Path Forward

Initial Disclosures
Though it seems self-evident, we are constantly surprised at the number of submissions we receive without the most basic data required to make an initial evaluation. At the risk of redundancy, we outline below the details we look for when evaluating a prospective investment. The more information we have about a prospect the better able we are to evaluate the risk in a potential transaction and the more confident we can be in our ability to add value. Accordingly, we prefer a certain minimum of initial disclosure. At a minimum we look for:

Detailed financial disclosures including:

The nature of the relationship between the selling party and the seller.

The nature of the business, The location of the firm and number of employees.

Three (3) years each of historical financial statements composed of at least:
• Income statements
• Balance sheets (including a balance sheet current to within 90 days)
• Cash flow statements
• Historical accounts payable/accounts receivable data and any aging information
• Historical capital expenditure data

Three (3) years of current and historical details with respect to:
• The entity’s capital structure
• The nature of the debt or other obligation

Of course, the more detail we are given the better. Accordingly we give some preference to opportunities where additional information is available. Along these lines we prefer to see:

Five (5) years each of historical, quarterly and audited, financial statements composed of at least:
• Income statements
• Balance sheets (including a balance sheet current to within 90 days)
• Cash flow statements
• Historical accounts payable/accounts receivable data and any aging information
• Historical capital expenditure (CapEx) data

Five (5) years of current and historical details with respect to:
• The entity’s capital structure
• The nature of the debt or other obligation
• Details of any shareholder agreements/voting trusts/dispositions
• Current descriptions of the structure, operations and facilities of the entity, including any subsidiaries and/or partnerships
• Biographical data on the officers, directors, key employees, etc.
• A summary of patents, copyrights, and other intellectual property
• A summary of significant contracts or other recurring revenue opportunities

Perhaps most importantly, we seek to understand the motivations of the seller. A transaction is a meeting of the minds. The more frank and open disclosure about the seller’s motivations we are privy to the better we can tailor a solution that addresses the sellers many needs. We highly encourage sellers to take particular care in crafting their statement on motivations.

We regularly give priority in our evaluations to opportunities that err on the side of disclosure over those with more limited detail.