By John Hallal

Business today faces a significant challenge in gaining access to capital to expand operations and develop new market share. With uncertainty and turmoil in the global markets, each event can undermine a firm’s ability to make requests of the credit markets. Despite the illiquidity of some investment vehicles, company leaders must obtain capital to grow their businesses and increase profits.

In times past, a locally owned business’ managers simply approached a neighborhood bank and filled out an application. If the firm had met previous payments and obligations on time, the local banker approved the loan and devised a payment system that worked within the business’ revenue streams and cash flow, while meeting the bank’s goals of creating returns for shareholders.

Some banks remain unaffected by the recent subprime mortgage crisis. These institutions retained sound lending principles and did not favor high interest in lieu of principal payments. Of course, many local banks continue to issue loans, but especially for branch banks, the criteria for extending credit have become much stricter than in years past. If a business owner can develop a relationship with a local bank that preserves a measure of autonomy, he or she holds an important card as a developer of local jobs, reputation, and tax revenue.

Commercial lenders not related to banks provide a valuable resource for companies that either do not have a strong local retail banking resource or have exhausted these insular organizations. Corporate leaders unused to more restrictive lending models often express concern about the relationship of assets and collateral to the direction of commercial borrowing. They need to realize, however, that these organizations facilitate funding for companies that do not qualify for the current requirements of institutional lending.

While such methods may seem exotic and even worrisome for some business owners and management, some of today’s companies rely on financial tools that experts would have considered extreme even a decade ago. Business finance has become far more specialized than in years past, while some traditional banks maintain standards set in the 1950s, when companies were either poised for mergers and acquisitions or in a position to overtake competitors in a city or region.

About the Author: John Hallal provides businesses with a wealth of experience in legal and financial resources aimed at growth and development. Possessing a keen ability to identify companies with profitability potential, John Hallal helps enterprises find and nurture new funding avenues.

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Since 2010, John Hallal has served as founder and partner of Acceleration Law. This Andover, Massachusetts, law firm focuses on business law and assists companies in the life sciences, Internet, technology, and software fields.

Emerging businesses can turn to Acceleration Law for aid. Through the firm, they can receive guidance in the form they should take, ways to obtain capital, and the development of their infrastructure.

Executive compensation functions as an important element when drafting contracts for senior members, and John Hallal can create equity agreements beneficial to the company and its employees. The firm also designs contracts related to commercial transactions with vendors, clients, distributors, and other entities.

Many businesses must protect their intellectual property. In addition to defending those whose trademarks, copyrights, and patents have been infringed, Acceleration Law handles the creation of licensing agreements.

This law firm also understands the wide range of issues involved in employment law. When representing management, Hallal offers insights into strategies that can enhance a company’s prevention, compliance, and best practices protocols.

To read more about this firm, log onto AccelerationLaw.com.

An attorney and partner at Acceleration Law Group, John Hallal has garnered many years of experience counseling clients. Outside of work, he enjoys an active lifestyle and regularly plays tennis and golf. In the winter, John Hallal enjoys skiing, although safety remains an important aspect of his hobby.

Individuals must ensure that they purchase the proper gear to protect themselves when skiing. Helmets prove essential for novice and experienced skiers alike. Studies have shown that the majority of head injuries while skiing happen to intermediate or advanced skiers going down steep slopes at high speeds. A proper helmet drastically reduces the chance of injury. Researchers have demonstrated that wearing a helmet reduces the risk of serious injury by up to 56 percent.

Skiers have a number of options when purchasing a helmet and the correct choice largely depends on personal preference. Individuals should always ensure a proper fit and verify that the helmet does not impair their hearing. A trend of “audio helmets” has arisen. These helmets allow skiers to listen to music, but this can prove dangerous on the slopes, where skiers must be able to hear warnings. Individuals who engage in more dangerous forms of skiing, such as freerides, may want to consider a full-face helmet.

Angel investing has become the preferred source of seed capital for many small businesses and entrepreneurs across America. Unlike venture capital firms, angel investment clubs generally focus on local companies; after a culling process, investors pool their capital to provide seed or launch stage funding for promising start-ups. After the funding process, some members may choose to retain interest in the company by becoming members of the board.

The Boston Harbor Angels investment group brings together over 50 business leaders to invest in early-stage technology-oriented companies from the medical, information technology, aviation, and business sectors. Currently, Boston Harbor Angels members are supporting investments in the early-stage companies Carbonite, Inc., which just went public, and SmartCells, now owned by Merck.

About the Author: John Hallal is a member of Boston Harbor Angels and also serves as Managing Director of Network Blue, Inc., a business consulting firm based in Andover, Massachusetts. Before becoming a financial adviser, Mr. Hallal practiced law for over ten years. He holds a Juris Doctor from Boston College Law School.

Dennis Lehane

March 18, 2013

Dennis Lehane at Borders Posted by garryknight

 

One of Mr. John Hallal’s favorite contemporary American authors, Dennis Lehane grew up outside of Boston, Massachusetts, as the youngest of five children. After Boston College High School, Lehane enrolled at Eckerd College and then pursued his passion for writing as a creative writing graduate student at Florida International University. Lehane published his first book, A Drink Before War, in 1994, which won the Shamus Award for Best First P.I. Novel the following year. The book commenced a series based around two central characters, Patrick Kenzie and Angela Gennaro. Gone, Baby, Gone, the fourth novel in the series, was the most popular, largely due to its conversion to the silver screen in 2007. Several of Lehane’s other works have also become films, including Mystic River and Shutter Island.
Lehane published his most recent novel, The Given Day, in 2008. The book concentrates on two protagonists, a Boston Police patrolman and an amateur baseball player, after the end of the First World War when laborers were forming unions. The policeman struggles with a salary below the poverty level while the baseball player becomes involved with a local gangster to support his pregnant wife. When he is caught trying to cheat the gangster, he is forced to abandon his wife and make a living elsewhere.

In November 2010, Lehane released Moonlight Mile, the sixth novel in the Kenzie and Gennaro series and a direct sequel to Gone, Baby, Gone. After saving Amanda McCready once, the detective duo must again seek her out at the age of 16, uncovering the seedy events of the previous decade in the process.

I often have found small business owners unaware of the myriad ways to sell all or a part of their business. In advising business owners, it is important to explore these options in order to create the best opportunities. Here are eight structures for sellers to consider when contemplating a sale of their business. There are more, but these are the most common ways for lower middle market companies to “exit”.
1. Sell to Strategic Buyer
Strategic buyers are companies already in your industry. The goals of a strategic buyer in acquiring your company can vary. For example, a strategic buyer may be able to institute cost cutting measures and consolidation to achieve greater EBITDA. A strategic buyer may be looking to expand geographically, add a product line, eliminate a competitor, add talent or “roll up” its industry. A strategic buyer usually, but always, pays the highest price, but most likely will restructure your company.
2. Sell to a Financial Buyer
Financial buyers can be individual investors or a firm with experience and capital, like a private equity firm, looking to buy a company, grow it and sell at a substantial profit. Financial buyers look for opportunities to acquire companies in which they can generate a substantial IRR before selling, usually in the 5-7 year timeframe. Here, typically debt is used in the financing of the deal and, often in smaller deals, the buyer is expected to take back a note to support the deal and assist in the financing.
3. Management Buyout (MBO)
An MBO is where a current manager (or a group of managers) of a business raise capital and arrange debt to acquire all or part of your company. Challenges include the ability of the group to raise the equity level required by the banks and the right mix of managers to acquire the firm.
4. Sell A Product Line or Division
This method and structure is often overlooked by business owners. Rather than sell your entire business, it may make sense to “peel off” a product line or division and sell it first. Owners may contemplate this approach when market conditions do not support a favorable sale of their entire business but growth capital is needed and debt is not available.
5. Recapitalization
In a “recap”, the company raises money (via debt or equity) and buys back shares from the owners of those shares. This method can be used to buy off a disgruntled (or troublesome) shareholder. Of course, the ability to use debt to effectuate a recap depends on strong EBITDA and the company’s ability to borrow additional funds from lending institutions.
6. License With An Option
Entering into license agreements with larger companies often can be a fruitful way to generate growth and an ultimate exit. This is a hybrid approach consisting of providing a larger company with (1) a license of your technology and (2) an option to purchase your company down the road. This approach is gaining in popularity, especially in the life sciences sector given the large risks associated with drug development and the like.
7. Private Placement of Equity for Family Owned Businesses
There are investment firms in the US which specialize in buying significant stakes in successful private or family owned firms. These firms link IRR to the achievement of financial goals and work in concert with you to grow the company with an eye toward selling the business within 3-7 years.
8. Initial Public Offering or Self-Registration
There are a few alternatives available in the public markets for middle-market firms to go public, including self-registration, reverse merger and, occasionally, initial public offerings. The benefit of these structures is increased liquidity for the remaining shares and cash for the shares sold. Business owners are wise to evaluate these alternatives carefully, making sure the future performance and growth of the company is projected to be strong and that the market can support the stock.

John Hallal is a Adjunct Lecturer at Babson Business School where he teaches Mergers & Acquisitions for Entrepreneurs, a business attorney and advisor to lower middle market business owners. http://www.accelerationlaw.com

Based out of Boston, Boston Harbor Angels serves as a group of angel investors seeking to find investment opportunities. Since its inception, it has funded entities in the information technology, consumer retail, Internet, manufacturing and other industries.

Entrepreneurs wanting to obtain capital from this group should visit BostonHarborAngels.com to learn about the group’s expectations, perform a self-assessment, and determine if they fit the requirements of this organization. If they do, they must submit an online application providing important details, such as business plans.

If the Boston Harbor Angels’ nominating committee is interested in the firm, they invite the applicant for a screening meeting. During this interview, submitters are required to give a 10-minute presentation and answer questions from a small group of the investors. After they pass this test, they must present to the organization’s full membership and respond to additional queries. Subsequently, Boston Harbor Angels will perform due diligence on the aspiring firm. Members of the group who decide to invest will then negotiate terms with the entrepreneur.

About the Author:

The founding partner at Acceleration Law, John Hallal dedicates his career to business law. Particularly interested in new and emerging businesses, Hallal belongs to the Boston Harbor Angels.

By John Hallal

About the Author: John Hallal, a Partner at the Andover, Massachusetts-based Acceleration Law Group, also serves the business consulting firm Network Blue, Inc., as Managing Director and Babson College as an Adjunct Lecturer. Mr. Hallal ranks John Irving, Dennis Lehane, and Stephen King among his favorite authors.

One of my favorite stories is a novella called Rita Hayworth and the Shawshank Redemption, which was subsequently made into a very popular movie, The Shawshank Redemption. The story of a banker wrongly convicted of the murder of his wife and her lover and sentenced to two life terms, it explores a number of issues, including friendship, the depths to which some people will sink in taking advantage of others, and man’s indomitable will to survive. The author of the novella, Stephen King, is well-known worldwide as a prolific writer of stories of horror and the supernatural.

Almost three dozen of his works have been made into movies, including such classics as The Shining, Carrie, Misery, and The Green Mile. King authored Rita Hayworth and the Shawshank Redemption in 1982 as part of a collection of four stories titled Different Seasons. In an unusual departure from King’s regular style, none of the four tales are horror stories, although one, The Breathing Method, employs a supernatural twist at the end.

Two of the book’s other stories also were made into movies, The Body (under the title Stand By Me), and Apt Pupil. Rita Hayworth and the Shawshank Redemption, like the movie it was made into, received overwhelming critical acclaim; some critics hailed the story as King’s “greatest work,” and the movie was nominated for seven Academy Awards. The story centers on Andy, a banker who enters prison as a relatively young man and befriends another prisoner, Red, also sentenced to life. As their friendship develops over the years, Andy uses his impressive knowledge of tax code and accounting to make himself a valuable resource to the guards and the corrupt warden.

When evidence surfaces proving Andy’s innocence, the warden squelches it, determined to keep Andy in prison as his unwilling accountant. Andy’s escape after decades in prison through a hole laboriously carved in a stone wall that was concealed through the years by posters of famous actresses, starting with Rita Hayworth, is a testimony to the value of patience and determination. It perfectly illustrates one of my favorite quotes by Winston Churchill: “If you’re going through hell, keep going.”

By John Hallal
Partner, Accelerated Law Group

American business made steady advances after World War II. Even into the 1960s, many of the companies and oligopolies formed in the first two waves of mergers enjoyed household brand status. Moreover, mergers of retail companies, hotels, and even newspapers forged new strengths that led the new organizations to strong profits.

Although mergers continued throughout the 20th century, the period known as the third wave of mergers began about 1965 and lasted for about four years. One of the most interesting things about the third wave of mergers lies in the fact that in most cases, smaller firms targeted large companies during this time. Antitrust laws added difficulty for larger companies to snap up smaller ones, but these same laws allowed minor entities to use equity financing to expand their businesses.

During this period, companies began to venture into business lines completely unrelated to their own. In some cases, firms chose to acquire organizations deemed lucrative or emerging to diversify their assets and to smooth out bubbles or gaps in the industries’ profitability.

Many people remember the fourth wave of mergers because the event occurred globally and eliminated a number of well-known brands. Deregulation of a number of industries, combined with emergence from the U.S. economic recession of the late 1970s, resulted in mergers and acquisitions that included takeovers of underperforming business models, especially in such industries as airlines, pharmaceuticals, banking, and oil and gas.

The companies that emerged as dominant in the fourth wave operated under more successful models or in more profitable markets than their competitors. This wave ended in the early 1990s when the U.S. government enacted reforms for financial institutions and antitakeover laws.

The fifth wave of mergers occurred as a result of a stock market boom from 1992 to 2000, as well as globalization sparked in part by communications and deregulation of new industries. Most of these mergers took place in the telecommunications and banking industries and were financed by equity. When the “tech bubble” burst in 2000 and stock prices became uncertain, this wave ended.

Today, new funding mechanisms, as well as historical understanding of mergers and acquisitions, enable companies grounded in smart financial and operational modeling to access funding from banks, venture capital, and angel investor organizations. While the government requires banks to make loans based on proven financials and assets, these new funding mechanisms recognize the special requirements and potential of organizations that promise new solutions and improved delivery of existing products.

About the Author: An accomplished attorney with significant experience in mergers and acquisitions, John Hallal practices law in Boston as a Partner in Acceleration Law Group.

By John Hallal

While some people call for doom and gloom during an economic downturn, we can take some solace in the fact that the U.S. economy has always experienced cyclical changes. In many cases, a downturn has enforced adjustments due to particular industries or business models. Some of these modifications triggered mergers and acquisitions that paved the way for companies to expand their footprints or product lines and for others to gain access to capital to fund growth in their core markets.

The first wave of mergers as we know them today occurred between 1897 and 1904. During this span, monumental horizontal mergers solidified companies that held major market shares in such industries as telephone service, oil, railroads, and mining. By affirming brand recognition and creating a major network of consumers and suppliers, these companies effectively pushed their challengers out of business or allowed them to snap up rival firms. Companies formed in the first wave of mergers include AT&T, DuPont, and U.S. Steel, but more than 1,800 small companies united to form organizations capable of developing infrastructure that would allow emerging technologies and production to meet consumer demand.

A later economic slowdown reduced the efficiency of mergers. By the time of the Panic of 1904, which was spurred by concerns about the nation’s banking system, banks struggled and the public felt wary of what the media touted as “big business.” Companies simply lacked the financing to continue merging. Moreover, a 1904 antitrust decision by the U.S. Supreme Court permitted the prevention of anticompetitive mergers under the Sherman Act.

While building monopolies may have motivated the first wave of mergers, the second wave related to creating oligopolies. This movement, which occurred from approximately 1916 to 1929, featured companies in such industries as foods, petroleum, transportation, chemicals, and metals banding together to create economies of scale aimed at increasing production and exports. The federal government approved these mergers because of the businesses’ impact on the American cause in World War I and because of economic benefits.

The 1929 stock market crash ended the second wave of mergers. By the 1940s, government tax relief and economic improvement prompted new interest in mergers similar to those of the second wave.

About the Author: John Hallal enjoys a reputation as an expert in mergers and acquisitions. In addition to his work as a Partner in the Acceleration Law Group and as a Managing Partner at Network Blue, Inc., Mr. Hallal serves as an Adjunct Professor at Babson College, where he teaches a course in mergers and acquisitions.