Frequently Asked Questions

Rollover equity involves reinvesting a portion of the proceeds from the sale of your business into the acquiring company's fund. Many private equity groups prefer that sellers reinvest at least 20% of their proceeds into the company post-acquisition. Typically, the buyer purchases 100% of your company and then requires a portion of the sale proceeds to be reinvested into their primary fund, often classified as Class A shares.

"Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)" is a measure of cash flow calculated by subtracting expenses (excluding tax, interest, depreciation, and amortization) from revenue. EBITDA provides insight into a company's cash flow and is often similar to its net income.

If your EBITDA is $500,000 and the multiple for your company is 4x, you would receive $2 million from the sale of your business. Multiples typically range from 4x to 12x, varying based on industry, gross revenue size, and the quality of EBITDA.

Typically, the sales process can last around 6 weeks, though with certain buyers, it may extend to 6 months. Therefore, thoroughly vetting the buyer before accepting an offer is crucial.

Quality of Earnings (QoE), conducted by an independent accounting firm, involves a thorough examination of a company's financial and operational data, with a focus on Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). This assessment typically occurs early in the sales process and is often considered a critical step.

A letter of intent (LOI) is a formal business document that expresses a party's intention to pursue a specific action. Typically presented in a business letter format, it outlines a preliminary commitment, often non-binding, between parties to engage in business. In the context of acquiring a business, an LOI serves as an initial offer, detailing its terms and conditions.

In finance, TTM stands for "trailing twelve months," representing a company's performance figures over the most recent twelve-month period. When referencing TTM or LTM (last twelve months), it typically indicates a request for the profit and loss data spanning the past year.

Multiple on Invested Capital (MOIC) is a key metric that evaluates the value or performance of an investment compared to its initial cost, commonly employed in private markets. It holds significant importance during fund due diligence processes. Typically, industries aim for a 3x MOIC for rollover investments, contingent on the investment's duration.

Adam Coffey authored two highly informative books: "The Private Equity Playbook" and "The Exit Strategy Playbook," which provide invaluable insights into navigating the complexities of private equity and business sale processes. For a broader perspective on M&A, "What It Takes" by Stephen Schwarzman, CEO of Blackstone, offers extensive knowledge from one of the most prominent specialists in the field.

A teaser document is a preliminary document sent to major investors or buyers to gauge their interest in an investment opportunity. Often, the teaser does not disclose the name of the company considering the offering.

For companies engaged in a sell-side process to sell their business, a Confidential Information Memorandum (CIM) is a comprehensive marketing document, usually spanning 50 to 150 pages. It offers potential buyers a detailed initial impression of the business before any in-person meetings with the selling company occur.

An Opinion of Value is an assessment by a third party that estimates the worth of a business. Our business experts will employ a variety of valuation methods to determine the current market value of your business comprehensively.

Mergers and Acquisitions.  

Internal Rate of Return (IRR) measures the performance of a private equity fund by considering the size and timing of its cash flows (including capital calls and distributions) and its net asset value at the calculation point.

An indication of interest (IOI) is a concise letter or notice expressing a buyer's interest in acquiring a security being offered for sale, or a company's interest in acquiring another company. In the context of investments, an IOI is submitted before an IPO, while in finance, it precedes the formal letter of intent (LOI).