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Journal Record - Corporate Finance Blog

We write a weekly column on Corporate Finance for the Journal Record, Oklahoma's statewide daily business newspaper - you can link to the Journal Record column here:

Link to ClearRidge column at the Journal Record

On a quarterly basis, we'll also add links to the most recent articles below.

Ready to sell your business in 2012 – NOT SO FAST. [m&a blog - part II of II]
POSTED: 02:16 PM Wednesday, March 14, 2012
BY: Matthew Bristow
Part II of II.
Last week:
- What happens when you accept a purchase offer?
- Stricter Confidentiality, Better Control and Fewer Errors
- Gap Analysis
This week:
Q: Do I really need to go through this?
Q: How much extra time will this take me?
Q: How much will it cost me?

Ready to sell your business in 2012 – NOT SO FAST. [m&a blog - part I of II]
POSTED: 09:56 AM Thursday, March 8, 2012
BY: Matthew Bristow
If you are considering selling your business in 2012, you need to consider the full sale process, from start to finish. Oftentimes, a business owner has so many other commitments and so little time, that they focus on the front-end of the sale process and work through the later stage of the process when the time comes. What we’re talking about today is why it is critical to consider the complete sale process at the outset and we’ll talk through some common mistakes and potential consequences.
This week:
- What happens when you accept a purchase offer?
- Stricter Confidentiality, Better Control and Fewer Errors
- Gap Analysis
Next week:
- Preliminary Due Diligence
Q: Do I really need to go through this?
Q: How much extra time will this take me?
Q: How much will it cost me?
Click through for the full article >>

Business Insolvency: Alternatives to Chapter 11 bankruptcy [Part II of II]
POSTED: 09:38 AM Thursday, February 16, 2012
BY: Matthew Bristow
In times of business insolvency, Chapter 11 bankruptcy has long been a tool for the business owner to negotiate with creditors, but it is only one tool in the toolbox and should only be used when other options have been explored.
In the last blog, we considered the asset sale alternative and in this second installment we consider the fiduciary alternative and section 363 alternative.
Click through to read the full article …

Business Insolvency: Alternatives to Chapter 11 bankruptcy [Part I of II]
POSTED: 04:03 PM Tuesday, February 7, 2012
BY: Matthew Bristow
Business insolvency has been increasing over the last few years and continues to be a significant problem in Oklahoma and across the US, with increased business bankruptcy filings through 2010 and sustaining elevated levels in 2011, according to the American Bankruptcy Institute.
In times of business insolvency, Chapter 11 bankruptcy has long been a tool for the business owner to negotiate with creditors, but it is only one tool in the toolbox and should only be used when other options have been explored.
We consider three alternatives:
i. Asset Sale alternative
ii. Fiduciary alternative
ii. Section 363 alternative
Click through to read the full article …

M&A Activity expected to increase again in 2012
POSTED: 10:47 AM Wednesday, December 28, 2011
BY: Matthew Bristow
According to a recent survey by an Ernst & Young group, US merger and acquisition activity is in a strong position to expand in 2012.
Click through to read the full blog, as well as an Oklahoma perspective from ClearRidge Capital.

7 Lesser Known Challenges of Selling a Privately-Owned Business [Part III of III]
POSTED: 10:59 AM Monday, December 19, 2011
BY: Matthew Bristow
In the final installment in this three-part series, we’ll discuss some of the lesser known, but frequent challenges that can occur when selling a company. While most are avoidable, they can still be tricky issues to navigate in a business sale process.
6 and 7:
- Structuring the Sale
- Protect Your Business from Unregistered Advisors
Click through to read the full article…

7 Lesser Known Challenges of Selling a Privately-Owned Business [Part II of III]
POSTED: 04:26 PM Monday, December 12, 2011
BY: Matthew Bristow
During this three-part series, we’ll discuss some of the lesser known, but frequent challenges that can occur when selling a company. While most are avoidable, they can still be tricky issues to navigate in a business sale process.
3, 4 and 5 this week:
3) Purchase Price Becomes Less Important As The Deal Progresses
4) Due Diligence and Closing Feels like the Buyer Doesn’t Trust You
5) Getting through Reps and Warranties
Points 6 and 7 next week. Click through to read the full article…

7 Lesser Known Challenges of Selling a Privately-Owned Business [Part I of III]
POSTED: 02:42 PM Monday, December 5, 2011
BY: Matthew Bristow
During this three-part series, we’ll discuss some of the lesser known, but frequent challenges that can occur when selling a company. While most are avoidable, they can still be tricky issues to navigate in a business sale process.
1 and 2 this week:
1) Leave or Stay?
2) Key Employees – Leverage at Closing
Points 3 through 7 in the next couple of weeks. Click through to read the full article…

Recapitalize Your Company? For and Against. (Part II)
POSTED: 01:45 PM Wednesday, November 16, 2011
BY: Matthew Bristow
This week, we have the second of our two-part piece on recapitalizing a business: What does it involve, why would a business owner consider it and what are the implications?
After last week’s positives, this week we’ll consider the potential negatives of a recapitalization for your business:
1) Bringing in the wrong partner
2) Increasing Management Discipline
3) Loss of Control
Click through to read the full blog and read about each of these three points above.

Recapitalize Your Company? For and Against? (Part I)
POSTED: 02:11 PM Wednesday, November 9, 2011
BY: Matthew Bristow
This week and next week, we have a two-part piece on recapitalizing a business: What does it involve, why would a business owner consider it and what are the implications?
To start, we are going to consider the positive reasons to consider a recapitalization for your business and next week we’ll consider the negatives:
1) Securing the Value of your Company
2) Bringing in a Capable Partner
3) Stabilizing the Capital Structure
Click through to read the full blog and read about each of these three points above.

Filling a Void? Oklahoma Venture Capital and Growth Capital
POSTED: 04:43 PM Friday, October 14, 2011
BY: Matthew Bristow
According to participants in yesterday’s Bricktown Capital Conference in Oklahoma City, Oklahoma has a need for more robust venture capital, nurture capital and in some cases private equity, when an entrepreneur needs between $1 million and $5 million to fuel the growth of their business. For any higher amounts, out of state capital is targeting Oklahoma companies, and for amounts below $1 million, there are small business grants, loans, incentives, family money and even bootstrapping that can provide the required capital. It is the critical gap in between where we need to focus our efforts.
There were both positive and negative perspectives of raising money and seeking capital for an entrepreneur in Oklahoma, but there seemed to be near universal agreement that it can be incredibly difficult to source $1 million to $5 million for a growing Oklahoma business, when the bank’s not interested in lending any more. This blog explores the topic.

Higher sale price and reduced time to Closing: Online Datarooms and Due Diligence Management
POSTED: 02:32 PM Tuesday, September 27, 2011
BY: Matthew Bristow
Numerous studies have shown that a more efficient and better managed dataroom, disclosure and due diligence process can lead to higher acquisition prices and higher closing success rates for the sellers of midsized companies.
Some may consider an online dataroom to be an unnecessary tool, others may consider it a benefit, but at ClearRidge, we feel that it’s now an essential part of the sale process. In this blog, we’ll highlight some of the reasons why.

Honor Thy Banks and Creditors – It’s Good for Business
POSTED: 04:19 PM Wednesday, September 14, 2011
BY: Matthew Bristow
In the last year, huge numbers of loans were refinanced on the back of competition among lenders to sell money and attractive loan pricing. As a result, many CFOs have now refinanced, put their loan documents away and will revisit them in a few years when it’s time to renew. Unfortunately, it’s not that easy anymore; in particular in a sluggish and faltering economy, as your creditors keep a closer eye on all the covenants of your loan.
This blog has steps to reduce business risks and loan problems … [click through for full article]

Section 338 Business Sale –Stock Sale, with Asset Sale Tax Treatment
POSTED: 04:05 PM Wednesday, August 31, 2011
BY: Matthew Bristow
A Section 338 is used when parties to the acquisition would like the tax treatment of an asset deal, but the legal structure of a stock deal. This tax treatment is predominantly related to the ability for a buyer to step up the tax basis of assets to fair market value (FMV), as opposed to a typical stock deal, which is on a carryover basis. In turn, this can have a significant positive effect on the purchase price for the seller.
If an acquisition is completed as a Section 338 election, … [click through for the full article]

Industrial Manufacturing M&A Activity Up again in Q2 2011
POSTED: 04:57 PM Friday, August 19, 2011
BY: Matthew Bristow
The value of Industrial Manufacturing Mergers and Acquisitions increased 70% in the second quarter of 2011, according to Assembling Value, a quarterly analysis of M&A activity in the global industrial manufacturing industry by PwC US.
This is good news for the owners of Oklahoma manufacturing companies that want to sell their business in 2011, as there is an inevitable positive trickledown effect on M&A values and volumes of midsized private companies in the same sector.
In the first six months of 2011, … [click through for the full article]

Acquisitions: Earnings Multiples or Absolute Valuations?
POSTED: 12:03 PM Tuesday, August 9, 2011
BY: Matthew Bristow
How is it possible to make an acquisition valuation based only upon earnings multiples in disparate economic environments and business climates? And how heavily should we rely upon “standard” earnings multiples for comparable transactions in an industry?
Most studies of acquisition volumes and values also focus on earnings multiples, in the same way that business owners use multiples as a measuring stick and buyers rationalize purchase price “fairness.”
Click through to read the blog that addresses these questions and discusses earnings and business valuations.

Lending for Business – Debt Ceiling Concerns?
POSTED: 11:53 AM Wednesday, July 27, 2011
BY: Matthew Bristow
The debt ceiling “debate” in Washington, in addition to concerns about the economy, is causing anxiety for many CFOs and business owners. According to a recent survey by the Association of Finance Professionals, around half of survey respondents were concerned about the potential government default. The general consensus, however, seems to be that the political gamesmanship will ultimately give way to a resolution to avoid a government default on the Fed’s debt obligations, the consequences of which would be global in reach and detrimental beyond our comprehension. An actual default could cause the cost of credit to increase significantly and possibly freeze the credit markets again.
Unfortunately, even speculation about a …

Implications of Earnouts when you sell your business – Tax Focus

POSTED: 04:50 PM Thursday, July 14, 2011
BY: Matthew Bristow
Earnouts should not be considered part of the purchase price if/until they materialize and are paid to the seller, but why not set additional opportunities to increase the purchase price paid, over and above the full cash price paid? If “x” is the maximum that a buyer will pay for a company in cash at closing, it is still possible to negotiate “x” at closing, plus an additional 25-50% or more after closing. As with most things in life and business, it is not the tool that is at fault, it is the way that it can be misused and misunderstood.
Tax Treatment of an earnout
In terms of tax treatment, if an earnout is contingent on continued employment of the seller by the buyer, then the IRS may see earnout as ordinary income if it is an alternative way of providing incentive compensation, rather than a capital gain as part of the purchase price. Click through for the full article >>>

Mergers and Acquisitions volumes up in first half of 2011 and expected to increase through remainder of 2011
POSTED: 10:40 AM Monday, June 20, 2011
BY: Matthew Bristow
Last week, PwC came out with their latest M&A survey. Mergers and acquisitions activity was up from the first half of 2010 and is predicted to strengthen through the second half of 2011.
The results of this survey come after a similarly positive report from Ernst and Young earlier this month. Whereas other predictions may not be worth much consideration, there is some value to the short-term predictions from this survey; …
… click through to read full article with industry highlights and deal data.

Duke/CFO Business Outlook Survey – Less Optimistic than early 2011
POSTED: 11:15 AM Thursday, June 9, 2011
BY: Matthew Bristow
Only 27% of CFOs said that they were more optimistic this quarter than last quarter, according to yesterday’s Duke University/CFO Magazine survey of U.S. CFOs. It’s not all doom and gloom – on a scale of optimism from 1 to 100, the average rating was 57, which is only down 4 from a year ago, but it seems like many had been hoping for increased optimism by the summer of 2011.
What may be causing less optimism among CFOs? Read the full article …

How would high inflation affect Oklahoma businesses?
POSTED: 09:23 AM Friday, June 3, 2011
BY: Matthew Bristow
One topic which seems to draw much discussion, as well as confusion right now is inflation. I’m not interested in talking about what the Fed could or couldn’t do to ease inflationary concerns or who screwed up the economy to get us where we are today – that doesn’t seem productive, because it doesn’t do much to help our business community. What I’ll attempt to do is highlight what to watch out for and consider some of the possible effects of high inflation on Oklahoma businesses.
Inflation never affects everyone equally. It shifts buying power from one group to another. And if we are looking at this from the perspective of a business, we want to understand how it could be affected by inflation. Read the Full Article for 7 Points on how high inflation would affect Oklahoma businesses.

When should you sign a Letter of Intent – Business Buyer vs. Business Seller?
POSTED: 05:29 PM Wednesday, May 18, 2011
BY: Matthew Bristow
If you sign a LOI early in the process, you are likely to sell for a lower price and weaker terms than you deserve. Unless the buyer is well informed about your business, the growth opportunity and all necessary information on which to make a fully informed decision, they are going to price the offer and terms based on a limited understanding, i.e. they will submit a lower-ball offer than they have to, leaving some wiggle room in consideration of the uncertainty on which they are basing the offer. Once that offer is in writing in a LOI with an exclusive period, it’s much harder to increase the price and terms.
This blog is about the timing for submission and execution a Letter of Intent (“LOI”) when a buying or selling a company. This is written for the perspective and benefit of a business seller.

Positive M&A trend gaining momentum for midsized private companies
POSTED: 10:04 AM Monday, April 25, 2011
BY: Matthew Bristow
The positive start for Oklahoma and Midwest mergers and acquisitions activity in 2011 is gaining strength and momentum. A recent survey by the Brunswick Group gives further support to what we are seeing for Mergers and Acquisitions Activity in the Midwest. 92% of survey participants believe that 2011 deal activity will continue to increase through the remainder of 2011. There have already been $302 billion in deals announced so far this year. Read More in the full article…

Consolidation in Oklahoma’s Community and Regional Banks?
POSTED: 10:58 AM Monday, April 11, 2011
BY: Matthew Bristow
There is likely to be consolidation in Oklahoma’s regional and community banks. At the same, we expect some of Oklahoma’s banks to double or triple in size in the coming years. We’re going to consider the reasons behind the likely reduction in number of banks in Oklahoma and some of the implications.
According to the FDIC, there were 7,657FDIC insured institutions reported in Q4 2010, compared to over 10,000 in 2000. We expect that number to continue declining, as it is increasingly tough to start up a new bank and evermore smaller banks are being swallowed by bigger regional banks.
Is there anything that can be done to preserve more small, regional banks or is this change inevitable?

Building a bridge to the other side: Plan and process for strategic success.
POSTED: 11:00 AM Wednesday, March 23, 2011
BY: Matthew Bristow
How do you determine where to start in a new strategic business project? In simple terms, you need to be in clear and detailed agreement among all stakeholders on where you are and where you want to get to before you start planning how you want to get there. When it comes time to try to communicate the planning process, my business partner has a great analogy – thank you Bruce. We try to picture the process in terms of an image that everyone can relate to and understand. So here goes, …

The NCAA in Tulsa – what business lessons can we learn?
POSTED: 02:16 PM Friday, March 11, 2011
BY: Matthew Bristow
Ray Hoyt took over as Executive Director of the Sports Commission last August. While he is evidently an expert in the world of sport and sport management, he also seems to have a handle on the business world and the broader implications of his role.
Aside from praising the work that they are doing, there was something that hit home for me from Ray’s talk on Wednesday that I wanted to highlight in this blog – in particular, everything outside of what you expected to hear him talk about. There were three attributes in his approach to the job that really resonated with me; i) his extensive preparation and systematic approach; ii) his focus on the real goal of the Sports Commission; and iii) his persistence and focus on a well-managed process. In the same way as with Ray’s approach, there is a value to skills, relationships and experience, but without a disciplined approach, it’s too easy to get lost in the details, issues and lose sight of how all the pieces need to fit together to successfully complete a project.

Capital Gain Tax Exemption for Business Stock Sales under $50 Million
POSTED: 03:27 PM Thursday, February 17, 2011
BY: Matthew Bristow
You may have read about the exclusion at the end of 2010 when H.R. 5297 Small Business Jobs Act of 2010 was signed into law, but it is certainly something of huge significance and worth repeating if you are one of the thousands of Oklahomans that owns a C-corporation with gross assets of $50 million or less that meets the criteria below. 

Winter storm hit your deal?
POSTED: 07:14 AM Friday, February 4, 2011
BY: Matthew Bristow
What happens when an unexpected winter storm hits your deal and what can be done to prevent this happening? If you can’t prevent it, how do you reduce the negative impact?
When it comes to a restructuring, corporate finance or M&A deal, there are so many issues that can break a deal. Many, if not all of the following issues, however, can be forecasted and in most cases measures can be taken in advance to reduce the impact on the deal and in many cases overcome the issue before it becomes a deal breaker. The critical point is to have advance notice and time to prepare prior to the storm hitting.
Potential deal breakers are inevitable in even the best deals. In this article are a list of issues we have encountered in the past and you may want to consider…

Reuters: M&A has busiest January in 11 years
POSTED: 11:09 AM Friday, January 28, 2011
BY: Matthew Bristow
Dealmaking is back on the agenda as CEOs step up the hunt for ways to put a multitrillion-dollar cash pile to work, triggering the busiest January for M&A in 11 years, according to Reuters.
Overall, multinational companies in developed countries are holding a record $4-5 trillion in cash, according to a report last week by the United Nations Conference on Trade and Development.
That money was built up as a buffer against a potential double-dip recession, or other systemic shocks, and it is beginning to look like a wasted opportunity.

Is 2011 a good time to sell my business?
POSTED: 08:36 AM Wednesday, January 26, 2011
BY: Matthew Bristow
We were recently asked by a prospective client for our evaluation of the current market conditions for the sale of his company. We have written on this topic and the broader economic environment in recent months for this blog and other Oklahoma media outlets, but it is actually more difficult question to provide the most appropriate answer for this question than you may think.
There are two parts to the question: “current market conditions” and “for his company.” In reality, our only focus should be on timing and conditions for his company, one factor of which is the general M&A market conditions for a sale…

Oklahoma Economic incentives – What Value?
POSTED: 10:51 AM Thursday, January 20, 2011
BY: Matthew Bristow
Much has already been written on this topic, but today we are going to focus on a different angle: the accountability for those companies and investors that receive funds or assistance from our state.
Perhaps there would be universal approval for state funded incentives by Oklahoma if the public could have greater confidence in the economic benefit to our state of the use of those funds. This blog discusses ways to increase the effectiveness of the incentives and improve public perception and support: Rules and Covenants for Receipt of Funds; Reporting and Tracking of Effectiveness of economic incentive programs; Integrity Monitoring of Each Business; Which economic incentives provide the most benefit to our state?

Top Ten Surprises for 2011
POSTED: 01:26 PM Tuesday, January 11, 2011
BY: Matthew Bristow
Byron R. Wien, Vice Chairman, Blackstone Advisory Partners, issued his list of The Ten Surprises for 2011.
Byron started the tradition in 1986 when he was the Chief U.S. Investment Strategist at Morgan Stanley. Byron joined The Blackstone Group in September 2009 as a senior advisor to both the Firm and its clients in analyzing economic, political, market and social trends. I found this to be one of the treats of the New Year. It’s refreshing when someone smart is willing to make bold predictions for the future, even if it only serves to broaden our perspective from what is probable, to what is possible. This is the way we should all be thinking anyway. Happy Reading.

The Positives of an Extended Recession
POSTED: 11:59 AM Tuesday, December 28, 2010
BY: Matthew Bristow
You may wonder how an extended recession can be positive for your business. What can be good about weak industry performance, more competition for less orders and a tougher environment to secure debt or equity investment? Well, every cloud has a silver lining. So here’s an alternative point of view.
If we had only gone through a 6-12 month recession, your company could have survived and subsequently thrived with the short-term fixes you made, returning to business as normal when the industry picked up. However, now that we have an extended recession, there is no real alternative but to think about creative and enduring ways to improve your business.

The best buyer for your business
POSTED: 02:57 PM Monday, December 13, 2010
BY: Matthew Bristow
In all likelihood, the buyer who ends up being your preferred choice wasn’t even close to being on your initial list. It’s possible they made it onto the expanded list, but more than likely was only a potential buyer you became aware of after a lot of research, digging, screening and hard work. You really need to keep challenging yourself from the first time you start thinking about selling your company, through to the day that the deal is done.
While it is essential that to start with most likely and obvious prospects, that should only be the starting point in an extensively researched and well thought out process to refine and define who could be a potential fit for your business.

Dividend Recapitalizations: Cash Alternatives for Private Equity
POSTED: 05:10 PM Monday, November 29, 2010
BY: Matthew Bristow
For those Private Equity Groups (PEGs) that own a strong portfolio company with high earnings and relatively low debt, they are increasingly turning towards dividend recapitalizations rather than selling ownership in their portfolio company in the short-term.
Before we go any further, let’s clear up the definition of a dividend recapitalization (recap). It occurs when the owner of a company, typically a PEG, as a preferred stock holder, issues new debt to pay a special dividend to their limited partners who provided the cash to fund the initial acquisition of the portfolio company. A dividend recap is an alternative to way of realizing cash, other than selling the company or trying an IPO. For example, a …

Industrial Manufacturing M&A Up in Q3 2010
POSTED: 11:28 AM Friday, November 12, 2010
BY: Matthew Bristow
The number of deals remained near constant quarter-over-quarter, with 29 deals in Q3 slightly down from 33 in Q2 1010 and the same as a year earlier. Value of deals, however, was up considerably this past quarter, up to $16 billion in Q3 2010, compared to $11 billion for the whole of the first half of 2010 and only $7.5 billion the same quarter a year earlier. Consequently, the average deal value was also up considerably.
In terms of US M&A volumes in the sector, 41% of all the global deals involved a US entity, and 50% of global deal value was linked to US companies.
The most active deal making sectors were industrial machinery and fabricated metal products manufacturers, both of which are major manufacturing sectors in Oklahoma.

M&A Up? M&A Down?
POSTED: 11:56 AM Tuesday, November 2, 2010
BY: Matthew Bristow
Ernst & Young just released their latest Capital Confidence Barometer. The latest prediction is for more moderate deal-making activity than anticipated earlier in the year. As a frame of reference, Q3 2010 was the best three months for M&A since Q3 2008.
29% of executives that participated in the survey are actively seeking acquisition targets, down from 38% earlier this year. About half of respondents said they are well positioned to execute an acquisition on short notice. In terms of capital structure for an acquisition, 61% plan to use cash, as opposed to bank financing, bonds or other forms of debt financing.
Approximately 75% are focused on organic growth as their capital allocation priority, which will be predominantly through restructuring and performance improvement, compared to 66% six months ago.
Thoughts on M&A Activity …

Corporate Debt in High Demand
POSTED: 04:50 PM Thursday, October 14, 2010
BY: Matthew Bristow
September was a blockbuster month for investment-grade corporate bond issuances. Yielding 4.9%, compared to Treasuries at only 2.7%, not only do investment-grade bonds offer cheaper financing for the issuing companies, but they also provide a higher return with relatively low risks for those insurance companies, pension funds and other institutional buyers, who no longer have asset-backed and mortgage-backed securities to invest in.
Getting down to the numbers, September was a really big month. New issues were at their highest level since May 2008, with 130 issues raising over $100 billion, according to Thomson Reuters, up 65% from August and more than double July’s new issues. September and October typically post higher numbers of issues, but this was significantly higher than expected.

Protect Confidentiality Before the M&A Process Begins
POSTED: 11:51 AM Monday, September 27, 2010
BY: Matthew Bristow
Recipients of confidential information do not typically have any obligation to the confidential information they receive, unless they have signed a confidentiality agreement, and if this is the case, they would be free to use it, without recourse, in any way they wish, even if it is harmful to the seller.
A standard confidentiality agreement for an M&A process will likely span 1,000 words or more of legalese and while we’re not going to talk through most of the points, we thought it may be useful to highlight some of the less obvious, yet important covenants.

Oklahoma Bankruptcies – Silver Lining, but it may keep raining
POSTED: 02:40 PM Monday, September 20, 2010
BY: Matthew Bristow
Year-to-date in the Eastern District of Oklahoma, there have been 1,612 bankruptcy filings, compared to 1,529 for the same period a year ago. Focusing on monthly filings, 2010 has been erratic: Jan- 100, Feb-167, Mar-272, Apr-243, May-201, Jun-184, Jul-230, Aug-215. If we were to perform well for the rest of this year, we would like to see consistent filings coming in under 175 per month. That may signal a reversal of the current negative trend.

M&A Activity and Valuations Up in Industrial Manufacturing
POSTED: 11:15 AM Wednesday, September 8, 2010
BY: Matthew Bristow
For deals above $50 million, there were $8.5 billion of industrial manufacturing deals announced in the second quarter of 2010, which was two and a half times the same period in 2009 and $8.5 billion for one quarter compares favorably to only $22.7 billion for the whole of 2009. There were 33 deals completed in Q2 of this year, compared to only 12 for the same period a year earlier. In short, industrial manufacturing deal activity and deal volumes are up significantly quarter-over-quarter and year-over-year. This is a confidence boost for manufacturing.

Gear up for Growth? Prepare for Declines?
POSTED: 11:45 AM Friday, August 20, 2010
BY: Matthew Bristow
One question that many business owners, CFOs and purchasing managers are asking themselves is: what can we expect of demand through the remainder of 2010. The crystal ball is very cloudy right now. You can, and should, have long-range projections, but right now your main focus needs to be on the remainder of 2010. One useful (yet lagging) economic indicator to help us is the Credit Managers’ Index (CMI).
Where possible, replace broad business forecasts, with a more focused forecast. Demand should be broken out by product/service, geography, client type and any other metric that may be useful. Start with a fresh approach and brainstorm every different factor that could affect demand within each part of your business.

Commercial Real Estate to Destabilize Regional Banks
POSTED: 09:56 AM Friday, August 6, 2010
BY: Matthew Bristow
Midsized regional US banks are being hurt the most by commercial real estate woes and it’s only likely to get worse. According to a study released last week by the International Monetary Fund (IMF), Commercial Real Estate (CRE) exposure represents 50% of the outstanding loans at midsized and smaller regional banks. And at seven banks shut down by the FDIC in the last couple of weeks, CRE represented 80% of the nonperforming loans. That’s a very bleak picture given what we’re about to discuss. While at a national level, CRE exposure makes up only 10% of total bank loans, the impact on regional banks has a major impact on small and midsized businesses that depend on them for capital.

Cash at Corporations. Save or Spend?
POSTED: 02:51 PM Tuesday, July 20, 2010
BY: Matthew Bristow
At some point, owners and shareholders are going to want management to put cash to work. And if we were to write this blog with a narrow and self-serving perspective, it could be HIGH CASH LEVELS = MAJOR INCREASE IN M&A. After all, as M&A Advisors, ClearRidge’s business benefits from increased M&A volumes.
In fact, results from a recent survey by the Boston Consulting Group, reveal that Mergers & Acquisitions continued to be the primary justification for managers hoarding cash, with 43% of respondents stating that strategic M&A should be the leading priority of companies with excess cash.
In reality though, large cash piles at corporations will only increase M&A volumes if management start deploying that cash. And so far, most have been playing it safe. And, in hindsight that’s been a wise decision as the companies holding the highest proportion of cash to assets have been valued by investors at a premium to their cash skinny counterparts for quite some time.

Debt Defaults Decline for Lower-Rated Companies
POSTED: 02:51 PM Thursday, July 15, 2010
BY: Matthew Bristow
The latest data shows that defaults on the bond debt of lower-rated companies has dropped from 18% a year ago to 2% today. A 2% default rate is half the historical average. Declining defaults on the bond debt of these lower-rated companies (known as junk bonds) reveal that many companies, previously in considerable distress have avoided financial disaster and are improving their financial performance.

39% Rise in M&A in 2010. 89% Expect M&A Volumes to Increase.
POSTED: 04:22 PM Friday, July 9, 2010
BY: Matthew Bristow
M&A volumes for deals under $500 million are up 39% over the same period in 2009. Middle market M&A volumes have been picking up, with approximately $300 billion of the total $339 billion of US M&A volumes attributable to midsized companies.
In the first half of this year, small to medium sized companies represented over 85% of all deals getting done in the US. Compare this to even a couple of years ago when Wall Street’s mega deals represented the majority of M&A volumes and dwarfed those of the lower and middle market.

Bank Lending Troubles – Continued Uncertainty
POSTED: 09:46 AM Thursday, July 1, 2010
BY: Matthew Bristow
US Bank lending (Commercial & Industrial Lending) as reported by the Federal Reserve Bank continues to decline and was down 18% in May year-over-year. This 18% decline is twice as severe as the previous worst decline in history of 9.3% in 1949. And the monthly declines show little signs of slowing. See chart in this story.
The picture is even worse for real estate lending at US banks. For the first time on record, we are seeing annual declines in real estate lending, down 4.6% over the same period last year. Until 2009, there had never been a year-over-year decline in real estate lending in the US and this may continue to worsen.

Non-Compete Agreements: 15 Year or Accelerated Amortization?
POSTED: 07:40 PM Monday, June 14, 2010
BY: Matthew Bristow
In a recent U.S. Tax Court case, the owners of a company amortized a non-compete over a twenty four month period, whereas under Section 197 of the tax code, relating to the amortization of certain intangible assets, the tax code states that a non-compete should be amortized over a period of fifteen years when it is “in connection with the acquisition of an interest in a trade or business or substantial portion thereof.” In this case, however, the owners justified their accelerated deductions, because they did not believe that the non-compete was entered into under the above condition.
The U.S. Tax Court, however, ruled against the Company and in favor of the IRS. In so doing, they disallowed deductions made by the owners of the Company nearly ten years earlier.

Working Capital Needs: Bust to Boom
POSTED: Thursday, June 3, 2010
BY: Matthew Bristow
How are midsized Oklahoma companies going to be able to cope with growth? This is a significant capital problem to watch out for in the next twelve months. We are going to see many companies struggling to find the cash to keep up with an increase in orders. And banks may be unwilling to extend the cash they need. As a result, now is the time to be working on better working capital systems and processes, so you can drive most of the capital requirements from internally generated cash and not need to ask for as much from your bank.
In 2006 and 2007, credit was cheap and easily available. 2010 is a new normal, so it’s time to start thinking about one of the greatest, but potentially most crippling problems you can have: How do we cope with all these new orders?

Handling Creditors when Cash is Tight
POSTED: Monday, May 24, 2010
BY: Matthew Bristow
While the economy may be showing signs of life and business activity is picking up, there are still thousands of Oklahoma companies that are strapped for cash. For many, the goal was to get through 2009 and they succeeded. Unfortunately, the reality of 2010 is not much better for cash poor businesses.

Bank Lending in Doldrums and May Stay That Way
POSTED: Friday, May 14, 2010
BY: Matthew Bristow
Greenwich Associates just came out with a new study reporting that 86% of commercial banks are moving away from commercial real estate lending, which still represents 46% of their loan books. Banks themselves are forecasting that C&I loans will grow to 25% of their portfolios in 2010, up from 22.5% last year. That, however, would likely mean an increase in C&I lending this year, which would go against historical trends. History suggests that C&I lending could continue to decline through 2012.

$445 Billion Cash Available at US Private Equity Firms
POSTED: Monday, May 10, 2010
BY: Matthew Bristow
There is currently $445 billion of uncommitted capital available at private equity firms across the United States. In particular, larger funds are most affected, with over half of the $445 billion overhang in funds with $5 billion or more in commitments and that 75% of the overhang will be in funds that raised money most recently (between 2007 and 2009).

Manufacturing M&A Data and Analysis - Q1 2010
POSTED: Thursday, May 6, 2010
BY: Matthew Bristow
Industrial Manufacturing M&A in the first quarter of this year was weaker than expected, according to PwC’s report. There were only 11 announced deals with transaction values over $50 million, down from 31 deals in the previous quarter and 16 deals in Q1 2009. Deals within the US represented a far higher proportion of global deals compared to previous year, with a US entity involved in 64% of global deals. Deals under $50 million, however, continued to be active.

Top Areas of Venture Capital interest right now
POSTED: Thursday, April 29, 2010
BY: Matthew Bristow
If you have a new project that needs funding, it’s critical to know which investors to target. Investors can take many forms from institutions, venture capital, angel investors, family offices, wealthy individuals and strategic investors (companies). If within that group you’re considering venture capital, you may want to know their top areas of interest.

M&A Deal Outlook for 2010 is 78% Positive
POSTED: Saturday, April 17, 2010
BY: Matthew Bristow
Ahead of Tulane University’s annual Corporate Law Institute conference on Thursday, the Brunswick Group released a survey on Mergers & Acquisitions Activity in 2010, polling a leading group of investment bankers and transaction attorneys.
The same survey last year showed that 69% of respondents believed it would take 5 years to see a recovery in M&A [...]

Oklahoma Bankruptcies Hit New High and Still Rising
POSTED: Monday, April 5, 2010
BY: Matthew Bristow
There were over 158,000 bankruptcy petitions filed in the US in March 2010, according to a recent report from Aacer, a bankruptcy data collection company, which was 35% more than the previous month. This was also a 19% increase over filings in October 2009, the previous high since personal bankruptcy law was tightened in October 2005.
Taking it to a more local level, the Bankruptcy Court of the Eastern District of Oklahoma highlights the same trend as the rest of the US, showing an increase in of 8% for the first quarter of 2010, compared to the same period in 2009 and 31% higher than 2008.

Impact of Healthcare Reform on Your Business?
POSTED: Wednesday, March 31, 2010
BY: Matthew Bristow
Whether you were for or against healthcare reform, it is difficult to have an informed debate. Hardly any of us understand the Patient Protection and Affordable Care Act, let alone have sufficient information to debate how it may impact our businesses in Oklahoma.

Wind, Solar, Oil or Gas – where to invest?
POSTED: Thursday, March 18, 2010
BY: Matthew Bristow
Irrespective of the industry, nothing is more important in a new venture than management. Past performance cannot guarantee future performance, but backing a management team that has consistently delivered is a recipe for success. Their reputation and track record speaks volumes. The best managers don’t win on every play, but they understand how to cut their losses and mitigate unnecessary risk. And that ability is a positive attribute to increase the likelihood of a positive return on investment.

M&A volumes picking up for midsized private companies

Know which bank your business needs to work with

Where is Warren Buffet’s blog?

What Shape is the Economic Recovery? 

The Best Companies are like Olympic Athletes

Stimulus Bill too Slow to Flow