Simplistically, the equity value of a business is increased when its cash flow stream grows, its outstanding debt is reduced and/or when the valuation multiple applied to its cash flows rises. There are, of course, many different steps a business owner or management team can take to drive improvement in all three of these areas.

After we invest in a family or management-owned company, we have generally found the following to be lucrative initiatives to pursue to increase equity value over time:

A Question Family and Management Owners are Asking as They Get Closer to Selling

There comes a time during the life of many family and management-owned companies when the owners and management consider pursuing a sale of the business. This typically occurs at a point when the business needs additional investment for growth or development, yet the owners are at a stage of life (or risk tolerance level) where they are becoming more focused on estate planning or wealth diversification.

Business owners have several options to consider at this point in life, including a sale to a competitor or some other industry participant (or “strategic buyer”), a sale to the employees (perhaps by using…

The Power of Maintaining a Company’s Liquidity and Operating Flexibility

Those of us who took corporate finance classes in college or graduate school were taught that the best way to create value was to capitalize a business in such a way as to minimize its cost of capital. This generally means maximizing the use of lower cost borrowed money (debt) and minimizing the use of higher cost equity. This notion has been further supported by the US tax code that allows businesses (at least in part) to deduct the interest expense related to the debt on their tax returns. …

Heartwood Partners

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