WEST ORANGE, NJ - Panelists from private equity, accounting, law and entrepreneurship addressed how to best prepare for a liquidity event at the monthly meeting of The Association for Corporate Growth (ACG) of New Jersey. A liquidity event is the purchase or sale of a company or an initial public offering (IPO). Panelists included Tom D’Ovidio, Partner, Private Equity, ShoreView Industries; George Hansen, Managing Director, Investment Banking, Dominick & Dominick LLC; Christopher Keefe, Partner, Nixon Peabody; and David Nowicki, Former Chairman of Bio Clinica, Inc. Moderating the panel was Jeremy Swan, Principal, CohnReznick, LLP.
Swan said that given that there is a dearth of really attractive quality assets currently available in the marketplace, transactions are very competitive for the quality assets that do exist and buyers are very aggressive. He said that this creates an attractive seller’s market. As a result, a discussion regarding how to best prepare for a liquidity event is timely.
Keefe said that it is critical that businesses focus on executing in the business as they consider a potential liquidity transaction. He said companies should have resources inside to get the company organized for liquidity. “Companies that invest in making sure the corporate house is in order…helps you show better to the bidder and the marketplace,” he added. Meanwhile, he said that externally, the company should retain a good accounting firm and a law firm.
The panelists were asked how to handle an unsolicited bid. Hansen said that the company that receives such a bid must really size it up. He encouraged such a company to listen to what is offered and then sit down with advisors. He noted that in most cases, the company that offers the unsolicited bid is not the best buyer and that the first offer is never the best offer. He said companies that receive an unsolicited bid should bring in multiple parties to maximize value.
Nowicki said that low ball offers are discounted and the credibility of the offering company suffers. “Once the buyer’s offer is seen as not credible, everything they say is seen as not credible,” he stated.
Regarding valuation, D’Ovidio said that valuation to secondary to strategy of the potential partnership, “who we are partnering with is most important.” As to when is the right time to sell, he said there is no one answer. He encouraged building the best business and suggested that the exit will work itself out.
Hansen said that the buyer wants to see financials, growth, high margins, and will typically look back two or three years. Buyers want certainty, minimal risk and audited financials. He said companies should clean up litigation issues and employee issues prior to considering a liquidity event. D’Ovidio added that no company is perfect and there is always risk in business. He said that key is communication and that there be no surprises since surprises can derail a deal.
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