May 2018 Newsletter

Early last month, there was a good piece in the Orlando Business Journal about the recent M&A activity in Central Florida and the complexities that go into those types of transactions.

More insightful, though, than the various structures and unique terms a given deal may include was the psychological toll that the sale of a business can take on its owners — especially when those folks are the people (or are related to the people) who started the business.  For many business owners, their identity, time, and much of their wealth and livelihood is tied up in their business.

The Conway Center for Family Business estimates that the average lifespan of a family-owned business is 24 years. For most of us, that represents roughly a third of our lifetime. So it’s no wonder that the idea of transitioning out of it comes with a boatload of stress. From worrying about your beloved employees to you and your family’s financial and personal future, there’s a lot of emotion involved.

It doesn’t help matters that the due diligence process is often arduous and chalk-full of scrutiny. So why go through the process at all? Why not pass it on to the next generation? Well, according to Bloomberg Business Week only 40% of U.S. family-owned businesses are passed on to the second generation. For third-generation, it’s a meager 13% — and those numbers are trending down. Meanwhile, the number of folks reaching retirement is at an all-time high. The U.S. Census Bureau reports that 10,000 baby boomers retire every day; many of them are business owners.

So, if the most common method of business-succession of the past is trending down while more owners than ever are looking to move towards retirement, what gives? Private Equity and strategic competitors seeking consolidation are becoming the new norms for business owners looking to move on to the next chapter of their lives. One stark proof point: deal activity in U.S.

Private Equity hit new highs in 2017 in both deal count and deal value, and Pitch Book believes a new record could be hit in 2018. Due to low-interest rates and an influx of money into PE funds, there’s more capital than ever that needs to be put to work. How does that affect business owners? Higher valuations! Monetarily, it’s one of the best times ever to be the captain of a profitable private business with your eyes on the exit door.

That doesn’t erase the fact that the sale process comes with the aforementioned challenges. But like all great outcomes, the obstacles are there to be overcome and if you’re working with an experienced team of advisors, it can make the journey much more palatable (and profitable).

 

If you or anyone you know is considering raising growth capital or selling/buying a business, please let us know. We’d love to chat.

 


Portfolio company that just closed out its seed round

 

Rentivity.com

Rentivity, a Florida based real estate technology company, successfully completed a fundraising round with NewGate Capital Partners of an undisclosed amount. Rentivity is launching the first end-to-end digital marketplace for single-family home rentals. Their solution integrates and supports all users (owners, landlords, property managers, tenants, vendors, etc.) in a single, mobile friendly, platform. Rentivity will save time and money for both renters and property owners while providing detailed reporting and a digital audit trail of all transactions.

 

You can visit them and stay up-to-date on their full market launch at rentivity.com.

 


 

Machine-Part Manufacturing Company for Sale

 

Image result for Machine-Part Manufacturing

 

NewGate Capital Partners has recently listed for sale a manufacturing company that is focused on producing machine parts for envelope, plastic bag, and notebook manufacturers. The Company was founded in 2005 and currently employs 11 people.

It is headquartered outside of Pittsburgh, Pennsylvania in a 10,000 square foot facility and mostly serves clients throughout Pennsylvania. Their niche-focus is a competitive advantage that has resulted in year-over-year sales growth of 13%. They finished the 2017 calendar year with just over $2 million in sales and an adjusted EBITDA of $600k and are expecting similar or better results for 2018.

 

The owner is currently looking to retire but has management in place that can take over post-transition.

The sale of the business includes the land and manufacturing facility.

 


 

 

 

Walmrt buys Flipkart

Walmart Gearing up in its Rivalry with Amazon

This article was originally posted on Recode.net by 

Walmart announced on Wednesday that it will buy a majority stake in India’s Flipkart e-commerce company, setting off a new chapter in its rivalry with Amazon, which has identified the world’s second-most populous country as the emerging international market of the future that it must win.

Walmart will pay $16 billion for a 77 percent stake in the company and says it will support Flipkart’s goal of eventually going public as a majority-owned subsidiary. Some Flipkart investors — including co-founder Binny Bansal, Tencent and Tiger Global — will continue to hold stakes in the company.

In its most recent fiscal year, Flipkart net sales grew more than 50 percent to $4.6 billion, but the company registers heavy losses as it battles Amazon for supremacy in the fast-growing e-commerce market.

If the deal were to close in the second quarter, Walmart said its earnings per share would be negatively impacted by 25 cents to 30 cents. Walmart expects that negative impact to grow to around 60 cents per share in the next fiscal year as it ramps up investment in the company.

 

walmart-flipkart-deal
“With the investment, Flipkart will leverage Walmart’s omni-channel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while Flipkart’s talent, technology, customer insights and agile and innovative culture will benefit Walmart in India and across the globe,” Walmart said in a release.

Flipkart was founded in 2007 and for many years was the leaders in India’s small but fast-growing e-commerce market, raising north of $7 billion in total to fund its growth. But Amazon’s entry into the country in 2013 has led to a fierce, cash-burning fight to become the dominant player in India.

Amazon has publicized investments of more than $5 billion into its India business as it supplants China as its most important long-term international market. Amazon has said that more people joined Amazon Prime in India in its first year of availability there than in any other new Prime-eligible country.

Between the Flipkart and Jet.com acquisitions, Walmart has now agreed to pay more than $19 billion combined for unprofitable businesses in order to become more competitive in online commerce in the U.S. and India. That’s the price the giant brick-and-mortar retailer must play for treating online sales as a side hobby for so long.

Walmart’s stock was down 4 percent in morning trading.

01- Oct2015
Posted By: Vanessa
177 Views

4 Reasons to Invest in Startups

growing a startup

Why should you invest in startup companies?

Here are four areas where investing in startups and the private markets is superior to investing in Wall Street:

Access

Investing in a Startup gives you unmatched access to the company and its affairs. You get to see minute details that you could only guess in a public company.

 

Legal Insider Information

According to Jason Cohen, “They  say the only way to consistently make money on Wall Street is to have insider information. Unfortunately it’s not a joke,  and although it’s illegal (and people sometimes go to jail for it ), those in the know will tell you it’s the norm.” Remember the Martha Stewart Case anyone?  Investing in an startup gives you legal insider information on a level that could send you to jail on Wall Street.

 

Arbitrage

Simply put, arbitraging is buying in one market and selling in another while taking advantage of price differences. For savvy investors, startups present opportunity to buy low and sell high when the company is either acquired by a bigger competitor or it goes public through an IPO – which is simply a process designed  for early investors to cash in on their investment.

 

Present at Creation

A startup is a creative force. At best, it is an innovative engine designed to push the limits of current dogmas. Startups investors are the grease that keeps this creative engine moving and they get to be present at the inception of such creative endeavors. America runs on innovation, startups thrive on innovation and startup investors fund such an innovation.

This article is based on an article first published on 2011 by Joe Alvarez Jr

 

 

 

12- Aug2015
Posted By: Joe
174 Views

MYTH: ANGEL BUSINESS INVESTMENTS DON’T DELIVER RETURNS

Million dollar myth: Sydney Angels co-founder Hamish Hawthorn says as little as $15,000 can get you access to an angel investment opportunity, and it’s not only grey-haired men that participate.

business investments

 

MYTH: ANGEL INVESTMENT DOESN’T DELIVER RETURNS

Angel business investments are certainly a high-risk area. Half of all startups, even after good screening, due diligence and post-business investments help, will fail to return what was invested. But these losses can be more than compensated by the few that return 10-30x the initial investment. The key to making returns is to have a portfolio of enough investments to contain some of these big winners. Those who use a disciplined investment process to build portfolio can see extraordinary returns from the startup sector over time.

A large-scale study undertaken by the Kauffman Foundation and NESTA found that angel investors in the US and UK generated an average return of 2.5 times the amount invested in a mean time of four years from investment to exit, equating to a very healthy 26% internal rate of return. “

 

 

Excerpt taken from article:  “We’re not all retired blokes, and 4 other angel investor myths busted” by Sydney Angels co-founder Hamish Hawthorn  http://www.brw.com.au/p/entrepreneurs/hamish_busted_sydney_angels_retired_O6yEoclYtKcIHAJ0S1n56H

 

 

 

 

Women – next wave of Angel Investors

Women – next wave of Angel Investors

http://www.forbes.com/sites/kauffman/2015/04/21/women-the-next-wave-of-angel-investors/

Except from the article by Alicia Robb:

“Females have historically made up less than 15% of the angel investors in the United States. The University of New Hampshire’s Center for Venture Research estimated that women angels represented 19.4% of the angel market in 2014, which was a significant increase from the 12.2% number from just two years prior. Women-owned ventures accounted for 23% of the entrepreneurs that were seeking angel capital and 19% of those entrepreneurs that received angel investment in 2013.”

Women – next wave of Angel Investors, Entrepreneur Magazine

1)      On a macro level, the biggest impact for getting more women on the investing side is to create more women entrepreneurs. Entrepreneurs are more likely to invest in other entrepreneurs, and the risk profiles of entrepreneurs match well to investing

2)      Highlight women investors more often. Every time she sees an opportunity to talk about angel investing, she makes sure women are speaking, which also brings more women.

3)      Any efforts to educate people outside of the startup community about angel investing would attract both men and women, and this would bring in investors who aren’t entrepreneurs.

New Tender Watch Video

 Tender Watch Video

Tender Watch is a proactive monitoring system that allows family members to keep track of elderly and handicapped loved ones who choose to live alone. This short video describes how the system works and the benefits of it’s use. Tender Watch is currently looking for strategic partners to help bring this innovation the world on a larger scale. Enjoy!