Sierra Pacific Partners

?? ??&?? ???????? ???????????? | ???????????????? ??????????????????/1 In the emerging middle market, more than 1 in 3 deals now include rollover equity, according to the Alliance of M&A Advisors' latest market study. With so many transactions involving rolled equity, it's crucial to understand how it’s valued from a financial perspective. Let’s start with the dollar value of that equity ?? Imagine your company is acquired for $50M (cash-free, debt-free), and you're rolling 10%. You might assume you're rolling $5M, right? ?? Not so fast. That $50M represents the enterprise value (EV)—the total value of the business, including both equity and debt. But rollover equity is based on equity value, not enterprise value. ?? If your company has $10M in debt, the equity value is actually $40M ($50M EV - $10M debt). ?? That means your 10% rollover is worth $4M, not $5M. This mirrors an all-cash deal, where debt is paid off before the remaining proceeds go to the owners. ? Next up: How does that $4M translate into your ownership percentage in the post-closing company? Stay tuned!

?? ??&?? ???????? ???????????? | ?????? ?????????? ???????????????????????? ?????????????? ?????????? ?????? ???????????? When buyers and sellers first connect, the conversations are usually light—building rapport, exchanging pleasantries. And that’s exactly how it should be! But eventually, buyers need to dig deeper. So, sellers, what key questions should you be ready to answer early on? ?? ?? Business Origins – When was the business founded? Who started it, and how did the seller come to own it? ?? Ownership Structure – Who owns the business, and how are decisions made? ?? Post-Sale Plans – Will the owners stay on, help transition, or exit entirely? ?? Operations – Who’s running the day-to-day—owners, key managers, or a broader leadership team? ?? Motivations for Selling – What’s driving the decision to sell? ?? Financial Overview – How’s revenue and EBITDA trending? Growth, stability, or contraction? ?? Customer Base – Who are the primary customers? Are relationships short-term, long-term, or recurring? Do any customers make up 10%+ of sales? ?? Products & Revenue Mix – What’s the breakdown of sales across products or service lines? ?? Competitive Landscape – Who are the key competitors? What challenges or opportunities exist? ?? Org Structure – What does the team look like? Any family members involved, and will they stay post-sale? ?? Talent & Retention – How does the business recruit and retain top talent? Any staffing challenges? ?? Facilities & Equipment – Are locations owned or leased? What are the CapEx needs? Could CapEx be a growth barrier? Some buyers take a structured approach, while others weave these questions into an organic conversation—building trust and getting candid insights along the way. ?? What other questions should buyers ask, and sellers be ready to answer? Drop your thoughts in the comments! ??

?? ??&?? ???????? ???????????? | ?????????????????????????? ?????? ???????????????? ???????????? ???????????? Scott recently had a fantastic conversation with the brilliant Corey Kupfer—an elite M&A attorney and experienced dealmaker. In this episode, they explore key M&A topics, including: ?? The complexities of the emerging middle market ?? Building strong relationships with counterparties ?? Understanding buyer motivations & expectations ?? Prioritizing value creation over multiple arbitrage If you're in M&A or considering a deal, this discussion is packed with actionable insights you won’t want to miss! https://lnkd.in/eqYhHyKb #MergersAndAcquisitions #DealMaking #BusinessGrowth #CoreyKupfer #LowerMiddleMarket #ValueCreation

??? Scott recently joined Brian from Coruzant Technologies on ?????? ?????????????? ?????????????????? ??????????????! They touched on a common analogy—M&A advisors as real estate agents, but for businesses rather than buildings. While it's a useful comparison, it oversimplifies the complexities of selling a company: ?? ?? Beyond physical assets, businesses have brand reputation, customer relationships & IP. ?? Sales involve contracts, employees, debts & compliance hurdles. ?? Due diligence is far deeper—financial, operational & legal. ?? Market trends & economic factors play a huge role. ? M&A deals take way longer than real estate closings. The analogy works—but only to a point! Thoughts? ?? #MergersAndAcquisitions #BusinessSales #PrivateEquity https://lnkd.in/gntur4fz

?? ??&?? ???????? ???????????? | ?????????????? ???? ?? ????????????????????? ????????’?? ???????? ?????? ???????? ???? ???????? ?? Strategic buyers—like industry competitors—are often ideal acquirers. They’re typically willing to pay a premium due to potential synergies and have a deeper understanding of the market, reducing perceived risk. Plus, they bring industry expertise, infrastructure, and capital to scale the business post-acquisition. That said, selling to a competitor comes with unique challenges. If you’ve received an unsolicited offer—or are already in talks—keep these key factors in mind: ?? Valuation – Know your worth. A strong M&A advisor helps ensure any offer reflects the true value of your business—not just what’s convenient for the buyer. ?? Negotiations – Deals with competitors require careful handling. Having experienced advisors in your corner isn’t just helpful—it’s essential. ?? Running a Process – Even if you're in talks with one buyer, quietly exploring other options can drive competition and maximize value. Many of our clients at Sierra Pacific Partners come to us after receiving an unsolicited bid. ?? Confidentiality – Protect sensitive data from customer lists to trade secrets with a solid NDA. Involve your M&A attorney early and use phased disclosure to minimize risk. ?? Regulatory Considerations – Even smaller deals can attract scrutiny, especially for horizontal mergers. Be aware of potential antitrust concerns before moving forward. ?? Post-Closing Strategy – Define your role post-sale and plan for integration. Aligning expectations with your team and stakeholders ensures a smoother transition. ?? Selling to a competitor can be highly lucrative, but it requires the right strategy. With the right approach, you can secure the best terms while safeguarding your company’s future. #MergersAndAcquisitions #M&A #BusinessGrowth #ExitStrategy

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?? ??&?? ???????? ???????????? | ?????????????????? ?????????????????? ???? ??&??: ?????? ???????? ???????????? ???????????????? ?????????? In M&A, strategic buyers—whether corporate buyers or PE portfolio companies—value targets more if they can unlock synergies. But what exactly goes into synergies, and how can they drive purchase price? Let’s break it down ?? Non-strategic buyers value a business based on its current benefit stream (e.g., EBITDA). In contrast, strategic buyers factor in not just the baseline benefit stream but also the synergies they can achieve post-closing (EBITDA + synergies). For synergies to translate into value, they need to be measurable with some degree of certainty before the transaction. Synergies typically fall into four categories: 1?? ???????? ?????????????? ?????????????????? ?? Often referred to as "hard" synergies, these are the easiest to quantify. Examples include reducing facility costs, payroll, marketing expenses, and vendor pricing. 2?? ?????????????? ?????????????????????? ?????????????????? ?? These occur when the combined company can achieve higher sales growth than the individual businesses alone. A common example is expanding a target’s products/services through the acquirer’s sales or distribution channels. 3?? ?????????? ???????????? ?????????????????????? ?????????????????? ?? Here, the target benefits from the acquirer's buying power, which leads to lower costs from suppliers and vendors. 4?? ?????????????????? ?????????????????? ?? These are often harder to quantify but include benefits like faster time to market (buy vs. build), eliminating competition, marketing advantages, geographic expansion, and talent acquisition (acquihires). While synergies increase value for the buyer, they’re not always factored into the purchase price, at least not fully. Buyers usually won’t willingly share synergies with sellers, as it’s the buyer’s capabilities that make these synergies possible. ?? Synergies are far from academic. In competitive bidding processes, buyers are often forced to share a portion of the synergies with the seller—or risk losing out to other bidders. That’s why having an M&A advisor who can create competition is essential.

?? M&A Deal Points | Simultaneous vs. Deferred Closings: What's right for your deal? One of the fundamental strategic decisions when structuring a business sale is whether to close when you sign up the deal (a simultaneous sign-and-close) or lock up the deal by signing first and then close later after certain tasks have been completed / conditions satisfied (a deferred closing). So, which makes sense for your deal? Let’s break it down ?? 1?? Simultaneous Sign-and-Close: ?? This is the simpler option—no closing conditions, interim covenants, or termination provisions to worry about. Since the deal closes at signing, either party can walk away before that point. ?? Buyers often prefer this structure, as it doesn't commit them to a transaction. ?? Many sellers like it, too, for the same reason. Yes, the seller is likely still under an LOI-based no-shop, but it’s much simpler to walk away after that exclusivity period expires than it is under a purchase agreement. 2?? Deferred Closing: ?? Under this structure, the parties are bound to complete the deal unless specific "outs" apply, like a failed closing condition. ?? Some closing conditions, such as requiring that the buyer be satisfied with diligence (a diligence out), can give buyers a lot of latitude to walk away, including for pretextual reasons. This can basically make a deferred closing deal look like an option for the buyer and a binding commitment by the seller - an unappealing leverage disparity for most sellers. If a purchase agreement includes a full diligence out, sellers should consider striking it or suggesting a move to a sign-and-close to restore parity. ?? From the seller’s perspective, sign-and-close deals can impose risks. Sharing sensitive information, informing employees, and notifying third parties (e.g., landlords, suppliers, or customers) about a sale - things that often need to happen prior to closing - before the buyer is fully committed can disrupt the business if the deal doesn’t go through. In those cases, a seller may prefer a sign-and-close with limited conditionality. ?? Alternatively, deferred closings are common in situations where regulatory approval, shareholder votes, changes to corporate structure, and/or third-party financing are necessary. ?? Sellers should keep in mind the level of competition for the business. If there are other qualified bidders, being able to back away from a party that turns out to be the wrong choice is valuable and suggests that a sign-and-close may be the way to go. If there aren't, a deferred closing may be ok as there's little in the way of counterparty opportunity cost, but sellers should keep in any attendant loss of leverage that comes from inappropriate conditionality. Whether you opt for a simultaneous or deferred closing is a critical strategic decision. Learn on your M&A and legal advisors to help, as this is a decision that has both process and legal implications.

?? ??&?? ???????? ???????????? | ???????? ?????????????????? Without financing -whether it's equity or debt - deals don’t happen. So, how much cash is your buyer bringing to the table ? ?? Before going to market, it’s crucial for sellers to understand buyers’ financing structure and financial position. Undercapitalized buyers may rely heavily on seller financing and earnouts—not just to reduce risk, but because it’s the only way they can make the deal work. Sellers should identify this early on, before investing significant time and resources or going under LOI with buyers who may not align with typical deal structures. According to GF Data, for deals ranging from $10M to $250M: 1?? Senior Debt made up 30-40% of financing in each deal. Sellers should remember that any payments owed to them through seller financing or other arrangements will be subordinated to senior debt. 2?? Junior/Mezzanine Debt accounted for 7-16% of the capital stack. Again, seller payments are subordinate here too. 3?? Buyer equity injections comprised roughly 34-43% of the capital stack. 4?? Seller Rollover Equity made up 11.5-15% of the capital stack. ?? Key Takeaway: If your buyer can’t bring at least 30% equity to the table, expect deferred or contingent payments. In some cases, it might be smarter to accept a lower offer with more purchase-price certainty.

?? ??&?? ???????? ???????????? | ???????? ???? ???????????????????????????? & ???????????????? ?????????????????? (??????)? In M&A transactions, Representation and Warranty Insurance (RWI) helps protect buyers from losses due to breaches of a seller's representations and warranties outlined in the purchase agreement. It plays a critical role in most deals by addressing concerns from both sides and smoothing out negotiations: ?? RWI covers financial losses related to inaccuracies in financial statements, undisclosed liabilities, compliance issues, and other material misstatements. While most policies are buy-side, costs can be negotiated between parties. ?? RWI often helps reduce lengthy negotiations over reps and warranties and indemnification provisions, while also reducing the need for escrows and holdbacks. It offers buyers better risk protection, while providing sellers peace of mind, especially if they remain involved post-closing or hold rollover equity. ???????? ?????? ???????? ?????? ???????? ????????????????????????????: ?? 1?? Underwriting: $25k - $50k 2?? Premiums: 2% - 4% of the coverage limit 3?? Retention (Deductible): 1% - 3% of transaction value ?? If your transaction isn't large enough for conventional RWI as discussed above, that doesn't mean there isn't a solution for your transaction. Sell-side coverage exists for deals from ≈ $1-15M. If that's your use case, reach out to Patrick Stroth to learn more. ?? ???????????? ???????? : RWI is becoming increasingly common, present in nearly half of middle market transactions. ??