Your Business I Your Life: Transition and Liquidity Strategies for Business Owners

1. Your Business Your Life
Transition and Liquidity Strategies for Business Owners

2. When we think about your business, we see
it for what it really is, as part of a far larger
enterprise—
your life.
What exactly do we mean by that?
Like many of our clients, you probably started and expanded your company at
considerable personal risk. You worked hard and created a valuable firm. And
then one day, something changes.
Maybe you watch a competitor sell his The Capital Strategies Group understands
firm for a good price. Or maybe your child the connection between the two. We are
announces she wants to go to medical a leading provider of investment-banking
school instead of taking over the reins services, which takes care of the business
from you. Maybe you stop thinking about side. And with our colleagues, we offer
retirement in the future tense. At that clients world-class wealth management
moment, you see the value of your business expertise—the personal side. The result:
in a new way. It’s time for a change and your business and your life, all in one plan.
inevitably the change will affect both your
business life and your personal life.
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3. seeing the Bigger piCture
The Capital Strategies Group is a leading three decades our entrepreneurial spirit
investment bank dedicated to serving the is still going strong. We offer our clients
needs of closely held and family-owned access to a worldwide network of contacts
businesses. We specialize in the sale or and resources, buyer relationships, and
recapitalization of companies with enterprise deep industry knowledge and research, all
values of $20 million to $200 million. We coupled with wealth management expertise
consistently rank among the top M&A applied before, during and after a sale.
advisors for mid-tier companies,1 and after
together With our Morgan stanLeY our serviCes inCLude:
sMith BarneY partners,
n Mergers and Acquisitions
CapitaL strategies group offers:
n Sell Side and Corporate Divestitures
n Strategies that help you optimize the value
of your business … and keep more of the n Partial exit strategies, including Recapital-
proceeds izations, for the business owner looking to
remain involved in the business
n Strategies for selling to employees in a
tax-advantaged way n ESOPs (Employee Stock Ownership Plans)
n Strategies for transitioning your business to n Capital Solutions
the next generation
n Strategies that help ensure your proceeds are
distributed and protected as you see fit
n Strategies for protecting your heirs from
unnecessary tax or debt consequences
n Strategies to help you use the value of your
business to accomplish what you want in life
Business and personaL. entrepreneuriaL and gLoBaL.
At the Capital Strategies Group, we see From our perspective, it’s simply treating
the bigger picture—and our clients tell your business like it’s the most important
us that this makes us different from other investment of your life—if for no other
investment banks. It’s how we think, how reason than this: It is.
we plan, and how we execute.
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Based on results extracted on January 21, 2009 and prior years from information prepared by and available from
Thomson Financial. The results were based on a query containing the following criteria: M&A transactions completed in
calendar 2002-2008, private targets located in the United States, transaction deal value from not announced up to and
including $100MM, seller financial advisor identified.
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4. a comprehensive process is our foundation
A successful transaction involves a series of complex steps, meticulously
orchestrated. We prepare intensively in the early stages of an engagement, and
have the experience and skills to work through the issues that inevitably arise.
Our process includes the following steps:
Pre-sale Planning: The best transactions Valuation: We understand what drives
start long before the company is for sale. We value in the eyes of buyers, both financial
work with you to understand your personal and corporate, in different industries. We
goals, and advise you on how to prepare are able to identify ways that may help to
your business for the type of transaction that increase value and, importantly, focus buyer
will best fit your individual situation. With our attention on the things that can have the
Morgan Stanley Smith Barney colleagues, most impact on price.
we develop a thorough wealth management
plan with a view toward structuring your Positioning and Deal Marketing: Working
holdings to help minimize tax implications side-by-side with our clients, we develop
when a sale finally occurs. Or, if you prefer a comprehensive marketing strategy, ad-
to pass the business to family members, dressing potential issues before the formal
we can provide succession planning for a marketing process begins and assessing
smooth transition to the next generation. the relative importance of control, liquid-
It’s a comprehensive approach, recognizing ity, price, and timing. Because of our years
your life’s goals and developing strategies to of experience in closing transactions, we
help optimize value and reduce risk. On the understand the questions that need to be
business side this might include a strategy to asked—and the issues that need to be
lock-in senior management and restructure positioned—prior to marketing. We strive to
debt; on the personal side it might involve develop the interest of multiple, competitive
arranging assets and structuring trusts early buyers by preparing comprehensive materi-
on, to help minimize tax exposure. als about your company and appealing to
the specific interests of each potential buyer.
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5. Identifying Prospective Buyers: The buyer agreement. We stand ready with a wealth
universe has changed. In the past, private of experience and knowledge to reconcile
equity groups were driven by purely finan- the many complex issues that can arise at
cial opportunities. Now they are strategically this step.
adding to their portfolios of companies,
looking for targets that complement their Due Diligence: Having your business
holdings. These buyers have raised record scrutinized by prospective buyers, their
funds in recent years, and are actively look- bankers, attorneys, accountants, tax
ing for investments. Public companies, large advisors, operations managers, and others
private companies, and offshore firms are can be a daunting prospect. Our goal is to
also active in the middle market. We identify help all parties maintain an objective view of
prospective buyers who suit your business, the business during this sensitive process.
location, and size, and whose expressed We put expert guidance and experience
goals most closely align with your objectives. to work in maintaining momentum while
By emphasizing the value and synergies keeping the transaction and your personal
from the perspective of each buyer, we work objectives on track.
with a goal of optimizing the transaction Implementing Your Wealth Plan:
price and terms. Congratulations—you have achieved a
Evaluation and Negotiation of Offers: At substantial level of hard-earned liquid-
this step, painstaking effort and attention to ity from creating, building, and selling or
detail become key elements of the process, recapitalizing your business. You likely have
and the value of an experienced investment- worked your entire life for this moment. Your
banking professional is magnified. We review pre-planning has paid off. With the transac-
each Letter of Intent, clarifying and evaluat- tion completed, you can now look forward
ing the terms of each proposal compared to incorporating the sale proceeds into your
with your goals and objectives, and valuing personal wealth management plan—a plan
the forms of consideration offered for the developed to go beyond investments alone
business. Alongside your legal counsel, to include estate and financial planning,
we assist in negotiating the final purchase lending, risk management, philanthropic
planning and more.
reduCing Your risk,
not Your roLe
Your company is not on the market. You are The final plan?
not planning to retire for at least another You sell anywhere from 25% to 75% of your
five to 10 years. Your first response to an firm to a private equity buyer and retain an
unsolicited offer: No thanks. ownership stake as well as the day-to-day
management reins. You have successfully
But then a productive meeting with a team
capitalized on a strong market. You no
from the Capital Strategies Group gives you
longer live with the risk of having most of
pause. Market valuations for good compa-
your wealth in one asset—the company
nies have been rising and more than one
you built. And your remaining stake in the
private equity group is looking to invest in company has the potential to increase
your industry. Specifically, these buyers are substantially as you expand the business
looking for a company with sound funda- with the financial backing and added value
mentals and an excellent management team. of your new partners.
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6. understanding the Our expertise in the sectors below guides
entrepreneur…through our understanding of valuation benchmarks,
the eYes of a BuYer buyer trends and interests, and the nuances
Most business owners will sell only one of the business. Focus areas include:
business in their lifetime. Most business n AEROSPACE, DEfEnSE AnD gOvERnMEnt
buyers will acquire dozens. We bridge
the gap. n BuilDing PRODuCtS AnD SERviCES
n COnSuMER PRODuCtS
We have the experience to navigate the
complications that often arise in a transac- n HEAltH CARE AnD MEDiCAl PRODuCtS
tion. For example, maybe you are wrestling n inDuStRiAl
with how to break the news of a sale to n infORMAtiOn tECHnOlOgy AnD
employees and customers, balancing the
tElECOMMuniCAtiOnS
risk that they will learn about it from others
with the risk that the news will change their n Oil AnD EnERgy
commitment to the company. Or, maybe
If three decades and nearly 2,000 transac-
you are in a highly seasonal business, with
tions have taught us one thing, it’s this:
a high line-of-credit balance in the peak
Your business and your life are inextricably
season and a purchaser who would rather
linked. Either by design or by accident they
not assume the debt. Or, maybe you’re
are part of one, bigger plan. We advise that
exiting your manufacturing company and
it be by design. We believe you’ll see that
need to protect yourself from liability related
this approach makes all the difference in a
to the thousands of products sold on your
transaction—the difference between what
watch. Years in the business have taught us
you get, and what you get to keep.
to anticipate—and resolve—these kinds of
issues.
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7. www.citicapitalstrategies.com
This information has been obtained from and is based upon sources the Capital Strategies Group believes to be reliable. We
do not guarantee its accuracy or completeness. All opinions and estimates constitute the Capital Strategies Group’s judgment
as of the date of the document and are subject to change without notice. Past performance is not a guarantee of future
results. This sales literature is for informational purposes only and is not intended as an offer or solicitation for the purchase
or sale of a security. Neither the Capital Strategies Group nor any other person accepts liability whatsoever for any loss
(howsoever arising and whether direct or consequential) from any use of the information contained herein or otherwise
arising in connection herewith. Morgan Stanley Smith Barney LLC, its affiliates, and its employees are not in the business of
providing tax or legal advice. These materials and any tax-related statements are not intended or written to be used, and
cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties. Tax-related statements, if any,
may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these
materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular
circumstances from an independent tax advisor.
© 2009 Morgan Stanley Smith Barney LLC. Member SIPC.
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