Early orchestration of a strategy for your business’ brand will create additional value at the time your business is sold. A brand represents the face of the business; a unique and recognizable design, sign, symbol, or slogan employed to create an image that identifies a product and differentiates it from its competitors. Aside from generating increased revenues and profits, strong brand recognition and reputation may clearly drive higher multipliers of cash flow for the potential business value for these reasons:

  • Higher customer retention; repeat business; effects reliability of future sales and sustainability of existing customers
  • Competitive edge in the market; identifies your product/services, differentiates it from the competition
  • Higher barrier for competition; customer recognition of credibility, quality/satisfaction with the brand; possible protected intellectual property
  • Owner is less essential to business success; company’s reputation stands for certain benefits/value
  • Attraction/retention of employees and management; strong successor management in place
  • Loyal customers who insist on product by brand name; prepared to pay a premium for it
By investing in your business’ brand recognition and reputation, your business will be worth more. An experienced M&A Team can assist you with identifying and accentuating your business’ brand and value.


In addition to a knowledgeable and ambitious management team, developing innovative operating systems and procedures enhance the value of a business. Effective operating systems and procedures must be reliable, updated and maintained regularly, documented systematically, administered consistently, and adequate for growth of the business. Operating systems, or formalized business processes and procedures, are utilized most often to improve the sustainability of a business’ cash flows; therefore, a focus on rapid growth and value maximization requires a business owner to integrate sophisticated operating systems and procedures across multiple business functions. These systems may include:

  • Enterprise Resource Planning (ERP) – streamlines back-office; accounting and financial applications, supply chain management, distribution, product/service planning and pricing
  • Customer Relationship Management (CRM) – manages/analyzes customer interactions and data; marketing, sales, service
  • Human Capital Management (HCM) – employee recruitment, hiring, scheduling, compensation, benefits, development, performance
  • Enterprise Content Management (ECM) – organizes/stores documents relating to business processes

The most desirable businesses have the capabilities to maintain their profitability after a sale, and implementing standardized systems and procedures validate continued success to prospective buyers. A qualified investment banking team can provide initial direction for enhancing this value driver.


An experienced, motivated and stable management team is the most significant value driver of M&A transactions. Businesses with a strong management team focus on the sustained growth of cash flows and profitability, command higher valuations in the marketplace, and allow for the seamless exit of the owners.

In the eyes of prospective buyers, there is no greater reassurance of continued business success than a talented management team. Therefore, business owners should consider the following while acquiring and developing their team:

  • Clearly defined job description, roles and responsibilities
  • Documented and measurable employee assessments
  • Alignment of employee goals with company goals
  • Non-compete or non-solicitation agreements
  • Performance incentives and stock ownership plans

Even if a business owner doesn’t exit their business for years to come or lacks a clearly defined exit strategy, a deep bench will accelerate growth, increase profits, and allow more time away from the office!


Client concentrations may be the curse of M&A transactions. They cultivate uneasiness with buyers due to the potential loss of revenue, and raise significant concerns with major lending institutions. If a substantial percentage of a business’s revenue is generated by a limited number of clients, buyers tend to have apprehension regarding future cash flows and withdraw from a potential sale. In my experience, it has always been difficult to turn away business in order to balance uneven client concentrations, especially in the start-up and growth phases of a business. However, business owners may prevent a future potential deal killer and value reducer by identifying the issue, knowing the long-term effect and solving the problem over time, including:

  • Focusing on profitability rather than revenue from a large client; the risks taken with high concentrations should be rewarded with greater profitability;
  • Developing strategies to mitigate client concentrations: set goals for reducing the percentages, increase sales to other clients;
  • Considering an acquisition; and
  • Entering new markets, begin diversifying revenue as quickly as possible.
Client concentrations are not an easy problem to solve; however, taking the steps to manage the risks will ensure the rewards outweigh the risks.


Earnouts, although palatable in principle, may be complex in structure, difficult to define, and subject to unintended consequences. Thus, the gut reaction of most investment bankers to the proposed use of earnouts as an instrument to close transactions is unequivocally: “Don’t use them!” This declaration will more than likely be superseded by a full disclosure of the realities of the private capital marketplace. Earnouts are used every day in middle market mergers and acquisitions (M&A) transactions, and under the direction of an experienced M&A Team, properly structured earnouts provide motivated buyers and sellers with a viable solution to otherwise “dead deals.”

An earnout tends to be most impactful when it is used to:

  1. Provide Measurable Incentives – motivate sellers to be growth-focused post-closing; retain key employees; acquire new customers; renew contracts
  2. Align the Needs of Both Parties – reconcile value differences – historical versus projected financial performance
  3. Mitigate Risk – assure future earnings/growth; address uncertainties
Buyers and sellers have to be flexible throughout the negotiation process; relying on their M&A Team for guidance and experience to facilitate the design of an achievable earnout.


The most desired transaction for lower middle market business owners contemplating the sale of their business requires deep consideration of the characteristics, motivations, and aspirations of the businesses’ prospective buyers. Customarily, strategic and financial buyers have the largest appetite for acquisitions in the private capital marketplace, and there are significant differences between the two buyer-types that necessitate further examination. Some of these differences include:

  • Includes private equity groups, holding companies, high net worth individuals;
  • Target single, cash-producing entities; attractive industries; high growth potential;
  • Focus on earnings growth; invest strictly to realize a financial return
  • Includes competitors, customers, suppliers, unrelated companies;
  • Established, operating businesses; possess industry experience/knowledge;
  • Focus on synergies/integration; increase long-term shareholder value;
  • Acquire to increase market share, expand geographically, gain technologies/key employees or diversify revenue streams

Two exits rarely follow the same path; however, it’s critical that the M&A Advisory Team understands your ‘perfect scenario.’ Financial buyer or strategic buyer – the knowledgeable investment bankers at Allston Advisory Group have the expertise and resources to customize a successful transaction process that captures your exit strategy objectives.


Ownership can be a powerful tool in the effort to attract and retain talented people, have employees think and act like owners, create an ownership culture, and build successful succession plans.

Restricted stock gives employees the right to earn shares of stock over some period of time through continued service or the accomplishment of certain goals. Restricted Stock Award (RSA) Plans have many options, and when properly designed, will provide your Company with an equity compensation plan that works. Advantages include:

  • Restricted Stock Award Plans either grant shares at no cost, or provides employees with the right to purchase shares at fair market value or at a discount.
  • RSA shares are subject to vesting requirements; vesting may occur all at once or gradually. The restrictions may be time, performance, and/or transaction based.
  • Restricted shares may be issued at grant; RSA shares remain subject to vesting restrictions; however, the shareholder receives dividends, has voting and other rights before vesting.
  • Employer may loan money to the awardees for purchase of the restricted shares. The RSA Plan gives key employees the ability to own shares.
In the M&A world, Restricted Stock Award Plans assist in the process of maximizing the value of your Company.


Detailed Confidential Information Memorandums (CIMs) require collaboration between Sellers and their Investment Banker(s), and will provide prospective Buyers with enough information to make purchasing decisions. Highly effective CIMs consider the Buyers’ perspective throughout the preparation process; accordingly, CIMs must emphasize the value drivers of businesses and all decision-critical content and data. Motivated prospective Buyers expect at a minimum:

  • Comprehensive Financials – the most important information; preferably prepared by an independent CPA; normalized and recast; asset listing
  • Desired Transaction – ownership/key personnel post-transaction intentions; relationship transferability; outline buyer deliverables
  • Define the Core Business – value drivers; various revenue streams; unique processes, technologies, or equipment; niche focus
  • Major Contracts or Customers – diversified or concentrated; percentage of revenue; client loyalty
  • Marketplace & Growth Opportunities – strengths/ weaknesses; CAPEX requirements; growth vision

The mergers and acquisitions sale processes with the fewest “surprises” depend on meticulous planning and preparation. Therefore, it is imperative that Sellers and their M&A Team understand what prospective Buyers look for in businesses in order to construct the most impactful Confidential Information Memorandum.


Most business valuations calculate the value of a private company using fair market value, and this value is rarely suitable for making investment and financing decisions. Fair market value, although compliance-oriented and theory-based, fails to consider a business owner’s objectives or reasons for a transaction. The type of transaction will determine the owner’s exit channel, and the exit channel will identify the buyer or investor. Therefore, private company value is relative to the exit channel and the buyer or investor type, and may encompass numerous correct values at the same point in time! Each exit channel has a different value, and these values may include:

  • Synergistic value – value to strategic buyer
  • Financial value – value to investor (minority, management)
  • Collateral value – value to bank from repossession
  • Incremental business value – value added from an investment
  • Fair market value – value to IRS or Courts
  • Others – Insurable, Public, Fair Value
With cash flows and risk expectations (ROI) differing in each exit channel and with each buyer, business owners should consider working closely with an M&A Advisor to identify buyers with the highest cash flows and lowest risk expectations.


Since a company owner never knows for sure what exit strategy may be successful, they should always consider decisions based on maximizing company value no matter what strategy is ultimately followed. Company owners should focus on the qualitative factors that drive quantitative results that align and strengthen the organization, improve profitability, enhance access to capital, reduce overall risk and maximize the value of the company.

We suggest identifying as many company specific risk areas as possible, assess them objectively, and link the assessments to the calculation of company value; the process maximizes the company value through risk reduction. The assessment framework of every company is composed of eight categories with many possible subcategories:

  • Planning: Target markets, product development, competition
  • Leadership: Corporate culture, leadership communication
  • Sales: Team, strategy, operations, projections, customer base
  • Marketing: Market branding, financial resources, sales strategy
  • Legal: Intellectual property, litigation, licenses, filings
  • People: Incentive programs, ability to scale, organizational structure
  • Operations: Supply chain, quality assurance, operating efficiency
  • Finance: Balance sheet, financial sustainability, internal controls
The primary benefit of the process is maximizing the value of the company; whether the company is sold, or not, depends upon the goals of the business owner.