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Pitching VCs: Getting It Right

Posted on December 20, 2012 by Bill Norman

Venture-Summit

Recently I attended the New England Venture Summit where approximately 79 emerging and early stage companies made presentations to more than 50 venture capitalists.  The various companies broke down into three primary groupings: Technology, Life Sciences, and CleanTech.

It is always exciting to see what innovations are on the horizon, and this Forum presented a first hand opportunity to get a glimpse of what the future may hold.

This post seeks to highlight for entrepreneurs/innovators an outline of the format of what a presentation for funding to VCs should encompass.

First and foremost, keep your presentation short, simple and concise, but compelling.  Each company at the Summit was given exactly 7 minutes to make their pitch for funding.

CONTINUE READING . . .

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Thinking Ahead: The Future of Small Business

Posted on December 6, 2012 by Bill Norman

In a previous post, “The M&A World- Now and the Future”, I wrote about the changing economy and its impact on the recent merger and acquisition activity.  If my supposition is correct, then what will be the future of small businesses in America and how will that directly affect the many baby boomer entrepreneurs?

Although it is next to impossible to predict the future course of events (who would ever have foreseen the shift in the auto industry that we have witnessed?), I have suggested that many of these businesses will be shuttered because they will no longer present competitive opportunities in the market and there aren’t a sufficient number of buyers to absorb the overflow of these less profitable companies.

Is this inevitable? No one knows for sure, but unless strategies are put in place to change this dynamic, we could be heading for a shift much like the world of banking and auto dealerships have undergone.

CONTINUE READING . . .

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Deal or No Deal: Letters of Intent

Posted on November 29, 2012 by Bill Norman

I have been somewhat absent from the blogging world since the presidential election.  Like most people, I got caught up in following it, which left little time for other outside activities.

Today’s blog discusses Letters of Intent.  Although the terms are as varied as the transactions that they address, there are two basic kinds: binding and non-binding.  Binding Letters of Intent are exactly that: they are legally binding on the parties who sign them. They attempt to describe in as much detail as possible the material terms of the transaction to which the parties agreed.   Even though binding, they generally anticipate that a more definitive agreement will follow as the parties progress through due diligence.

Non-binding Letters of Intent intend to articulate the proposed terms of a particular transaction, but are subject to a variety of conditions occurring before the Letter is satisfied and a definitive agreement is executed.  Certain terms, however, in a non-binding Letter, such as confidentiality, no-shop, etc. are binding regardless of whether the transaction moves beyond the Letter of Intent.

CONTINUE READING . . .

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The M&A World: Now and the Future

Posted on November 12, 2012 by Bill Norman

We have experienced a change in the nature of activity in Mergers and Acquisitions.  The overwhelming number of transactions seems to be driven by aggregators who are backed by private equity or are privately held or publicly owned companies that make strategic acquisitions designed to grow their top and bottom line revenues. This revenue growth comes from the synergies potentially realized by acquiring competitors or provider companies (i.e., those companies that supply services/products in the vertical and horizontal markets that serve the acquiring company).

This shift has come about because of the financial and economic downturn that has existed over the last 4-5 years.  Companies that have succeeded in trimming their excesses and in creating increased profits out of decreased or stagnant revenues, have finally realized that the market will more than likely continue along this trend, at least over the next few years, even if it’s moving toward recovery.  Flushed with cash, and this realization, they have turned to the strategies outlined above.  Two observations:  first, this has produced relatively good multiples for the sellers who are the targets of these acquisitions, primarily because they are seen as “the best of the best” in their respective industries; second, this acquisition strategy has made it more difficult for the frail to compete and survive.  Consequently, since many of these weaker companies are owned by baby boomers, it leaves their owners with little value in their businesses to fund their retirement.

CONTINUE READING . . .

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Employee Incentive Plans: Don’t Wait to the Last Minute

Posted on November 1, 2012 by Bill Norman

Over the course of representing sellers of businesses, I have discovered that many of them are very concerned about the well-being of their employees upon the sale of the company.  Consequently, they scramble in a last minute effort to address this concern.

If properly advised, they will create some form of a bonus plan (“stay bonus”) aimed at keeping key employees focused on contributing to a successful sale.  This stay bonus arrangement is not only predicated upon the sale, but also requires employees to remain with the company until the sale is consummated. The bonus amount is usually tied to the purchase price that will ultimately be paid for the business, and in that way, they are incentivized to maximize their efforts in continuing to grow the business. It is not uncommon in such arrangements to insert a contingency that requires key employees to negotiate in good faith for a new employment relationship with the buyer. “Good faith” may be defined as agreeing to accept an employment arrangement with the buyer under terms and conditions which substantially mirror their employment arrangement with the seller or an enhanced version of that employment arrangement that was anticipated had the employer not sold the business.  In consideration for the employee’s promise to negotiate in good faith, the employee will often be asked to accept reasonable restrictive covenants or agreements, such as non-disclosure, non-solicitation and non-competition agreements.

Another approach sellers use to protect their employees is to negotiate for a provision within the Acquisition Agreement that obligates the buyer to continue to employ the seller’s employees, usually for a fixed period of time, or to offer a reasonable severance package as an alternative.

CONTINUE READING . . .

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Business Essentials for Success

Posted on September 24, 2012 by Bill Norman

As an emerging business seeking funding, these are some of the key factors to keep in mind:

  • A concise statement of how your business will generate revenue and make profit.
  • What advantages does your company bring to the market so that it will be successful in competing. In other words, what is your company’s value proposition?
  • How does your company leverage innovation in its business so that it will be distinctive?
  • A leadership team with experience, successful track record and specific expertise. A Leadership Team refers not only to the management team but its Board of Directors and/or Advisory Board.

Although particularly important when trying to obtain funding, a leadership team is one of the most critical components of successful companies and should not be underestimated.

CONTINUE READING . . .

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The Politics of Business

Posted on September 7, 2012 by Bill Norman

In the thirty eight years that I have represented privately held companies in the middle market (a somewhat amorphous reference point, depending upon who you are talking with, but nonetheless a better than not understood reference), I have not witnessed such indecision in the business world by companies and their owners and management teams as I am witnessing now. The economy and all financial (stock market, employment, dollar valuation, etc.) indices have been trending downward for the last 4 years or at best stagnating at a low end of the economic spectrum.

What to do? As we all know, companies can not sit on the sidelines forever, because doing so will generally mean losing ground. But in today’s world, there are too many variables in flux, such as taxes, government regulations (or should I say, “over regulations”), general economic policies governing the conduct of business, banking regulations, etc.  for companies to make intelligent, forward thinking plans and investments.

Unfortunately with the upcoming political race for the White House, the dilemma has only been exacerbated. Clearly, the two parties pose very different solutions for energizing the economy, and America, in general. Until the results are in, it likely will be difficult to witness any substantial change in the upcoming months.

Will we suffocate from holding our breath a little bit longer or finally exhale in relief?

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Confidentiality In The Workplace

Posted on September 4, 2012 by Bill Norman

Recently, the National Labor Relations Board (NLRB) held that Employers should avoid blanket requests for employees to maintain confidentiality in the workplace during internal investigations (In Banner Estrella Medical Center).

Initially, businesses were forewarned that they should be careful to maintain the confidentiality of an investigation of alleged misconduct, so as to protect the subject of the investigation and the witnesses until there was a final determination. This necessarily required them to inform other employees who were involved in the investigation to keep the discussions conducted with them confidential. It is apparent why this was requested, and indeed required.

The NLRB ruling now requires businesses to justify this confidentiality, without which they will be held to have violated Section 8(a)(1) of the NLRB Act.

In my opinion, this is the kind of dilemma that companies face when there is overregulation.

CONTINUE READING . . .

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Warranties, Representations, and Covenants

Posted on August 23, 2012 by Bill Norman

All too often, business owners do not appreciate the significance of warranties and representations, and covenants in a definitive asset or stock purchase agreement, and the impact that such matters can have on the purchase price paid. Equally important is the survival period attached to each of these warranties and representations and covenants.

Almost without exception, every agreement has some escrow or holdback mechanism to secure performance under that agreement consistent with the warranties and representations and covenants. The way in which these items are worded can be the difference between the owner walking away with his entire anticipated purchase price or losing a significant portion to cover damages for breach of these matters.

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Business Shorts from a Lawyer

Posted on August 16, 2012 by Bill Norman

Have Plan, Will Travel

I recently wrote a blog about the different kinds of business plans (see here).  After reading an article written by Tim Berry of Palo Alto Software that was recently published in “Open Forum” by American Express, I have decided to highlight a point I touched on in my original blog post: traveling with your business plan.  The essence of Mr. Berry’s article was that your plan should be with you at all times.   Simply put, a business plan is impacted by the events that take place daily and as such, requires constant review, updating, and re-thinking.  The only way to assure that this process will effectively occur is to have the plan with you when these events arise.  Another way of looking at it is that a BUSINESS PLAN is a LIVING, BREATHING DOCUMENT and, like all organic things, must be nurtured daily in order to achieve its full potential.

Bosses vs. Leaders

Are you a boss or a leader? (taken in part from an interview with Bill Flemming, president of Skanska USA Building, Inc, by Adam Bryant and from Napoleon Hill’s Book: “Think and Grow Rich”.)

CONTINUE READING . . .

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