Keystone Marches into 2025 in Growth Mode
We are thrilled to announce that Derek Branch and Darryl Heller have joined Keystone Business Advisors bringing with them a wealth of experience and expertise that will greatly benefit our clients.
Derek Branch, M&A Advisor
Derek has over 20 years of experience in accounting, finance and business operations, working with small to mid-sized businesses across industries such as marketing/advertising, consumer packaged goods, wholesale distribution. and restaurant/hospitality.
Before transitioning into his role as an M&A Advisor, Derek served as a CFO, where he conducted due diligence on potential target companies for strategic acquisition. His keen ability to identify risks and opportunities during the due diligence process was instrumental in driving growth and value creation.
Derek’s deep understanding of financial statements and business operations allows him to uncover the true value proposition drivers of any business, providing his clients with strategic insights and guidance.
Darryl Heller, M&A Advisor
Darryl brings over three decades of leadership experience in the electronics and manufacturing industries, having held senior management roles in companies ranging from start-ups to large publicly traded corporations.
Most recently, Darryl served as Vice President of Operations & Engineering at a local custom architectural design manufacturer. In this role, he worked closely with the company’s owner and private equity partners to enhance performance and profitability.
With an MBA in Technology from San Jose State University and a Bachelor of Science in Chemical Engineering from the University of California, Santa Barbara, Darryl combines deep operational expertise with a broad industry background to provide clients with the confidence and support needed for successful transaction closings.
Please join us in welcoming Derek and Darryl to the Keystone team. We are confident their unique skill sets and extensive experience will play a vital role in achieving our mission of delivering exceptional results for our clients. You can reach them by clicking here
Read MoreHow does an election year impact M&A activity?
Election years often bring a unique set of uncertainties that can have a notable impact on mergers and acquisitions (M&A) activity. Here’s how election dynamics generally influence M&A trends:
- Uncertainty in Policy and Regulation
As elections approach, policy stances on taxation, trade, antitrust regulation, and industry-specific rules become focal points. Companies may hold off on M&A deals if they anticipate significant regulatory changes under a potential new administration. For example, if a candidate promises stricter antitrust enforcement, some businesses may hesitate to pursue mergers that could draw scrutiny. - Valuation Fluctuations Due to Market Volatility
Elections can cause stock market volatility as investors react to shifting political forecasts. This market fluctuation impacts company valuations, which can affect M&A. If prices become too uncertain or inflated, buyers might delay acquisitions, or sellers may decide to wait until valuations stabilize post-election. - Changes in Access to Capital
Election uncertainty can make lenders cautious, which impacts financing options for M&A. This is especially true in deals that rely heavily on borrowed capital, such as leveraged buyouts. If lenders anticipate economic instability, they may tighten credit standards, leading to higher costs for financing M&A transactions. - Industry-Specific Impacts
Some industries are more affected by potential election outcomes than others. Sectors like healthcare, energy, technology, and defense are especially sensitive to shifts in policy. For instance, potential changes in healthcare policy could delay deals in pharmaceuticals or insurance until there is more clarity on the regulatory outlook. - Cross-Border M&A Caution
Foreign companies may hold back on acquiring U.S. companies during election years due to concerns about trade policies, tariffs, and foreign investment restrictions that could change post-election. Similarly, U.S. firms may hesitate to pursue international acquisitions if there is uncertainty about foreign policy directions. - Opportunistic Buying
Some companies view election-related volatility as an opportunity, targeting undervalued assets or businesses with strategic advantages. Private equity in particular may become more active if they see an opportunity to acquire assets at lower valuations during market fluctuations.
Ultimately, M&A activity during an election year tends to reflect a balance between strategic goals and the level of risk companies are willing to take. Many deals do proceed, but firms are often more conservative in the timing, pricing, and structuring of transactions to manage election-related uncertainty. We’re happy to talk through this in more detail, contact us here
Read More
Llamas Plastics, Inc. Acquired by Lee Aerospace
Llamas Plastics, Inc., a world-class manufacturer of aircraft transparencies, has been acquired by Lee Aerospace in a transaction facilitated by Keystone Business Advisors. This acquisition will provide Lee Aerospace with direct entrance into the military aerospace transparency markets, diversify its product line, and increase its capacity.
“When evaluating Llamas Plastics, we were very impressed that they had a family-oriented culture like Lee Aerospace,” said Jim Lee, President of Lee Aerospace. We both value our employees, and many have been with us for decades. In addition, by sharing technology and best practices, we will propel both companies forward by providing additional advanced offerings to the aerospace industry; be it general aviation, commercial, or military.”
Keystone Business Advisors served as the exclusive M&A advisor to Llamas Plastics, Inc. for this transaction. “We worked closely with the team at Llamas Plastics to understand their business and goals and used our expertise and network to find the perfect buyer for them,” said Dave Richards, Managing Partner of Keystone Business Advisors.
“Llamas Plastics, Inc. is ready to move to the next level and Lee Aerospace will take it there,” said Rick Llamas, President of Llamas Plastics, Inc. “We were impressed by their people, technical expertise and plans for the future. I’m confident with Lee’s leadership, Llamas Plastics will continue to achieve great things.”
Keystone Business Advisors has completed over 250 transactions and has considerable experience in most industries including manufacturing, wholesale/distribution, service, e-commerce, software, IT, logistics, professional services and healthcare. View recent transactions here.
Read MoreStay Bonuses Will Add Value When Selling A Business
M&A Advisor Tip
Beware the Benchmark Valuation
You can practice some back of the napkin math to value a company, but it’s not always reliable. A company with $3 million in EBITDA, may, as a general rule of thumb, sell at a 4x to 6x multiple. In other words, it might sell for $12 million to $18 million in an average market.
Pulling a multiple on EBITDA is the most simplistic form of doing a valuation. But it doesn’t tell the whole story. It doesn’t account for standout business qualities that drive up value, and it doesn’t account for current market dynamics.
If you own a business, it’s a good idea to get an estimate of value every few years. Knowing what your business is worth (and what’s behind that value), can help inform your growth plans. Alternately, you may also find the business is worth more than you expected – and accelerate your exit plans.
Owners Who Engaged in No Formal Planning Prior to Engagement to Sell
Presented by IBBA & M&A Source
M&A Feature Article
Stay Bonuses Add Value When Selling a Business
We’re selling a business in which a management team member holds a minority equity stake. This critical employee stands to get a small windfall in the sale. On top of that, the seller was telling us she meant to give this employee a nice financial gift as a thank you afterwards.
That’s where we pumped the breaks a bit. We’re all for recognizing your key contributors as you exit your business, but let’s talk about structuring those payments as a stay bonus instead of an outright gift.
A stay bonus provides an incentive for an employee to stay with the company during and after a sale. They’re designed to protect the company in times of change.
Recognize that a business transition can create a lot of uncertainty and anxiety for employees. Some managers may wonder if they’ll be let go after a sale. Or, more likely in this talent market, valuable team members may feel the timing is right to pursue new opportunities—rather than put themselves through the uncomfortable process of an ownership change.
Who Gets a Stay Bonus
Typically, we see stay bonuses used in situations like these:
- An employee who must be told. Normally, we advise business owners to keep the sale process strictly confidential. If employees become aware of a pending sale, they may look for other positions rather than risk the uncertainty of a business transition. But sometimes certain team members must be included in the sale process, particularly when the owners are no longer active in day-to-day operations.
- An employee who must do extra work. Sometimes certain employees like your CFO or your HR leader will need to be told the business is for sale. They’ll be heavily involved in gathering due diligence information, which can be a big job on top of their normal duties. Unfortunately, these administrative leaders pitching in extra time are the most likely to be made redundant in a transition. A stay bonus can help ensure they stick around to help the sale go smoothly.
- An employee who’s critical to the business. Stay bonuses become increasingly important in a tight labor market. Turnover in a key position creates substantial risk for a buyer, but a stay bonus can reduce that risk and add value
to the sale process.
How They Work
Stay bonuses can be structured in any number of ways, depending on the employee’s role, compensation, and potential value to a buyer. You need to find a balance between a meaningful incentive and a gift so “life changing” that the employee is likely to walk away as soon as they get it. Between 50% to 100% of an employee’s annual salary is often a good guideline.
Payouts usually happen in two parts – a small payment (between 25% – 50%) when the sale closes and the remainder six months to a year later. Structuring these deals can be a point of negotiation with your buyer. They may be willing to share the cost of an incentive.
Similarly, some transition negotiations will include an employment agreement for key staff members. This establishes that certain severance payments are to be made if an employee is terminated after a sale. This is another way for the business owner to protect their employees and discourage management from seeking new jobs.
Timing
When do you talk to employees about a stay bonus? Telling an employee the business is for sale is always a sensitive issue, and timing will vary based on your individual scenario.
But you can’t wait too long, especially if you believe your sale could be dependent on keeping key talent in place. If you present it to the employee when the deal is still in the early stages, you can avoid last minute pressure to get contracts signed days before the closing date.
Otherwise, you may find your employee has gained an unhealthy amount of leverage. I have actually seen a key employee take a deal hostage, demanding a higher salary and bonus, because they knew the transition hinged on their retention agreement.
Talent Continuity
Buyers will pay a higher price for a business when they can eliminate perceived risks. A proven management team who will maintain key operations and relationships can help a buyer achieve performance targets.
That’s why we consistently advise sellers to develop a strong, empowered management team who can run the business. Buyers may pay a premium if they know they’ll have an experienced team to not only maintain the business but take it to the next level.
How to Sell a Manufacturing Business in California for Maximum Value
When it comes to selling a manufacturing business in California, there are many factors that can influence the value you receive. From market conditions and industry trends, to the quality of your product and your reputation in the industry, there are many factors that will impact the success of your sale. However, with the right strategy, preparation and understanding of the market, you can achieve a maximum value for your manufacturing business when you sell it.
Understanding the Market
The first step in achieving maximum value when selling a manufacturing business in California is to understand the market. This includes conducting research on industry trends, market conditions, and the competition. This research will help you to identify opportunities for growth and areas of weakness in your business, as well as help you to understand the demand for your products. This information will be essential in preparing your business for sale and will help you to make informed decisions about pricing, marketing, and negotiating the sale.
Preparing Your Business for Sale
Once you have a solid understanding of the market, the next step is to prepare your business for sale. This includes evaluating your operations, products, and services to ensure they are of the highest quality, and making any necessary improvements. It also involves cleaning up your financial records, preparing a detailed business plan, and creating an accurate representation of your business’ value. This preparation will help to attract potential buyers and increase the perceived value of your business.
Determining the Value of Your Business
The next step in achieving maximum value when selling a manufacturing business in California is to determine the value of your business. This involves considering factors such as revenue, earnings, and assets, as well as market conditions and industry trends. You may also want to consider hiring a professional appraiser, business broker or M&A advisor to help you determine the true value of your business. This will help to ensure that you receive a fair price for your business and will give you a baseline for negotiating the sale.
Marketing Your Business
Once you have prepared your business for sale and determined its value, the next step is to market your business to potential buyers. This includes creating a professional sales brochure, advertising your business, and reaching out to potential buyers. It is also important to choose the right sales approach for your business, such as listing your business for sale through a broker or selling it yourself through a direct sale. Whichever approach you choose, it is important to focus on marketing your business effectively, to reach as many potential buyers as possible.
Negotiating the Sale
Finally, the last step in achieving maximum value when selling a manufacturing business in California is to negotiate the sale. This involves working with the buyer to determine a mutually agreed-upon price, and to come to terms on the terms and conditions of the sale. It is important to have a solid understanding of the market, the value of your business, and the needs and desires of the buyer, to be able to negotiate the best possible sale. With the right approach and preparation, you can achieve maximum value when selling a manufacturing business in California.
Conclusion
Selling a manufacturing business in California is a complex process that requires careful preparation and understanding of the market. From determining the value of your business, to marketing it effectively and negotiating the sale, there are many factors that will impact the success of your sale. However, with the right strategy and preparation, you can achieve maximum value for your manufacturing business when you sell it. Whether you choose to sell your business through a broker or through a direct sale, it is important to focus on marketing your business effectively, preparing it for sale, and negotiating the best possible deal for yourself.
Read More