Middle Market Deals and how to buy, sell and raise capital from $5 to $500 million

Jennifer Slegg, author of JenSense, wrote a great post about what I'll call a due diligence tip:  make sure the web site you'd like to buy isn't banned from AdSense by Google.

The problem arises that many websites get traffic but don't advertise, presumably because they've never cared to do so.  What if, however, you decided to buy a business with such a site presuming that they didn't advertise only because they hadn't cared to but in fact, the site had been banned by Google for violating one of its many rules.

You better find out and JenSense tells us all how.

One of the most frequently unasked questions, but one that everyone wants to understand, is what is a fair M&A advisory fee?

To be clear, for a firm that genuinely plays the role of a broker-dealer or investment bank, operating under the requisite legal framework, the answer falls into a fairly narrow band. 

Ignoring the costs of any required fund raising (see my post on fees for raising capital) the fees for advising the buyer or seller in the middle market arena, tend to follow the 5-4-3-2-1 "Lehman Formula."

The Lehman Formula provides that the advisors get 5% of the first million, 4% of the second, 3% of the third, 2% of the fourth and 1% of all the consideration above four million. 

In a political context, we talk about liberal and conservative, Democrat and Republican, Bush and Clinton.

In accounting, we talk about aggressive and conservative.  The traditional notion was that accounting entries that resulted in understating actual earnings were “conservative” and entries that led to overstating earnings were “aggressive.”  The question for entrepreneurs and executives might be, “which is best for maximizing the value of my business?”

The SEC and FASB (the folks who define Generally Accepted Accounting Principles or GAAP) view it as their primary objective to end this discussion in favor of being “simply right.”