Category: Business Broker

Dec 2018 Newsletter

As we near the end of 2018 (my, my what a year this has been), we would like to provide a brief overview of a few of the exciting partner companies in our portfolio (in no particular order). As you can see, we are industry agnostic so our portfolio ranges from the highest of high-tech to a delicious line of Rum. We have additional companies in our portfolio as well as multiple businesses for sale that we will cover in future newsletters.We are very fortunate and grateful that a boutique firm like NewGate Capital is able to attract such quality deals.


locator x company logo

LocatorX plans to disrupt the $27 Billion GPS location services market through their partnership with Oxford University which provides exclusive rights to the University developed Solid-state Miniature Atomic Clock. Once scaled, the patented Global Resource Locator will enable real-time tracking of any asset – both indoors and outdoors – at a low per-unit cost, without the need of installing expensive beacon systems.

As the Internet of Things (IoT) continues its rapid growth, the Global Resource Locator will seamlessly integrate into any device or product to enable accurate and timely location tracking.  While the Global Resource Locator is being developed for mass production, LocatorX is creating a suite of products to improve product and tracking information which will commercialize the back-end functionality of the final product and generate near term revenue.


threatlocker
ThreatLocker has developed an application whitelisting solution that allows businesses to control exactly what is running on their systems while giving them complete visibility. The ThreatLocker solution stops users from running unknown applications (i.e. viruses, malware) without explicit permission from the I.T. department. This results in the virtual elimination of malware and cyber breaches. Unlike traditional whitelisting solutions, ThreatLocker is easy to deploy, requires little management, and easy to permit new software when it is needed. ThreatLocker is fully developed and is in the market with customers and revenue.


A passion for Caribbean culture, coffee and rum. RumJava is a line of artisan crafted rums (4 dark rums and 2 rum creams) distilled in Florida from Florida cane and other natural ingredients. The rums, infused with five Java’Mon Coffee blends, are positioned in the growing flavored rum category and they compete with premium sipping rums. RumJava was awarded 3 Gold Medals at the Miami RumFest and was the highest selling rum at Miami RumFest, UK RumFest and the London Spirits Show. Created in 2017, RumJava has sold 24,000 bottles in 8 states, the UK and the Virgin Islands and is increasingly cashflow positive.

 


secureair

SecureAire has developed and commercialized today’s most advanced air purification systems to combat the growing problem of indoor air quality. SecureAire’s patented Particle Control Technology is able to filter out critical contaminants including viruses, bacteria, mold, VOCs and dissolved gasses (CO2). SecureAire technology has been proven through several supervised pilot projects in hospitals and commercial buildings.  SecureAire is currently manufacturing and selling units for commercial and residential applications.


SuperCooler Technology

SuperCooler Technologies focuses on precision refrigeration and beverage supercooling. They hold numerous patents for chilling, storing and serving beverages. SuperCooler’s flagship product keeps liquids just below their freezing point to offer a perfectly cooled beverage with an instant slush.  A version of this product is being offered in partnership with Coca-Cola branded as Artic Coke. Two of the first Artic Coke Supercoolers in Florida have been placed in Disney Springs at the Coca-Cola Store.


Rentivity is developing the first end-to-end digital marketplace for single-family rentals. A highly automated single point of entry SaaS platform integrates all users, streamlining the entire asset lifecycle. Originated from experience, Rentivity is designed to scale while mitigating risks, improving rents, reducing vacant time on market, and controlling costs.  The Rentivity platform is fully developed, has completed testing, a pilot launch and will be fully released with live customers before year’s end.


GeoToll

GeoToll has created a mobile phone app that replaces the window stickers and other devices used for electronic toll collection. Not only easier to use than SunPass, EZ-Pass, Peach Pass, and all the other toll passes but your one GeoToll app can handle them all. GeoToll has you covered whether you are driving locally, cross country or in a rental car.

GeoToll technology has been proven through multiple pilot tests and is now entering two go-to-market launches in California. The Bay Area Toll Authority (BATA) and the LA County Metropolitan Transportation have awarded GeoToll exclusive contracts and have committed over $350k to proving customer acceptance and operational benefits.


We want to wish each and everyone of you a wonderful Holiday and a very prosperous New Year.

May 2018 Newsletter

Local Mergers and Acquisitions

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 away from a family built business comes with a boatload of stress. You worry about your employees 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.

If the most historically common method of business-succession is trending down and more business owners than ever are looking to move towards retirement, how can a business owner plan to move forward? 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 advisers, 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 atrentivity.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.

 


 

 

 

Possible scenario(s) of the future of various industries

Change is inevitable

I imagine some of this will not turn out quite as planned, but it’s interesting to think about, just the same.
In 1998, Kodak had 170,000 employees and sold 85% of all photo paper worldwide. Within just a few years, their business model disappeared and they went bankrupt.

What happened to Kodak will happen in a lot of industries in the next 10 years – and most people won’t see it coming. Did you think in 1998 that 3 years later you would never take pictures on film again?

Yet digital cameras were invented in 1975. The first ones only had 10,000 pixels, but followed Moore’s law. So as with all exponential technologies, it was a disappointment for a long time, before it became way superior and got mainstream in only a few short years. It will now happen with Artificial Intelligence, health, autonomous and electric cars, education, 3D printing, agriculture and jobs. Welcome to the 4th Industrial Revolution. Welcome to the Exponential Age.

Software will disrupt most traditional industries in the next 5-10 years.

Uber is just a software tool, they don’t own any cars, and are now the biggest taxi company in the world.  Airbnb is now the biggest hotel company in the world, although they don’t own any properties.

Artificial Intelligence: Computers become exponentially better in understanding the world. This year, a computer beat the best Go player in the world, 10 years earlier than expected.

In the US, young lawyers already don’t get jobs. Because of IBM Watson, you can get legal advice (so far for more or less basic stuff) within seconds, with 90% accuracy compared with 70% accuracy when done by humans.  So if you study law, stop immediately. There will be 90% less lawyers in the future, only specialists will remain.

Watson already helps nurses diagnosing cancer, 4 times more accurate than human nurses.

Facebook now has a pattern recognition software that can recognize faces better than humans. In 2030, computers will become more intelligent than humans.

Autonomous cars: In 2018 the first self-driving cars will appear for the public. Around 2020, the complete industry will start to be disrupted. You don’t want to own a car anymore. You will call a car with your phone, it will show up at your location and drive you to your destination. You will not need to park it, you only pay for the driven distance and can be productive while driving. Our kids will never get a driver’s license and will never own a car.

It will change the cities, because we will need 90-95% less cars for that. We can transform former parking spaces into parks. 1.2 million people die each year in car accidents worldwide. We now have one accident every 60,000 mi (100,000 km), with autonomous driving that will drop to one accident in 6 million mi (10 million km). That will save a million lives each year.

Most car companies will probably become bankrupt. Traditional car companies try the evolutionary approach and just build a better car, while tech companies (Tesla, Apple, Google) will do the revolutionary approach and build a computer on wheels. Many engineers from Volkswagen and Audi; are completely terrified of Tesla.

Insurance companies will have massive trouble because without accidents, the insurance will become 100x cheaper. Their car insurance business model will disappear.

Real estate will change. Because if you can work while you commute, people will move further away to live in a more beautiful neighborhood.

Electric cars will become mainstream about 2020. Cities will be less noisy because all new cars will run on electricity. Electricity will become incredibly cheap and clean: Solar production has been on an exponential curve for 30 years, but you can now see the burgeoning impact.

Last year, more solar energy was installed worldwide than fossil. Energy companies are desperately trying to limit access to the grid to prevent competition from home solar installations, but that can’t last. Technology will take care of that strategy.

With cheap electricity comes cheap and abundant water. Desalination of salt water now only needs 2kWh per cubic meter (@ 0.25 cents). We don’t have scarce water in most places, we only have scarce drinking water. Imagine what will be possible if anyone can have as much clean water as he wants, for nearly no cost.

Health: The Tricorder X price will be announced this year. There are companies who will build a medical device (called the “Tricorder” from Star Trek) that works with your phone, which takes your retina scan, your blood sample and you breath into it.nIt then analyses 54 biomarkers that will identify nearly any disease. It will be cheap, so in a few years everyone on this planet will have access to world class medical analysis, nearly for free. Goodbye, medical establishment.

3D printing: The price of the cheapest 3D printer came down from $18,000 to $400 within 10 years. In the same time, it became 100 times faster. All major shoe companies have already started 3D printing shoes.  Some spare airplane parts are already 3D printed in remote airports. The space station now has a printer that eliminates the need for the large amount of spare parts they used to have in the past.
At the end of this year, new smart phones will have 3D scanning possibilities. You can then 3D scan your feet and print your perfect shoe at home.  In China, they already 3D printed and built a complete 6-storey office building. By 2027, 10% of everything that’s being produced will be 3D printed.

Business opportunities: If you think of a niche you want to go in, ask yourself: “in the future, do you think we will have that?” and if the answer is yes, how can you make that happen sooner? If it doesn’t work with your phone, forget the idea. And any idea designed for success in the 20th century is doomed to failure in the 21st century.

Work: 70-80% of jobs will disappear in the next 20 years. There will be a lot of new jobs, but it is not clear if there will be enough new jobs in such a small time.

Agriculture: There will be a $100 agricultural robot in the future. Farmers in 3rd world countries can then become managers of their field instead of working all day on their fields.

Aeroponics will need much less water. The first Petri dish produced veal, is now available and will be cheaper than cow produced veal in 2018. Right now, 30% of all agricultural surfaces is used for cows. Imagine if we don’t need that space anymore. There are several startups who will bring insect protein to the market shortly. It contains more protein than meat. It will be labeled as “alternative protein source” (because most people still reject the idea of eating insects).

There is an app called “moodies” which can already tell what mood you are in. By 2020 there will be apps that can tell by your facial expressions, if you are lying. Imagine a political debate where it’s being displayed when they are telling the truth and when they are not.

Bitcoin may even become the default reserve currency. Of the world.

Longevity: Right now, the average life span increases by 3 months per year. Four years ago, the life span used to be 79 years, now it’s 80 years. The increase itself is increasing and by 2036, there will be more than one year increase per year. So we all might live for a long long time, probably way more than 100.

Education: The cheapest smart phones are already sold for $10 in Africa and Asia. By 2020, 70% of all humans will own a smart phone. That means, everyone has the same access to world class education.? Every child can use Khan academy for everything a child learns at school in First World countries. We have already released our software in Indonesia and will release it in Arabic, Suaheli and Chinese this Summer, because I see an enormous potential. We will give the English app for free, so that children in Africa can become fluent in English within half a year. Boom!

 (Author unknown)

Why Choosing Franchise Ownership over Starting from Scratch

So if I scared you in the last blog about the 85% failure rate you are now being realistic about your chances. I also promised a way to get into business that is less risky, ready.

I?m writing this to both newbies and serial entrepreneurs, consider a proven concept with a well-established franchise. Of course, you already know all about that and have been receiving vast amounts of promotional material from various Franchise ownership and development departments. They want you to buy a NEW location. While their concept might be proven, locations seldom are. However, good Franchisors have good methods for picking locations. So what do I have to say that?s different?

I suggest you seek out existing franchises that are either underperforming or the owner (franchisee) just needs or wants to get out. Franchisors know about these folks but will not suggest this upfront as their fees are much less when a transfer is made. In fact, at any one time at least 20% of a Franchise portfolio is in transition or holding the ownership of the franchise is looking to move out a poorly performing location because the owner is just a bad manager or lazy thinking he or she didn?t have to work at the business. This can be the ?chicken? way of getting into a?business as there are good records and you?ll know what you are getting into. Plus, it will have revenues day one! You will most likely get into this existing location around 30% less than if you had started it. Now that?s a better deal. We like to be creative in finding deals for folks.

For you serial business folks with deeper pockets, there are often groups of locations available for many of the same reasons above. You can buy the whole package or pick and choose for a slightly higher price. Either way, you get a viable, ongoing group of locations priced based on their current performance, not the excellent performance you will get out of them once you apply your smart management talents. Choosing franchise ownership can reap great benefits.

By

Steve Ivey

Keep it Confidential: When Selling your Business

Confidentiality when selling your business

confidentiality - Selling your business

The best way to relate to a situation is imagining you are there. If I were in a job, everything is going well, and then, rumor has it the company is on sale. The first thing it would come to my mind would be, what?s going to happen to my job? Should I start looking for a new one?

When selling a business the best is to do it discreetly for many?reasons:

News that your business is for sale can generate negative reactions among your employees, customers, suppliers, creditors and bankers.

As an employee, I believe this would lower the morale and make others nervous affecting productivity and customer service. Your competitors can get predatory and spread the word. It opens the door for them to steal business from you.

You, as a business owner, want to protect your business at all costs. Whatever is the reason for you selling your business, it is imperative to be discreet. Hiring a business broker can be beneficial when it comes to selling your business while keeping a low profile.?? They can list your business for sale while at the same time protecting the identity of your company.

A business broker uses a document called a Blind Profile, a document describing the company without revealing its identity.? In the case of a buyer showing up, he must sign a confidentiality agreement to have access to any sensitive information, protecting you and your business.

You as a business owner should focus on running your business even if it?s on sale. A business broker is an intermediator who will help you to run the process smoothly from beginning to end.

 

NewGate Capital Partners can help you sell your business.?Contact us anytime at?http://www.newgatecapitalpartners.com/business-brokerage/

 

 

Why Hiring a Business Broker when Selling your Business is a Wise Idea

How a broker can help when selling your business.

For starters, a broker is an independent agent whose main responsibility is to bring sellers and buyers together. If you hire a real estate broker to sell your house the broker acts as a middleman, he doesn’t own the house and he instead facilitates the transaction. Just like with a house if you have a business, you as an owner can sell it yourself. However, there are many reasons why you should consider hiring a business broker:

      • Paperwork: Do you know how much paperwork you will need if you are selling your business? According to the Small Business Administration SBA you need to prepare a sales agreement. What else? You can invest your time doing the research on your own or consult a business broker. A business broker’s expertise consists of navigating through extensive paperwork and the formalities in a daily basis. Having an experienced business broker on your team will save time completing paperwork. Don’t forget that time is money!
      • Business Continuity: Selling a business is a full-time job as it is. The owner should maintain focus on running the business and take it to its full potential. All of these while selling.
      • Confidentiality: If you are an owner and are selling your business how do you keep the matter confidential from employees and other stakeholders. You don’t want anyone to panic. The situation can be disruptive to the normal operations of your business. If you choose a business broker, he can protect the identity of your company while on sale. They can use a blind profile, a document describing the company without revealing its identity. We are going to talk further about ‘Confidentiality when selling a business’ in our next blog.
      • Valuation Knowledge: Brokers can help you determine the value of your business. They have access to tools such as business transactions databases. There are also other variables that affect the value of your business. A broker can provide guidance calculating the accurate value of your business.
      • Marketing: Business brokers can help you market your business. They can suggest diverse ways to advertise and put your business out there.

Ultimately, the decision is yours, you should take in to account the variables of time, money and resources and put on a balance and see what works better for you and your business.

New Gate Capital Partners is here to answer your questions, we can help you to sell your business.  Feel free to check out our business brokerage page.

Thinking of Selling your Business

You are contemplating selling your business and don’t know where to start.

We suggest asking yourself some basic questions, start from there, and then talk with your trusted accountant and/or attorney.

The main question : Should I sell my business?

    • Why are you selling your business?
    • Is my business ready to sell?
    • Is the business profitable?
    • What type of professionals do I need in my team?
    • Are the current market conditions right?
    • What’s the paperwork?
    • What about taxes?

  • These are just a few of several questions you may have and need answers for before selling a business.

    Selling your business may be a daunting journey but it doesn’t have to be scary. You can have many reasons why you are considering selling, it may be burnout, retirement, health, it’s time to pursue other passions or you are leading a different direction in your life. Whatever it may be NewGate Capital Partners are here to assist you in the process. For us, each potential new client is an opportunity to provide something exceptional, focusing on important things like performance, integrity, and trust.
    We are a team of Florida business brokers ready to assist you in selling your business. If you have more questions about how to sell a business, feel free to contact us anytime at http://www.newgatecapitalpartners.com/business-brokerage/

    Recommended article:
    Thinking of Selling Your Company? 8 Things to Consider First

Why EBITDA is Not Cash Flow

Why Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA) is Not Cash Flow

Published  by Axial  November 2013 by Cody Boyte

 

There is often a misconception that EBITDA is synonymous with cash flow. While most seasoned deal professionals are careful to remember the distinction, some company owners (or entry-level analysts) can benefit from a friendly reminder.

The EBITDA metric gained prominence with the arrival of the LBO industry in the 1980’s, as buyout firms used it to estimate how much debt a company could take on, a key component of the LBO strategy. While EBITDA has become standard in company valuation – purchase prices and loan covenants are often quoted as multiples of EBITDA – the metric is not uniformly defined under GAAP standards and its calculation varies from company to company. This variation can lead to disparities and misunderstandings about the true cash-generative abilities of a business.

EBITDA does not take into account any capital expenditures, working capital requirements, current debt payments, taxes, or other fixed costs which analysts and buyers should not ignore. The cash needed to finance these obligations is a reality if the business wishes to grow, defend its position, and maintain its operating profitability.

Here are three costs that are not included in the EBITDA calculation, and their omission tends to overstate operating cash flows:

Capital Expenditures

Certain industries like heavy manufacturing, shipping, aviation, telecom, clean technology and oil and gas require heavy ongoing or up front investments in equipment. EBITDA does not take into account capex, the line item that represents these significant investments in plant and equipment. Ignoring capital expenses to inflate EBITDA by $3.8B precipitated the bankruptcy of WorldCom. Essentially, the company capitalized operating expenses, allowing them to be depreciated over time, thus decreasing operating expenses and boosting EBITDA.

Depreciation

“The biggest problem I encounter is an over or underestimation of capital expenses for asset-heavy companies such as trucking. Adding back all depreciation for a company like this without leaving an allowance for capex can grossly overestimate the available cash flow. However, not adding back any depreciation can underestimate the cash flow, especially if the company uses accelerated depreciation,” advises Axial Member Jaime Schell of Plethora Businesses. There have been more insidious cases of companies manipulating depreciation schedules to inflate EBITDA, such as?Waste Management in the mid-nineties extending the useful lives of its garbage trucks and overstating their salvage value.

Working Capital Adjustments

Businesses need to invest revenue back into the company to keep expanding. EBITDA does not account for changes in working capital and the cash required to run the daily operating activities. Ignoring working capital requirements assumes that a business gets paid before it sells its products. Very few companies operate this way. Most businesses provide a service and get paid in arrears. Ideally a business collects up front for its services and pays in as much time as possible to remain as liquid as possible and to quickly reinvest cash into profitable investments like inventory purchases. This relationship between sources and uses of cash speaks to a company’s ability to take on more projects such as higher debt payments in the case of an LBO.

While EBITDA is useful in that it allows for a back-of-the-envelope comparison of two companies with similar business models or in the same industry, a 2000 letter to Berkshire Hathaway shareholders written by Warren Buffet put EBITDA in its place: “References to EBITDA make us shudder…We’re very suspicious of accounting methodology that is vague or unclear, since too often that means management wishes to hide something.

David Simmons at Forbes magazine once called EBITDA the “device of choice to pep up earnings announcements.” It does not exist in a vacuum and is irrelevant on a standalone basis. It does help when comparing similar companies under time constraints, but is by no means a thorough valuation tool when making an important investment decision.

 

compliments of: http://www.axial.net/