www.bvresources.com/products/dealstats
• Biz Comps: https://bizcomps.com/
• ValueSource: https://www.valusource.com/
• Peer Comps: https://peercomps.gvalue.com/
• Pitchbook: https://pitchbook.com/
• Brokerage Simplification Act Info: https://masource.org/resources/legal-updates/

This episode features an interview with Shelia Darby, Managing Director of Bizworth, who has over 25 years of experience in business valuations. The discussion covers the following key sections:

Introduction and Background

Shelia shares her background, starting in the corporate world at companies like Enron and transitioning to the middle market and Main Street valuations. She discusses her certifications and the importance of continuous learning.

Importance of Accurate Business Valuations

Shelia explains why accurate business valuations are critical for both buyers and sellers in M&A transactions, helping to close more deals and avoid leaving money on the table.

Valuation Methodologies

The three main valuation approaches are discussed: asset approach, market approach, and income approach. Shelia dives into the details of each approach, common methods used, and when to apply them.

Special Circumstances and Challenges

Various special circumstances and challenges in business valuations are explored, including non-operating assets, intangible assets, regulatory impacts, distressed businesses, and rapid growth or volatile businesses.

Best Practices and Ethical Considerations

Shelia shares best practices for valuations, emphasizing transparency, honesty, and using reputable sources. She also discusses ethical considerations, drawing from her experience on the Ethics Oversight Board of NACVA.

About Bizworth

Shelia provides information about her company, Bizworth, and the valuation services they offer to support M&A advisors and business brokers.

Throughout the interview, several questions were asked and answered:

Q: How did you get into the business of valuations, and what drew you to it as a career?

A: Shelia started in the corporate world at companies like Enron, working in valuation groups. She transitioned to Main Street and middle market valuations in 2014, finding it more appealing.

Q: Why is an accurate business valuation critical for both the seller and the buyer in the M&A process?

A: Accurate valuations help close more deals, avoid leaving money on the table, and identify gaps early on.

Q: What are the different valuation methodologies, and what should M&A advisors consider when looking at them?

A: The three main approaches are asset, market, and income. Sheila explains each approach, common methods, and when to use them.

Q: What are some common challenges you come across when valuing businesses, particularly in the small and medium enterprise area?

A: Common challenges include non-operating assets, intangible assets, regulatory impacts, distressed businesses, and rapid growth or volatile businesses.

Q: What are your thoughts on best practices and ethical considerations in valuations?

A: Best practices include transparency, honesty, and using reputable sources. Ethical considerations involve operating with integrity, avoiding conflicts of interest, and staying in your lane.

Here are five valuable quotes from the interview:

"If you don't get a proper accurate valuation, you're leaving money on the table. First of all, you're not closing as many deals as you can, right you're not identifying as early on as possible if there's gaps."

• Shelia Darby, on the importance of accurate valuations

"Honesty is the best policy. Transparency is crucial. It doesn't matter if you're an M&A advisor, an attorney supporting an M&A advisor, CPA, or evaluation professional honesty is the best policy transparency.”

• Shelia Darby, on best practices

"Make sure you're not making things up you're not feeling your way through everything it's one thing to have an intuitive gut. We all want to listen to our gut, but back it up with facts."

Shelia Darby, on best practices

"If you're going to spend a lifetime building up your reputation, don't lose it in 5 minutes that's that's the standard there, that you're going to have a long plus, very plus, you know, very you have lots of prosperity in your field if you just abide by those."

• Shelia Darby, on maintaining a good reputation

"It's OK to say you have a valuation professional supporting you. You don't have to be your clients valuation professional and CPA and attorney stay in your lane and be the best conductor to get their business sold."

• Shelia Darby, on the role of an M&A advisor

This interview with Shelia Darby provided valuable insights and lessons on business valuations, including:

• The importance of accurate valuations in closing more deals and avoiding leaving money on the table.
• Understanding the different valuation approaches (asset, market, income) and when to use them.
• Recognizing special circumstances and challenges in valuations, such as non-operating assets, intangible assets, regulatory impacts, distressed businesses, and rapid growth/volatility.
• Best practices for valuations, including transparency, honesty, and using reputable sources.
• Ethical considerations, such as operating with integrity, avoiding conflicts of interest, and staying in your lane as an M&A advisor.
• The value of partnering with valuation professionals and experts when dealing with complex situations.

In summary, this interview highlights the complexity and nuances involved in business valuations, emphasizing the need for M&A advisors to have a solid understanding of valuation principles while also recognizing the importance of collaborating with valuation experts to ensure accurate and defensible valuations.

Visit the show notes at https://podcast.masource.org

Visit M&A Source at https://masource.org

In today's episode of the M&A Source Podcast, we discuss the myriad benefits that M&A Source offers to its members with Russell Cohen, an M&A advisor and board member for M&A Source. Russel is also the chairman for the membership benefits committee.

Russell and David cover a wide range of topics, from exclusive discounts on essential services like insurance and data room solutions to access to valuable tools that are crucial for any successful M&A advisor. Russell shares his personal experiences and success stories, highlighting how these benefits have positively impacted his professional journey.

We also touch on the importance of the M and A Source community in fostering connections and sharing knowledge within the M&A world.

Whether you're an experienced advisor or just starting, this episode is a treasure trove of information on how being a part of M&A Source can elevate your practice in the competitive world of mergers and acquisitions.

Resources Mentioned in the Show:

• Membership Benefits: https://masource.org/membership/benefits/
• Vertical IQ: https://verticaliq.com/ (regularly $100 / mo or $125 per report - Free to members)
• Private Equity Info: https://privateequityinfo.com/
• VaultRooms (data rooms): https://vaultrooms.com/ (free with membership)
• DealRelations (CRM): https://dealrelations.com/ (member discount)
• Digital Wow (Web, Social Media, etc): https://www.thedigitalwow.com/masource
• ValueCraftz: http://www.valuecraftz.com/ (member discount)
• ClientsIO (email lead generation): https://clientsio.com/ (two months free)
• Sourcescrub (private company research): https://www.sourcescrub.com/ (50% off)

Welcome to our latest episode of the M&A Source Podcast. In this episode, we dive deep into the world of Purchase Agreements with our esteemed guest, Matt Bowles, an attorney at Hogan Lovells. Here's what you'll discover in this insightful discussion:

1. Introduction to Purchase Agreements: We start by exploring why purchase agreements are more than just documents. They are crucial tools in M&A transactions, impacting everything from payment to maintaining tranquility in post-deal activities.
2. Expert Insight: Matt Bowles brings his extensive experience with purchase agreements to the table, offering in-depth knowledge for both beginners and veterans in the M&A space.
3. Anatomy of a Purchase Agreement: Delve into the structure of purchase agreements. We discuss key components such as economic terms, representations, warranties, covenants, and closing conditions.
4. Real-World Applications: Listen to real-world scenarios from Matt's experience, demonstrating the practical application and importance of purchase agreements in various M&A situations.
5. Role of Intermediaries and Attorneys: Understand the crucial roles that intermediaries and attorneys play in the M&A process, particularly in relation to purchase agreements.
6. M&A Stories: Matt shares stories from his career, illustrating both successful and challenging M&A deals, and how purchase agreements played a role in these.
7. Educational Focus: Whether you're new to M&A or a seasoned professional, this episode provides valuable insights into the complex world of purchase agreements.
8. Final Takeaways: We wrap up with key learnings and advice for M&A professionals, emphasizing the importance of understanding and effectively utilizing purchase agreements.

Join us in this enlightening conversation and enhance your understanding of the critical role of purchase agreements in M&A transactions. Whether you're a business owner, intermediary, or legal professional, this episode offers valuable insights for all.

Additional Resources:

• Matt Bowles' LinkedIn Profile
• Hogan Lovells Website
• M&A Source Website for Further Learning and Networking Opportunities

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• Visit our Website: https://masource.org
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• Subscribe to our podcast for more insightful episodes

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In this episode of the M&A Source Podcast, host Dave Dejewski is joined by Ryan Hurst, an expert in financial consulting, to discuss the complexities and significance of working capital in mergers and acquisitions.

Key Highlights:

Ryan Hurst's Background: Ryan shares his journey from growing up in a family-owned business to his current role in financial consulting, focusing on helping business owners broaden their perspectives on their companies' potential.

Understanding Working Capital: The episode delves into the multifaceted nature of working capital in M&A transactions. Ryan explains the varying interpretations across different sectors like accounting, valuation, and transaction advisory.

Real-World Scenarios: Ryan provides three compelling case studies, each highlighting different aspects and challenges of working capital in M&A:

• A Complex Transaction: A $60-70 million deal with inventory and project completion issues.
• A Typical Scenario: A $30-40 million consumer products deal illustrating common working capital challenges.
•   An Ideal Transaction: A smooth $50-60 million construction-oriented company sale, demonstrating the benefits of thorough preparation and clear communication.

Advice for M&A Intermediaries: The importance of early preparation, understanding working capital, building trust, and staying informed about industry trends is emphasized.

Connecting with Ryan Hurst: Listeners interested in Ryan’s expertise can reach him through RKL’s website, LinkedIn, or his email. See his bio and contact info here.

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*This podcast is brought to you by M&A Source, a nonprofit organization dedicated to the professional development of mergers and acquisitions intermediaries. For more information, visit [M&A Source](www.masource.org).*

Scott Mashuda, a founding Partner of River’s Edge Alliance Group and M&A Source’s Chairman-elect, discusses his background and what he’s excited about for M&A Source in 2023.

Rich Jones (Zabel Companies) and Bob McCormack (Murphy McCormack Capital Advisors) Discuss Building Trust between Entrepreneurs and Equity Partners

Lamar Stanley of Lead Capital Partners chats with Joel Redmond and Kalimah White of Key Private Bank about techniques that they use in their business advisory practice to help business owners reduce tax exposure in transactions.