This post was submitted by Capstone Project Manager Gretchen Johnson:

Experts say that the death of a business owner could mean the end of the company without a sound strategy.

Rather than a single, dramatic moment, the smooth succession of a business is a series of events. Like a relay race, a company transition should be graceful, carefully strategized and well executed to be successful. Unfortunately, the majority of business owners neglect to plan for their own succession.

More often than not, the reasons are psychological. No one likes thinking about their mortality, and entrepreneurs are no exception. Moreover, some owners so closely identify with their ventures that they can’t imagine their heirs continuing without them. Others believe they’re too busy to plan and consequently put off succession planning until tomorrow.

Tomorrow is too late. It is important to develop a business succession plan that defines what would happen to the company in a worst case scenario. It is especially important to ease the burden for family members who are left to pick up the pieces.

If a business owner dies before a plan is implemented, the business could be sold under duress at price far less than what the business might be actually worth. Or worse – the state could decide the future of the business and all of its assets if a written plan is not in place.

Owners should begin planning while they are still healthy and active. If you wait until after you’re 65, you can’t do many of the jobs associated with succession planning, such as teaching, explaining how the business operates, and passing on the spirit and vision with which it was founded.

Many sources define the time to plan between the ages of 55 and 65. And the handing over of the baton, the plan itself, should be a process, rather than a single event. Some experts recommend a three-to-five year plan while others advocate five to 10 or even 10 to 15 years. All agree, however, that the more time allotted for planning, the better the outcome.

There are a various business plans that could help determine a company’s future, including buy/sell agreements, life insurance on business partners in case of death, trusts and estate planning.

It is important to find a team of experts. The team could consist of a number of different specialists, including lawyers, accountants, investment advisors, insurance specialists and trust officers. While hiring specialists can be expensive, it would be more costly to forgo their services.

Estate and succession planning is about much more than money and finances. While it is important to be a good steward and maximize profits, maintaining the owner’s legacy and diminishing family burden can often be of greater value.

Technorati Tags: Capstone, estate planning, External Growth, Gretchen Johnson, insurance, owners, succession

“The First Date”: Contacting Owners and Successful First Meetings
CPE Credit Awarded
Thursday, July, 29 2010; 11:00 AM ET

Hosted by David Braun, Capstone CEO

David Braun, CEO of Washington, DC- based external growth consulting firm Capstone, is hosting a webinar with Capstone Project Manager Gretchen Johnson.

Having identified the target companies you would like to consider acquiring, you are ready to make contact with the owners. The first connection is decisive. Handled correctly, it can initiate a positive relationship that may eventually lead to union. But if you botch it, that one phone call can terminate the opportunity to buy.

This webinar will show you how to approach owners of “not-for-sale” companies armed with the right information and strategy to get your foot in the door and get that critical first meeting. You will also learn about how to approach that meeting - the “first date” in what could be a successful (and lucrative) relationship for all involved.  You will be able to keep owners saying “Yes!” until you say “No!”

After completing this course, you will be able to:
•    Explain what typically motivates owners to consider the sale of their business
•    Describe effective contact strategies for getting and keeping owners on the phone
•    Detail how to use your previous market and prospect research to gain credibility with an owner
•    Outline steps to take for a successful first face-to-face visit with an owner
•    Develop a persuasive first meeting presentation to highlight the strategic fit between your company and the prospect
David and Gretchen will speak for approximately 50 minutes followed by a question-and-answer session.

Date:  Thursday, July 29, 2010
Time: 11:00 AM ET/ 10:00 AM CT/ 9:00 AM MT/ 8:00 AM PT

No Prerequisites or Advanced Preparation needed!

To register, click here:  https://www2.gotomeeting.com/register/558113314

Registration Fee: $79

IMPORTANT PAYMENT INFORMATION:  Once you register, we will send you a request for payment via PayPal (may take up to 24 hours).  Once payment is confirmed, your registration will be approved and you will receive the log-in information for the webinar.

CPE Credits – 1 CPE credit in Business Management and Organization will be given for those attending this webinar
Program Level:  Basic
Delivery Method: Group Internet-Based

Please feel free to forward this information on to anyone who might be interested in corporate growth strategies.

Refund policy: Requests for refunds must be received in writing by 1:00 PM ET Wednesday, July 28 and the money will be refunded in full within 5 business days.  After 1:00 PM ET on Wednesday, July 28 a credit will be given for a future webinar.  In the event of a cancellation, you will be given the option of of a full refund or applying your fee to a future webinar.

For questions or concerns, please contact Matt Craft at 703-854-1910 or mcraft@capstonestrategic.com

Capstone Strategic, Inc. is registered with the National Association of State Boards of Accountancy as a sponsor of continuing professional education of the National Registry of CPE Sponsors.  State boards of accountancy have final authority on the acceptance of individual courses for CPE credit.  Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 4th Ave N, Suite 700, Nashville, TN, 37219-2417. Website: www.nasba.org

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, CPE, David Braun, External Growth, first meetings, Gretchen Johnson, mergers, Mergers and Acquisitions, owner contacts, owners, webinar

Negotiations, whether between individuals, businesses or even countries are nothing more than a process in which concerned parties come to an agreement that serves everyone’s best interests. Instead of one dominating or imposing power over the other, the parties attempt to reach a consensus in which everyone is satisfied.

When preparing to negotiate you need to ask yourself three questions: Why am I negotiating? Who am I negotiating for (myself, my company, my family)? And how much is my ego involved?

These questions will help you establish the importance of the negotiation - what the outcome will affect.

After answering those first three questions, additional ways to assess the situation include:

• Set goals and limits – what are your walk away triggers? You must be able to walk away from the table.
• Win or lose – Make sure you have a plan to deal with the outcome; both near and long term benefits
• Are you prepared to lose/win? What did I lose/win, if anything? If you did lose/win, what will it affect?
  • Long-term, short-term benefits
  • What will happen to the relationship?
• Will your relationship with the other party be intact when the negotiation is over? If not, is that the outcome you want? Could this negotiation come haunt you in the future?
• How do you want to be remembered once the negotiation is complete?

Taking a brief minute to answer these issues will leave you better prepared once you sit down at the table.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, External Growth, Gretchen Johnson, M&A, M&A News, Mergers and Acquisitions, negotiations

Valuing a for-sale opportunity becomes more challenging during periods of economic and financing uncertainty.
During an economic boom, sellers are often able to obtain top dollar due to increased competition among buyers, with readily available financing options.

However, in today’s market, buyers are more cautious about the businesses they are buying and the amount they are willing to pay. Despite a challenging economic market, most sellers have not adjusted their expectations regarding the value of their businesses. Such misperceptions make negotiating a purchase price much more difficult.

An earnout provides a way to bridge the seller/buyer gap with contingent payments that mitigate risk for buyer and creates incentives for sellers/ management. For example, the targets can be based on meeting certain revenue goals or the development of a product. While not new, earnouts are more frequently used during economic downturns and with small, private company acquisitions.

Earnouts are challenging instruments to structure. Since earnouts can result in litigation among the parties, it is vital that the buyer and seller carefully consider the conditions under which future earnout payments will be made.

Since an earnout is based on future financial performance, both parties should be clear about the method for calculating the performance targets (including accounting methods), how much control over the operations of the business the seller retains during the earnout period (including the amount of capital available to fund the business, who has the ability to hire and fire employees, and how strategic business decisions are made), and seller’s remedies (such as a fixed dollar amount of damages) if the buyer breaches its obligations under the earnout.

While earnouts are not appropriate for all transactions and can be complicated and time consuming to negotiate, earnouts provide an additional tool to consider as either a buyer or seller – particularly in an uncertain and challenging economy.

Technorati Tags: Acquisition Strategy, acquisitions, business acquisitions, Capstone, David Braun, earnouts, External Growth, Gretchen Johnson, Integration, M&A, m-and-a, mergers, Mergers and Acquisitions, valuation

On this blog previously, David discussed some of the issues surrounding the AOL-Time Warner merger.  Given that the ten year anniversary of the merger was recently marked, I wanted to re-visit the ill-fated deal to explore it a little more in-depth.

AOL and Time Warner merged to create the “world’s first Internet-age media and communications company” for an all-stock combined value of $350 billion. The merger announcement stated that the new company “will be uniquely positioned to speed the development of the interactive medium and the growth of all its businesses. It will provide an important new broadband distribution platform for AOL’s interactive services and drive subscriber growth through cross-marketing with Time Warner’s pre-eminent brands”… which doesn’t include the laundry list of growth opportunities captured in the remainder of the announcement covering everything from music to telephony.

Instead of delivering on these ambitious promises, the merger imploded, translating into about $100B in lost shareholder value. The new company was plagued by many issues such as: short-term thinking, bad technology, bungled product development, and a risk-averse culture more prone to imitation than innovation. Most importantly the vision and passion the deal champions Jerry Levin and Steve Case established in 2000 were not effectively translated and executed by their people.

Yes, there were external pressures such as regulators and Wall street that increased merger difficulties – but I believe it all comes back to a clear vision that sets the strategic direction that the rest of the organization can understand and execute against. To that point – AOL’s original vision was “to build a global medium as central to people’s lives as the telephone or television… and even more valuable”. The company accomplished this vision prior to the merger. Eventually they replaced the statement in 2006: “to serve the world’s most engaged community”, which is nondescript and applicable to many businesses.

Recently, Jerry Levin, former CEO of AOL-Time Warner, and Steve Case, co-founder of AOL were on CNBC reflecting on the merger (see the video below). Levin apologized for the merger, “I presided over the worst deal of the century… I’m really very sorry about the pain and suffering and loss this has caused.” Levin and Case’s observations included:

• Leaders need to be compassionate and understanding of the significant tension due to a merger’s disruptive nature and cultural differences
• AOL TW was to be a ‘supermarket’ but instead was a ‘mall’
• Vision is nothing without execution in which people are key
• Too much focus on internal politics and wall street instead of customer needs

Technorati Tags: Acquisition Strategy, acquisitions, AOL, business acquisitions, Capstone, David Braun, External Growth, failed acquisitions, Gretchen Johnson, M&A, M&A News, m-and-a, mergers, Mergers and Acquisitions, Time Warner