The best time for you to sell, merge or recapitalize your company is when business is good, profits are rising, a solid management organization is in place and your company’s future prospects are bright and exciting. In short, the best time to sell is when you have absolutely no need to do so.

You will benefit through increased liquidity and the ability to diversify your portfolio, plan your estate, save on taxes, direct the transition of your company’s ownership and spend more time on personal interests and non-business activities. Your employees will benefit through greater opportunities for advancement and enhanced incentive, stock option, pension and profit sharing plans and the elimination of the risk associated with the unexpected death or disability of the principal owner. Your company will benefit from the availability of institutional capital necessary to facilitate rapid growth, the ability to market the acquirer’s product though its distribution channels and the ability of the company to market its products through the acquirer’s distribution channels.

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Today’s low foreign exchange value of the dollar, America's continuing investment allure as the world’s largest, most stable consumer and business marketplace and the reality that to be truly globally competitive, non-U.S. based operating companies must have a meaningful presence in the U.S. has attracted leading foreign acquirers to the U.S. merger and acquisition marketplace. In addition, however, today leading foreign operating companies are seeking to capitalize on what looks to be an attractive arbitrage opportunity: invest inexpensive dollars and purchase U.S. operating assets today, and get a boost to profits when a stronger dollar is converted into local currencies in the future. As a result, industry observers expect continued strong merger and acquisition activity involving foreign companies in 2007.

The terms "sale," "merger" and "acquisition" are often used interchangeably to describe a variety of different transactions through which a business is sold. Assuming that the business being sold is a corporation, two basic transactions can occur: a purchase and sale of assets or a purchase and sale of stock.

In a purchase and sale of assets, a corporation sells substantially all of its assets to an acquirer without transferring ownership of the actual corporation. An asset sale requires approval of the corporation's shareholders, and is typically followed by a dissolution of the corporation and a distribution of the remaining assets, including the proceeds of the asset sale, directly to the shareholders.

A purchase of stock involves the acquisition of a corporation's stock directly from its shareholders. In stock transactions, ownership of the corporation, not just its assets, is transferred to the acquirer. The acquiring corporation can either maintain the acquired corporation as a wholly-owned subsidiary, or it can effect a merger or consolidation. In the case of a merger, the former corporation would cease to exist, and the latter's corporate existence would continue as the surviving entity. In the case of a consolidation, the two individual corporations would cease to exist and a new consolidated corporation would emerge. In stock transactions the surviving or consolidated corporation takes over all of the assets and assumes all of the liabilities of the former individual corporations.

The form of an acquisition, whether it is a purchase and sale of assets or purchase and sale of stock, is frequently dictated by tax, strategic and liability considerations.

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A recapitalization is a type of transaction that results in the reallocation of value between a company’s debt and equity. A recapitalization can be particularly attractive to an owner who does not wish to sell his business, but who would like to realize the many benefits a successful sale or merger transaction can provide. How? By enabling the owner to receive the vast majority of the value of his business in cash, while at the same time maintaining a significant, in some cases controlling, ownership interest in the recapitalized company going forward.

Recapitalization transactions are typically undertaken with a financial acquirer that contributes equity and debt, or contributes equity and arranges for a lender to provide debt to the recapitalized company. Recapitalization transactions can also be structured so as to divide a company’s equity and debt into two or more classes, with provisions of each class designed to serve the objective of a particular owner or group of owners of such class.

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There are also many disadvantages to ESOPs that must be considered, and after reviewing the structure, many owners have concluded hat the disadvantages outweigh the advantages. The foremost disadvantage concerns the valuation at which the ESOP will purchase the shares from the owner. Valuations of businesses for the purposes of an ESOP tend to be extremely low; substantially lower than the value that could be obtained from a motivated third party financial or strategic acquirer. ESOP transactions also present business owners with a variety of ongoing and both costly and burdensome federal and state legal and regulatory requirements. These regulatory burdens are even more acute if an owner decides to become the ESOP trustee. While serving as trustee affords the owner an opportunity to influence the direction of the company, it also places upon him direct fiduciary responsibilities, which may substantially limit his flexibility to transact in the future.

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If more than cash to continue growth is required, the public markets may not be the best solution. For example, a public sale raises money for the corporation but is unlikely to provide an owner with significant liquidity. There are ongoing SEC reporting requirements with which to comply. The new stock is not immediately saleable, and is tied to the public perception of how the company is doing and will do in the future. Your wealth is still subject to unpredictable and uncontrollable fluctuations. Proper estate planning cannot be completed and you do not have the benefit and comfort of cash in the bank.

A private sale provides instant liquidity for owners looking to cash out completely or reduce business and personal risk by diversifying assets. A sale or merger with the right organization will also provide business synergies that a public offering will not. But a private sale of your business requires just as much effort and planning as a public offering does.

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First, we will help you determine if the timing is right for your company and you. If it is, we will commit our professional staff, our capital and our resources to your transaction. We will study your industry and prepare a comprehensive report on your business. We will identify and contact the best acquirers for your company worldwide. We will negotiate on your behalf. We will advise you every step of the way. We will provide you with the expert, professional, effective representation you need to confidently engage in a transaction, knowing that you are doing so on equal footing with even the largest, most sophisticated potential acquirers. Click here to learn more about Etkin & Company’s approach.

Etkin & Company only represents the sellers of successful, privately held businesses; never acquirers. We focus exclusively on the many issues that affect you as a seller and serve as your uncompromised advocate, advising you each and every step of the way. Our commitment is to provide you with the expertise we have gained through 20 years of initiating and completing successful merger transactions for owners of outstanding privately held businesses. You can learn more about Etkin & Company, review our research report, determine the true earnings power of your business and calculate a preliminary value for your company in our secure interactive Business Valuation and Personal Wealth Workshop. If you prefer, feel free to contact Bill Etkin directly on his direct line (212) 888-7812, or via e-mail at betkin@etkincompany.com.

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