NSS Workshop Series for CEOs and Business Owners

Private Equity Transactions: From Raising Growth Capital to Making an Exit | What you Need to Know.

Date: Tuesday, November 9, 2010   7:30am – 9:30am

Host: Wolf & Company | 99 High Street | Boston, MA 02110

Who Should Attend?

This workshop is exclusively for any President/CEO or Business Owner of a mature company with greater than $10MM in sales. If you are not a candidate of the above criteria, please forward this email to clients and colleagues who are.

Attention: This workshop will be strictly confidential. Names and contact information will not be released.  No solicitations.

Moderator:

Frank Leibly, Partner, Alcon Partners

Panelists:

John Fernsell, CEO, Ibex Outdoor Clothing

Ethan Flaherty, Partner, Pabian & Russell

Laura Kevghas, Partner, Mirus Capital

Discussion Topics:

• What is Private Equity, and how is it relevant to my business?
• What kinds of transaction structures are common?
• What questions should I be prepared to answer?
• What types of companies are good candidates to work with Private Equity firms?
• Should I hire an investment banker or business broker?
• What are the steps towards a capital raise and an eventual exit?
• What does a due diligence process look like?
• Why a private equity transaction instead of a strategic sale?
• What to expect after a transaction is complete?
• Is now a good time for a private equity transaction?
• Horror stories and how to prevent them.

Sponsored by Next Stage Solutions, Inc

Attendance is complimentary, but registration is required

Call today 617-449-7728 or send an email info@nextstagesolutions.com to save a space

By Mark Ott, CFO Consultant, Next Stage Solutions, Inc. (NSS)

Previously I talked about How to Prepare Your Company for Sale and the need to get your historical financial information in order.  While potential buyers are certainly interested in how well your company has performed in the past, they are even more interested in how well you will perform going forward as this is what they are truly buying.  While no forecast is guaranteed, nothing will make a potential buyer more nervous than a rosy forecast that doesn’t hang together.

Prepare a Credible Forecast

Many things go into a sound financial forecast but here are a few key things to focus on:

• Sound historical financials – the past is often times a good indication of the future.  Dramatic changes in trends from the past to the future need to be explainable and believable.
• Detail your assumptions – capture each and every assumption and test them before you employ them in your forecast.  Be able to explain the assumptions and defend them.
• Test the logic built into your model – test it yourself, give it to a trusted colleague to test, give it to your accountant/financial advisor to test.  After you’re satisfied, give it one more test.
• Consider buying or subscribing to a forecasting tool – Many companies rely solely on Excel models.  I can almost guarantee you that there are flaws in any such models.  Using a forecasting tool can eliminate many of these flaws, make it simpler to import actual data, and make it far easier to do what-if scenarios.
• Presentation – Simpler is better. Prepare materials that are easy to read and understand and have supplemental charts, graphs, and more that drill down into more detail should questions come up.

Working on these points will go a long way to developing better forecast, budgets, and long range plans.  One other thing to keep in mind:  make sure you and your financial partner understand the projections thoroughly and can talk about them easily and freely.  No matter how sound they may be, if you’re unsure of yourself in front of potential investors, they will be wary of what you are telling them.

Next time we’ll talk a bit about why it may be helpful to enlist the help of professional people to help you sell (or buy) a company and when it is appropriate to do so.

If you are contemplating to sell your business, make sure to join our next NSS CEO Workshop on this topic on Tuesday, Nov 9, 2010

The workshop was sponsored by NSS and hosted by WilmerHale Venture Group. The NSS CEO Workshop Series is intended for CEOs of revenue producing companies.

The board room was chuck full at the WilmerHale Venture Group office in Waltham. The invited speakers were Joan McArdle of Mass Resource Capital, Jane Braun of Silicon Valley Bank, Robin Lockwood of Flybridge Venture Partners and Christopher Mirabile of RacePoint Capital LLC.  The panel discussion was led by Lee Schindler of WilmerHale.

The focus was around changes in the funding arena and how that has affected each group.  We then opened it up to a dialogue with the CEOs.

Here are some interesting facets of this discussion (loosely defined by NSS):

• Significant changes in activity around Angel Groups, almost a flip side between VC and Angel funding.
• More syndications between Angels and VCs.  Angels are valuation centric.
• Huge migration in the VC world and closing of funds from 800-900 down to 600-700 VC funds
• Because of high multiples among some VCs,  Angels are filling some of that gap
• With uncertainties in economy it has been hard for companies to commit to expansions
• Lots of Re-Capitalizations are happening.  Good timing.  With lower interest rates it is advisable to reconsider a re-cap with the layers of debt and the different view from lenders a company may have.  Mass Capital Resources provides this type of re-cap with a 2-3yr interest only financing.  Mass Capital is currently doing deals in the $1M to $5M range and at an interest rate typically between 10% and 12%.
• Companies are starting to invest again.  All agreed that they are seeing an uptick in business activities.
• There is a huge Global push
• More VCs give smaller checks
• VC’s today are investing in companies that are capital efficient or not at all.
• It’s more difficult to get investment in a product or services business than it is in a software business.
• How do you get a highly leveraged company to an exit in today’s market?  Not really any differently.
• How can an entrepreneur know how much money to raise?  Determine what the life of an investment is and then try to match it with the right investor.  For example, an investment of $500K to $2.5M over the life of the investment probably won’t be appealing to a typical VC.  Putting in $30M over the life of the investment would be more appealing.
• How often do Angels and VC participate in similar events?  There are some forums when a mixture of investors is present.
• How about grants as a way to get some funding?  That may be a good thing (it’s non-dilutive) as long as it fits your business strategy.  Do not lose focus.
• Whether or not an angel or VC invests in the company depends in large part on how good the entrepreneur is.  “Can he/she do it?”
• Best thing to do if you’re raising money – Don’t go around town asking for money.  Instead, spend your time building relationships with investment community, asking questions like “what would you do if you were me?”
• M&A activity is picking up and deal flow is up

Our next CEO Workshop will be Tuesday, November 9 from 7:30am-9:30am and the topic will be around “Merger & Acquisitions”.  Save the date!

Help identify the outstanding women leaders in New England technology

Nominations are open for the 2011 Mass High Tech Women to Watch Awards. Now in its eighth year, the program recognizes accomplished women in the New England technology and innovation sector who are on the rise in their careers and their industries.

These women are the technology stars of tomorrow. They are bright, innovative, inspirational to others and highly motivated. They will shape the future of their industries, and they serve as role models for girls.

The honorees are leaders in developing and commercializing technology, or in leveraging technology to build successful businesses. They also are active as mentors within their organization and leaders in their community (an important factor in the selection process).

Honorees will be recognized at a special event in March.

Nominations close December 7.

MHT encourages you to nominate your peers, partners and co-workers. Complete the online nomination form at http://www.masshightech.com/nominations/womentowatch.html

Join us for the Finance and Funding Options Panel

Date: Tuesday, September 21, 2010 | 7:30am – 9:30am

Place: WilmerHale Venture Group | 1100 Winter St

Bay Colony Corp Center | Center Entrance

4th Floor | Waltham, MA 02451

Exclusively for CEOs of revenue producing companies who are considering raising expansion capital. Come and meet the experts, learn what’s new and explore what type of financing or funding matches your needs. Lots of time for Q&A, so bring your questions.

Panelists:

Jane Braun, Silicon Valley Bank

Christopher Mirabile, Race Point Capital

Joan McArdle, Mass Capital Resource Company

Robin Lockwood, Flybridge Capital Partners

Moderator:

R. Lee Schindler, WilmerHale

Sponsored by Next Stage Solutions, Inc

Attendance is complimentary, but registration is required.  Call today 617-449-7728 or send an email info@nextstagesolutions.com. 

If you are running a company, Intangible Capital (IC) is a must read. This newly published book (2010) by Mary Adams and Michael Oleksak addresses the knowledge economy and its shortcomings in how we value corporations today. It is a provocative book, but an excellent read reflecting a deep understanding of how businesses work and how the intangible is becoming more important than the tangible. How do we account for that?

According to IC, only 30% of corporate assets are tangible, what about the rest? Knowledge assets are simply not measured, leaving 70% on the table. Today we have no good approach in how to account for the changes, not short term nor long term and certainly not in terms of inclusion in Financial Reporting. The book divides the knowledge intangibles into three classes of assets: human, relationship and structural capital and every chapter provides a set of tools.

Working with early stage companies, I often found push back from CEOs not wanting structure for their businesses, as it was viewed as a hindrance to innovation and entrepreneurial thinking. Intrigued by this fact, I wrote an article From Dissonance to Harmony to emphasize the importance of striking a balance between no structure and a hierarchical structure within the innovative community. I agree with the book that today’s business must have fluidity and flexibility and be an engine for ongoing learning, to allow for new thinking and better ways of problem solving from all employees with the ultimate goal to bring best value. Since the Google phenomena and vast technology advances, we have moved further into the knowledge economy. The authors were right on in suggesting leading as a conductor (horizontal) rather than the more traditional as the commander (vertical). I love that vision.

Another intangible asset is collective knowledge, a topic near and dear to me and how I believe Next Stage Solutions (NNS) is evolving. IC points out that markets coupled with technology today move so fast, that no one person can have all the information. This is certainly true in financial services where rules and regulations are changing almost daily. Within NSS, we work as a team of senior level financial experts exchanging ideas and solutions empowering each member to greater knowledge on behalf of our clients. The book explains how shared knowledge multiplies and emphasizes the necessity for value creation.

It continues to describe how it is imperative that a business today examines what its core competency is and looks at outsourcing all other aspects of a business. This leads in their opinion to the relevance of strong external partnerships or ‘relationship capital’ where what is not core to you is core to your partner, collectively creating a powerful engine, what the authors call a Knowledge Factory, displayed creatively with Legos in the book. The importance of networks and technology are significant facets of doing business.

All in all, I loved this book because it describes so well in how to think about a 21^st century business. It validates NSS’ approach in many aspects, but more importantly for me, it gives me tools and metrics in the continued development of our knowledge and innovation strategy. The Knowledge Factory demands that we look at our business holistically and all involved must be engaged. Only then does the collective knowledge fuel our economic engine.

Make sure to get a copy of Intangible Capital today. The flexible business model is here to stay. It includes a mapping of the networks, multiplicity of goals and benefits with bottom up thinking. Congratulations to Mary and Michael with the publication of this innovative and pioneering book, helping businesses look at intangibles in a better way for doing business today and the future. Let’s continue the discussion in how to account for intangibles in business valuations and in our financial reporting.

Title: Intangible Capital, 2010
Authors: Mary Adams and Michael Oleksak
Publisher: Praeger, Santa Barbara, CA
ISBN: 978-0-313-38074-7

Steve Dance is part of the NSS team.  He brings over 30 years of high level financial expertise in Life Sciences and High Tech. Steve has raised over $500MM in capital.

Most Satisfying: In your CFO work you have done in the past, what is the most satisfying feedback you got from the CEO?

That the CEO could always count on me to be calm and focused during a crisis.

Most Inventive: Given that as CFO we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

The sale of one of my previous employers to a major biotechnology company was a complex process, with many potential obstacles arising during the negotiation and due diligence process.  As CFO, I was part of the negotiation team and provided the bulk of the due diligence materials.  I was responsible for resolving the many issues that came up during the sale process.  I believe I was able to establish a strong level of trust with the acquirer’s team and we were able to reach agreement on all the issues, and the sale was successfully concluded.

Most Positive: CFOs have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

I was CFO for a biotech company in California that had 300 employees, over 200 of whom were located in Europe, principally in Lyon, France, following a recent acquisition.  Since I speak French, I was able to establish good relations with the finance group in France, and ultimately the rest of the management team.  I played a key role in ensuring that the needs of the European team were met and consequently was appointed President of European Operations in addition to my CFO duties.  The good relationships that I built with the European organization also enabled me to negotiate successfully with the French labor union to avoid a workers’ strike that would have halted manufacturing.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

The Wall Street Journal – still a great way even in this digital age to keep on top of what is happening in the business world.

Funniest Fact: Tell us something funny about you.

I was raised in Wimbledon, England and when I was a kid I used to go and watch the tennis at Wimbledon every year.  In those days the players used to walk through the crowds on their way to the courts.  One time I got too close to a player and he accidentally trod on my foot.  My foot was sore for days afterwards; the player won his match.

NSS Advisory Board member Steve Honig, partner in the Boston office of Duane Morris, a national law firm, published an interesting article in Lawyers Weekly.  It ponders with the issue around corporate governance and Enterprise Risk Management.

Enjoy the paper on The Emerging Scholarly Brain by Michael J. Kurtz.  He invented the Smithsonian/NASA Astrophysics Data System ADS in 1993 which astronomers use worldwide as their primary bibliographic research tool.  The above paper is looking into the near future of how data may be used and distributed leading to collective thinking – the global brain.

For full disclosure – he is my husband and also Next Stage Solution’s Clerk!

Laurie Taylor joined the NSS team recently.  He has over 20 years of experience and has worked with multiple start-up as Controller. We are delighted to have him on board.

Most Satisfying: In your CONTROLLER work you have done in the past, what is the most satisfying feedback you got from the CEO?

Nineteen out of twenty client companies have offered me a full time position during the engagement.

Most Inventive: Given that as CONTROLLER we understand the importance of providing our clients with more than just accounting and financial reporting, share with us a project that truly made you a value creator.

I began a two person project to determine why a major bank’s ATM conversion had an out of balance total of $19M after the merger of the two banking systems.   The bank booked a 200k reserve to cover this reconciliation exposure.  I requested a Bank Tiger team to assist my current consulting team and at the end of the project we had completely reconciled the account and were only unable to account for $9k in bank funds.  We also discovered a major systems glitch that was the result of the systems merger and trained the banking staff to recognize the problem and how to correct the system if it occurred again.

Most Positive: CONTROLLER’s have different skill set, yet often we are viewed as one of the same.  Tell us a story where your actions made a powerful positive change and why.

I was assigned a project to take over for a Director of Finance at a specialized moving van company.  I first determined that there was a massive amount of misspending going on and no one was managing the AR accounts.  In 6 weeks we were able to make enough corrections that company was stable enough for sale to a much better funded and staffed regional carrier.  The sale of this business unit saved 250 staff member’s jobs as a result of the merger instead of a company closure due to prior management neglect.

Best Business Book: What should every CEO be reading going forward in this tepid economy?

The Why of Work: How Great Leaders Build Abundant Organizations That Win by
David Ulrich and Wendy Ulrich

Funniest Fact: Tell us something funny about you.

I am crazy about WWII aircraft that have massively supercharged engines that “go fast, stay low, and turn left!” also known as the National Championship Air Races held each fall in Reno, NV.  The only rules are that these planes must have a prop and straight wings.