Latest Podcast Episode
Kelcey Lehrich | Succeeding in E-Commerce
How can M&A firms succeed in the e-commerce niche? Kelcey Lehrich, co-founder and CEO of 365 Holdings, is here to share how he provides e-commerce brands with a permanent home when entrepreneurs are seeking an exit.Kelcey also breaks down what makes consumer products thrive in the marketplace—and why you should treat e-commerce as a channel, not an industry.
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The Biggest Danger to M&A Sellers – and How to Avoid it
I got a call earlier today… one that I wasn’t exactly happy to receive. But I feel like I should share the situation that I learned about because it showcases the importance of transactional liability insurance to cover M&A transactions. Here’s the situation… The caller had sold their industrial supply company in the Midwest for just about $3.5M. But, as the deal neared close, additional inventory, not initially part of the deal, was discovered. Buyer and Seller agreed that this inventory was worth $150,000. And the Buyer suggested that they would pay the Seller in installments of $10,000 over 15 months. This agreement was documented. And everything was going fine for a year or so. Then, one month, the Buyer failed to make a payment. The Seller reached out, and the Buyer simply admitted that they didn’t have the money. They commented that they thought the business would be more robust… that it would be doing a lot better. They also threw in that they felt like it was at least partly the Seller’s fault because, in their view, the Seller hadn’t been totally straight on the financials of the business. In fact, the Buyer planned to look into the situation further to see if the Seller had been hiding something. As this unfortunate situation unfolded, the Seller reached out to me to talk about Transaction Liability Private Enterprise (TLPE) insurance. If you’re not familiar this is an innovative, relatively new insurance product very similar to Representations and Warranty (R&W) insurance, that is available for deals with a Transaction Value of $1,000,000 to $30M. While similar to more traditional R&W insurance, TLPE coverage differs in key ways. One of main ones: TLPE policies are sell-side only, which means they are triggered only when the Buyer brings a claim against the
Why – and When – M&A Buyers Should Secure Sell-Side Transactional Liability Insurance
Let me say this loud and clear right now: Every Buyer of a sub-$30M EV target should insist on a sell-side Representations and Warranty (R&W) insurance policy from their counterparty. This might sound strange. And I know that you’ve probably encountered many Buyers who are reluctant or resistant to the idea of even considering a sell-side insurance policy. After all, the Buyer is not insured under this coverage. The name on the policy is the Seller’s. A sell-side policy is only triggered when the named insured (the Seller) receives a demand from the Buyer saying there has been a breach and they have suffered a financial loss.
Latest Podcasts
Kelcey Lehrich | Succeeding in E-Commerce
How can M&A firms succeed in the e-commerce niche? Kelcey Lehrich, co-founder and CEO of 365 Holdings, is here to share how he provides e-commerce brands with a permanent home when entrepreneurs are seeking an exit.Kelcey also breaks down what makes consumer products thrive in the marketplace—and why you should treat e-commerce as a channel, not an industry.
Ken Heuer | How Core Principles Guide Your Thinking
In M&A, having a set of core principles to guide your thinking is essential… Ken Heuer of Kidd & Company is here to share the firm’s 3 core principles and how they make business decisions simple. We also discuss ● What Kidd & Company brings to the table for the lower middle market ● The emergence of a new reps & warranties product to protect sellers ● And more Mentioned in this episode: ● http://kiddcompany.com ● kheuer@kiddcompany.com ● https://www.linkedin.com/in/kenneth-heuer-6b16b3/
All Insights
The Biggest Danger to M&A Sellers – and How to Avoid it
I got a call earlier today… one that I wasn’t exactly happy to receive. But I feel like I should share the situation that I learned about because it showcases the importance of transactional liability insurance to cover M&A transactions. Here’s the situation… The caller had sold their industrial supply company in the Midwest for just about $3.5M. But, as the deal neared close, additional inventory, not initially part of the deal, was discovered. Buyer and Seller agreed that this inventory was worth $150,000. And the Buyer suggested that they would pay the Seller in installments of $10,000 over 15 months. This agreement was documented. And everything was going fine for a year or so. Then, one month, the Buyer failed to make a payment. The Seller reached out, and the Buyer simply admitted that they didn’t have the money. They commented that they thought the business would be more robust… that it would be doing a lot better. They also threw in that they felt like it was at least partly the Seller’s fault because, in their view, the Seller hadn’t been totally straight on the financials of the business. In fact, the Buyer planned to look into the situation further to see if the Seller had been hiding something. As this unfortunate situation unfolded, the Seller reached out to me to talk about Transaction Liability Private Enterprise (TLPE) insurance. If you’re not familiar this is an innovative, relatively new insurance product very similar to Representations and Warranty (R&W) insurance, that is available for deals with a Transaction Value of $1,000,000 to $30M. While similar to more traditional R&W insurance, TLPE coverage differs in key ways. One of main ones: TLPE policies are sell-side only, which means they are triggered only when the Buyer brings a claim against the
Why – and When – M&A Buyers Should Secure Sell-Side Transactional Liability Insurance
Let me say this loud and clear right now: Every Buyer of a sub-$30M EV target should insist on a sell-side Representations and Warranty (R&W) insurance policy from their counterparty. This might sound strange. And I know that you’ve probably encountered many Buyers who are reluctant or resistant to the idea of even considering a sell-side insurance policy. After all, the Buyer is not insured under this coverage. The name on the policy is the Seller’s. A sell-side policy is only triggered when the named insured (the Seller) receives a demand from the Buyer saying there has been a breach and they have suffered a financial loss.
Kelcey Lehrich | Succeeding in E-Commerce
How can M&A firms succeed in the e-commerce niche? Kelcey Lehrich, co-founder and CEO of 365 Holdings, is here to share how he provides e-commerce brands with a permanent home when entrepreneurs are seeking an exit.Kelcey also breaks down what makes consumer products thrive in the marketplace—and why you should treat e-commerce as a channel, not an industry.
Ken Heuer | How Core Principles Guide Your Thinking
In M&A, having a set of core principles to guide your thinking is essential… Ken Heuer of Kidd & Company is here to share the firm’s 3 core principles and how they make business decisions simple. We also discuss ● What Kidd & Company brings to the table for the lower middle market ● The emergence of a new reps & warranties product to protect sellers ● And more Mentioned in this episode: ● http://kiddcompany.com ● kheuer@kiddcompany.com ● https://www.linkedin.com/in/kenneth-heuer-6b16b3/
A Close Look at Deal Drivers for 2023
When looking ahead at 2023, it’s clear there are economic headwinds out there impacting deal-making, including inflation and the threat of recession. Big tech companies are entering a period of austerity, with giants like Google and Microsoft laying off tens of thousands of employees recently. They over-hired during the pandemic, and they are now having layoffs. But I’d make the case that lower middle market M&A, especially with regards to tech, media, and telecommunications firms and business services companies, will see no slowdown in deals… In fact, there could very well be an increase in transactions in the coming year.
Alan Clark | Why This Major 2023 Prediction is Wrong
When your small business owner client is in a room full of MBAs, they can feel out of their depths… So how do you keep your client’s emotions in check during a high-stakes sale? Alan Clark is here to share his perspective as a sell-side advisor helping clients exit their businesses.Alan also reveals why he thinks a common 2023 M&A prediction is wrong—and weighs in on a new sell-side reps & warranties product.
Breaking Down Your Transactional Liability Insurance Options: No Insurance, Traditional Buy-Side, and New Sell-Side
When looking at options to cover a M&A transaction in the past, we’ve always said that you could either use traditional Representations and Warranty (R&W) insurance or… nothing. Nothing would often be the case for deal sizes under $20M, where R&W coverage simply does not extend these days except in very special cases. Now, we have a compelling third option, an innovative Sell-Side policy, for the smaller acquisitions out there. It’s called Transaction Liability Private Enterprise (TLPE). It was created just a couple of years ago by London-based CFC Underwriting but is now gaining ground in a serious way as more M&A players wake up to its potential, especially for covering smaller deals where traditional R&W does not apply.
TLPE Case Study: Buyer Uses TLPE to Win Auction on Desirable $13M Tech Company
For many years, it was standard practice for Sellers in M&A deals with leverage to insist that Buyers forgo escrows as part of the terms of their deal and instead use Representations and Warranty (R&W) insurance. However, there is a catch … This process works only if the target’s pricing is above the Buy-Side R&W guidelines, which is $20M in most cases. And even then most insurers are reluctant to cover more than 30% of the purchase price.