NEW YORK — Anyone thinking about selling their company should start planning for it at least a year in advance.
That was the advice from a panel of experts who spoke on “Mergers and Acquisitions for the Fashion Industry,” sponsored by the New York State Society of CPAs here on May 1 at the Foundation for Accounting Education at 3 Park Avenue.
Joseph Ferrone, an accountant at The Resnick Druckman Group, was the moderator. Panel participants included Alan Annex, partner at the law firm Greenberg Traurig; Richard Kestenbaum, co-founder and partner of investment banking firm Triangle Capital, and Matt Polsky, managing director of financial advisory firm Net Worth Solutions Inc.
Annex told the attendees that the one year is needed to work on such issues as tax planning and personal finance concerns for the seller.
Polsky noted that there may be other issues that might need to be addressed in operations, legal or accounting before the business can be presented to any buyer. Kestenbaum noted that selling a company can take nine months to a year or more, and sellers need to plan for that possibility.
Kestenbaum also said that while many firms now are eyeing the public markets and wondering if they too can follow in the footsteps of Michael Kors Holdings Ltd. and Tumi Holdings Inc., many times there are other strategic options that can provide a suitable financial solution.
“The IPO market can be fickle. The window opens and closes, and if it is closed, [an option is] recapitalization to raise money for an investor to come into the company,” he said.
The banker also said that companies these days are more brand focused when they are on the acquisition trail. That makes valuating companies harder to do. “It used to be you look at an income statement and balance sheet to figure out what a company is worth. Now it’s different. There are [intellectual property] assets. The sales team, other IP assets….If you ask what is the motive for a buyer to buy, chances are it’s an asset not on the balance sheet,” Kestenbaum said.
Annex noted that M&A activity was light last year due to tax fears, and while it is still a somewhat slow market, “It’s a great year to plan for a sale next year.”
The event included a presentation by Sonny Grover, a senior managing director of Alliantgroup, an accounting firm that specializes in taxes.
Grover spoke about research and development tax credits. He noted that in the apparel sector, credits are available for product development, such as topical treatment of fabrics or something to do with the manufacturing process. The latter requires active product-related testing, such as the testing and design of a new shoe or generating prototypes and fit samples of new products.