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When Private Equity Knocks, Will You Be Ready to Answer?
The wealth-building strategy for the executive team and investors in a franchisor traditionally focused on setting the stage for one of three scenarios: a private sale to a strategic buyer; going public through an initial public offering, with a secondary offering to partially liquidate the group's investment; or establishing an enterprise with significant cash flow available for salaries, bonuses, dividends, and other emoluments of financial success. An attractive option now available is the private equity option, which involves a sale of all or the controlling share of the equity of the business to a financial buyer. This approach reorients financial exit strategy to harvest simultaneously the gain in enterprise value while positioning existing management and possibly investors to participate in future value accretion. This approach usually allows, or even compels, existing management to participate in the equity of the business going forward.
The sellers' objective is always to maximize selling price, tempered by the reality of creating a tenable rollover equity position should the sellers desire to continue ownership at some level. As seller management considers this prospect, the books, records, and practices of the franchisor will come under intense scrutiny as part of the diligence process. The skeletons in closets will be identified and valued, and downside risk will be weighed. Several simple steps could enhance value and reduce downside risk. These steps could also cement the image of management as truly on top of the business and capable of managing the next phase of growth.
1) Codify inspiration and lore. Much of the genius of franchise systems derives from the instinctive management decisions made by the founders or early management. Some of the decisions are truly insightful and spontaneous, based on intuition as much as science or empirical data; others represent the application of experience and the culmination of research, development, testing, and evaluation. A major risk to a financial buyer is that the wrong people take the money and run, losing the benefit of the acumen and insights that have been important to the success of the business. To the extent possible, management should create written operating guidelines, standards, practices, and procedures that can be readily understood by diligence investigators and successor managers. The new writings will likely facilitate growth by enabling the training of more people to execute projection of system support and management.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
The Stranger to the Deed Rule
In 1987, a unanimous Court of Appeals reaffirmed the vitality of the "stranger to the deed" rule, which holds that if a grantor executes a deed to a grantee purporting to create an easement in a third party, the easement is invalid. Daniello v. Wagner, decided by the Second Department on November 29th, makes it clear that not all grantors (or their lawyers) have received the Court of Appeals' message, suggesting that the rule needs re-examination.