Biden’s Tax Hikes Won’t Work if Loopholes Like Delaware’s Still Exist
Biden’s $1.8 trillion plan for American families raises taxes. But his numbers don’t add up.
Our Managing Director on NBC News.
Joe Biden Takes “Blue-Collar Blueprint” to the Public
The general editor of the The Times, David Charter, quotes our managing director, Joshua Jahani.
https://www.thetimes.co.uk/article/joe-biden-takes-blue-collar-blueprint-to-the-public-dz05vlbsw
The US Government’s Debt-to-GDP Ratio Is Worse Than Greece’s Before the 2008 Crash
The USA’s Debt-to-GDP Ratio is rising. The managing editor of the Foundation for Economic Education (FEE), Jonathan Miltimore, quotes our managing director, Joshua Jahani.
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At a Glance
- President Biden’s first moves in the Middle East — bombing Iran-backed militias in Syria, for instance, while de-prioritizing much of the rest of the region — neglect the bigger picture of a region that is leading the world out of the pandemic. And with the first US-China meeting under the Biden administration getting off to a tough start this week, that’s more important than you might think.
[/vc_column_text][/vc_column][/vc_row][vc_row dfd_row_config=”full_width_content” el_class=”blog-img-section”][vc_column][vc_single_image image=”9178″ img_size=”full”][/vc_column][/vc_row][vc_row dfd_row_config=”full_width_content”][vc_column][vc_column_text]The Gulf states and Israel provide an opportunity for the US to participate in a global economy that will be more centered on the Middle East than it was before the virus. This future must be a cornerstone of US policy, as well the legacy issues around security.
Covid has threatened the mature economies of the US and Europe, accelerated China’s inevitable rise, and given opportunity to the region’s often more agile and adaptable countries.
There are few countries in the world who have (almost) put the pandemic behind them and are on good terms with both the US and China. Those are the countries who are set to lead the world in the 21st century. They are almost exclusively in the Middle East.
The rise of the Middle East as a gateway between the US and China presents an opportunity for Biden to re-engage with Beijing through the neutral soil of Israel and the Gulf states. Biden should not be afraid of celebrating and building on the diplomatic progress achieved under the Trump administration through the end of the GCC rift and the Abraham accords.
Being the “new Europe” is something that Middle Eastern leaders are understandably motivated by, particularly in light of their relations with both DC and Beijing. Europe was the middle ground for the Soviet-US Cold War, and the Middle East is the same for the China-US relationship — geographically, politically and economically.
Rather than continue to fight yesterday’s conflicts and ignore today’s achievements (perhaps focused on distancing himself from Trump’s policies), Biden should craft policy based on the reality that the Middle East is transitioning from a 20th century defined by conflict and insecurity to a 21st century where the Silk Road is once again the social, economic, cultural, and political center of the world.
This is a future into which the Middle East is rapidly progressing. Three of the top five countries with the most Covid vaccinations (excluding the Seychelles and Maldives) are in the Middle East — namely the UAE, Israel, and Bahrain. In addition to a successful vaccination campaign, total death rates in these countries and others in the region have remained low. All this while key industries, including tourism, have often remained open.
Saudi Arabia has been working to almost triple its non-oil revenues, and is investing billions into futuristic cities like NEOM and “The Line.” The UAE successfully completed a mission to Mars during the pandemic and recently announced plans to double Dubai’s population, all while commentators in London and New York discuss the “death of cities.”
Gulf economies also benefit from a low debt to GDP ratio, which will allow them to maintain growth while more developed and leveraged economies struggle in the wake of the pandemic. The US currently has a debt to GDP ratio of over 100 percent; in Saudi Arabia and the UAE, the debt to GDP ratio is only 20 percent, meaning those governments will have spending power well into the future for public and private projects.
China is busy building deeper links in the region, where doing business is more important than talking politics. It is important to Biden’s legacy that US policymakers and investors do the same, and foster both cultural and economic connections to the new Middle East rather than allowing themselves to be crowded out.
To this day, too many American political and business leaders are driven by the impulses that impacted actions between them and the Middle East at the start of the millennium. Twenty years on, the White House should look to the future. It must adapt to the rise of China by utilizing the Middle East’s neutral ground to increase cooperation with Beijing.
It’s high time an American president looked to the Middle East for its entrepreneurship, adaptability and its e-governance, rather than simply for its oil.
Joshua Jahani is a Cornell alum, public speaker and investment banker with a focus on the Middle East and Africa
https://www.independent.co.uk/voices/biden-china-meeting-middle-east-b1819729.html[/vc_column_text][/vc_column][/vc_row][vc_row el_class=”more-from-report”][vc_column][vc_column_text]
Sources
[/vc_column_text][vc_row_inner][vc_column_inner width=”1/2″][vc_column_text]https://www.bbc.com/news/world-middle-east-35221569[/vc_column_text][vc_column_text]https://www.politico.com/news/2021/03/29/us-biden-iran-nuclear-deal-478354[/vc_column_text][vc_column_text]https://www.reuters.com/article/us-iran-nuclear-usa/bidens-iran-approach-praised-as-deft-despite-lack-of-progress-idUSKCN2AW2SB[/vc_column_text][/vc_column_inner][vc_column_inner width=”1/2″][vc_column_text]https://www.bbc.com/news/world-middle-east-42008809[/vc_column_text][vc_column_text]https://www.washingtonpost.com/world/2021/03/19/biden-iran-deal-stalemate/[/vc_column_text][vc_column_text]https://www.nbcnews.com/politics/national-security/biden-administration-says-it-s-ready-nuclear-talks-iran-n1258299 [/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row el_class=”more-from-report” disable_element=”yes”][vc_column][vc_column_text]
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Joshua Jahani on S&P Reaching 4,000
In this episode of BBC Newsday Joshua Jahani talks about the S&P 500 reaching 4,000 (11:30).
Also in this episode:
Taiwan’s rail company says 36 people are known to have died, and dozens injured. Myanmar’s deposed leader Aung San Suu Kyi had already been accused of breaking COVID-19 rules and illegally possessing walkie-talkies—now she’s been charged with violating the country’s official secrets act. And the story of the Italian businessman who tried to fake his own kidnapping for financial gain, but ended up as a prisoner of a jihadist group for three years.
How to Perform a Disciplined Sell-Side M&A Process to Maximize Results
A Step-by-Step Guide to the Sell-Side M&A Process
The sell-side M&A process is long and complex. Bringing a company to market does not guarantee the company will achieve its M&A goals. The M&A process is challenging for three reasons:
- It is difficult to build consensus among a large number of stakeholders
- Gathering relevant, transparent, and adequate data is complicated, particularly in private markets
- The M&A process contains many steps, and within each step there are many opportunities for things to go wrong
This report contains the step-by-step guide Jahani and Associates (J&A)—an NYC-based global independent investment bank—uses to maximize results for its clients. Each step in the sell-side M&A process is driven by activities, deliverables, and solutions.
STEP 1: Preparation to Solicitation
Preparation to solicitation requires the company and their investment banker to generate the artifacts buyers need to make an offer for the company. This information includes but is not limited to financial information, the growth history of the company, intangible asset information (e.g., customer relationships and proprietary technology), and the reasons the owners are selling the business.1 This information must be woven together and organized correctly so buyers can efficiently formulate their offers.
Industry-standard deliverables, such as a confidential information memorandum (CIM) and audited financial statements, are used in this phase to market the business to potential buyers.
STEP 2: Solicitation to Indication of Interest (IOI)
This is arguably the most important part of the sell-side M&A process. Reaching the sufficient number of solicitations to ultimately find an interested buyer is difficult and incredibly important, particularly in the lower-middle and middle markets. The volume of solicitations necessary is higher than most professionals expect. The methods to generate qualified buyer leads also vary based on the industry, region, and type of investment bank (e.g., healthcare investment bank, agritech investment bank, etc.). Solicitation is initiated with a blind teaser, using a code name in lieu of the company’s name. Buyers may request more information after the teaser—at which point a nondisclosure agreement (NDA) is required. J&A recommends only sending detailed material during the preparation phase to potential buyers after they have signed the NDA. For sellers to create a succinct and consistent story for all potential buyers at this stage, it is very important not to provide too much information.
Common sources of buyer solicitations include direct connections from an investment banker’s warm network, introductions and referrals from partners in the investment banker’s network, direct solicitations of qualified buyers determined from research (e.g., PitchBook), and target emails to qualified lists of buyers. Coordinating all four types of outreach is a complicated task. Figure 2 demonstrates common reasons for failure and how J&A recommends sellers and their advisors avoid them.
IOIs contain valuation ranges and general expectations of earnout. These should be negotiated as necessary to have a smooth transition from an IOI to an executable letter of intent (LOI). IOIs are nonbinding.
STEP 3: IOI to LOI
A site visit usually occurs while transitioning an IOI to an LOI. The visit is an opportunity for the buyer and seller to meet and conduct a deep dive into any outstanding items that need to be settled before executing an LOI. Since LOIs are legally binding, many buyers will require exclusivity after an executed LOI, which is also referred to as a “no-shop clause.” This means the seller will not be able to conduct sale-related conversations during the no-shop period and must ensure the upcoming due diligence will be satisfactory in order to close the deal.
STEP 4: LOI to Purchase Agreement, Including Due Diligence
Due diligence is often the longest part of the sell-side M&A process. Depending on the size and complexity of the deal, it may take up to 120 days.2 Due diligence is the process of affirming the information the buyer has used to make its offer and determining whether or not the company is in good standing with the relevant administrative, legal, financial, technological, security, operational, and other information in its possession.
Once due diligence is complete, executing the purchase agreement is the final step in the sell-side M&A process. These agreements can either be asset purchases or stock purchases. The purchase agreement is the binding contract where ownership officially changes hands. If due diligence went as expected, this step should be relatively simple. The changes that may affect purchase agreement negotiations are material discoveries in due diligence, economic forces, material alterations in the business’ operations, and management changes. It is very important for business activities to go according to plan during due diligence.
Problems and Solutions: Quickly Resolving Challenges Requires Deep Thinking and Preparation
Jahani and Associates collected common challenges that exist in each step of the sell-side M&A process and the best way to resolve them. It is important for M&A stakeholders to plan ahead and know where expected weaknesses may lead to exacerbated challenges.
It is imperative the investment banking team has a plan to resolve these challenges before they even arise in order to avoid disruptions or delays in the M&A process.
Preparation to Solicitation
Companies most often do not go from preparation to solicitation when seller management teams are not aligned or properly prepped for the sell-side M&A process. This can occur when multiple stakeholders are involved, particularly in companies boasting a significant capital raise. A seller may also not move to the solicitation phase due to major market forces negatively affecting business performance. If a business undergoes a change that materially reduces the company’s desired valuation, management often decides to postpone the process.
Solicitation to IOI
Fundamentally, solicitation to IOI is a sales process. Therefore, sellers and their teams are most prepared when they view this as a sales exercise. This is often the most difficult step in the process for unprofitable companies in the lower-middle market.
IOI to LOI
Moving from an IOI to LOI is a matter of negotiation and mutual understanding between the buyer and seller. A site visit is often used in between the IOI and LOI to develop a relationship between the buyers and sellers.
LOI to Purchase Agreement, Including Due Diligence
Due diligence is the process of confirming the buyer’s understanding of the business at the time they made their offer. Due diligence is time-consuming. Material information that changes the valuation and earnout identified in the LOI may be discovered during due diligence. This will be negotiated as part of the purchase agreement. Purchase agreements may be made for either cash or stock, each of which has its own tax, legal, and strategic considerations.
The Sell-Side M&A Process Is Challenging, but the Seller’s Success Will Be Maximized When a Disciplined Process Is Followed
The challenges, solutions, and KPIs in this paper are not exhaustive, but they provide an overview of the way to maximize success in sell-side M&As. It is important that all stakeholders understand the challenges they will face and how to alleviate them as quickly as possible. Establishing a consensus among stakeholders from the outset will also help mitigate any issues that may unfold. Focusing on a problem-solution-KPI framework gives transparency to the client and allows the investment banker to increase the size of their team while preserving client service and information sharing. Experience in dealing with these issues is paramount to successfully delivering M&A results, and that experience must be coupled with actionable outcomes.
Any business owner seeking to sell their business must carefully consider all these factors. Being aware of expected obstacles and how to overcome them early will significantly increase the likelihood that a company successfully completes a sell-side M&A transaction. The analysis contained herein is based on decades of experience and is included to support business owners across the world as they achieve a maximally successful exit.
ABOUT THE RESEARCH
In 2019, Jahani and Associates surveyed hundreds of business owners about successful and failed M&A deals, why they failed, and how those failures could have been avoided. J&A then compared these stories with its own processes and tools to determine the best way to anticipate and avoid these failures in any M&A scenario. The resulting analysis is this document that outlines common reasons for failure and how to avoid them. This document is meant to serve as a resource to business owners and other service providers to give the best strategic advice and service for their businesses or clients.
ABOUT JAHANI & ASSOCIATES
Jahani and Associates (J&A) is an independent investment bank located in New York, New York. The firm specializes in healthcare and technology and provides specialized M&A and capital markets advisory services. The combination of J&A’s unmatched skills in technology, engineering, and business operations allows the firm to create sustainable value for its clients. J&A works at the intersection of cutting-edge financial theory and business practicality. Creativity is highly valued within the firm, which allows J&A to continually improve the way businesses thrive.
Sources
If Biden Wants to Improve Relations With China, He Should Look to the Middle East
President Biden’s first moves in the Middle East—bombing Iran-backed militias in Syria, for instance, while deprioritizing much of the rest of the region—neglect the bigger picture of a region that is leading the world out of the pandemic. And with the first US-China meeting under the Biden administration getting off to a tough start this week, that’s more important than you might think.
The Gulf states and Israel provide an opportunity for the US to participate in a global economy that will be more centered on the Middle East than it was before the virus. This future must be a cornerstone of US policy, as well as the legacy issues around security.
The COVID-19 pandemic has threatened the mature economies of the US and Europe, accelerated China’s inevitable rise, and given opportunities to the region’s often more agile and adaptable countries.
There are few countries in the world that have (almost) put the pandemic behind them and are on good terms with both the US and China. Those are the countries that are set to lead the world in the 21st century. They are almost exclusively in the Middle East.
The rise of the Middle East as a gateway between the US and China presents an opportunity for Biden to re-engage with Beijing through the neutral soil of Israel and the Gulf states. Biden should not be afraid of celebrating and building on the diplomatic progress achieved under the Trump administration through the end of the GCC rift and the Abraham Accords.
Being the “new Europe” is something that Middle Eastern leaders are understandably motivated by, particularly in light of their relations with both DC and Beijing. Europe was the middle ground for the Soviet-US Cold War, and the Middle East is the same for the China-US relationship—geographically, politically, and economically.
Rather than continue to fight yesterday’s conflicts and ignore today’s achievements (perhaps focused on distancing himself from Trump’s policies), Biden should craft policy based on the reality that the Middle East is transitioning from a 20th century defined by conflict and insecurity to a 21st century where the Silk Road is once again the social, economic, cultural, and political center of the world.
This is a future into which the Middle East is rapidly progressing. Three of the top five countries with the most COVID-19 vaccinations (excluding the Seychelles and the Maldives) are in the Middle East—namely the UAE, Israel, and Bahrain. In addition to a successful vaccination campaign, total death rates in these countries and others in the region have remained low. All this while key industries, including tourism, have often remained open.
Saudi Arabia has been working to almost triple its non-oil revenues, and is investing billions into futuristic cities like NEOM and “The Line.” The UAE successfully completed a mission to Mars during the pandemic and recently announced plans to double Dubai’s population, all while commentators in London and New York discuss the “death of cities.”
Gulf economies also benefit from a low debt-to-GDP ratio, which will allow them to maintain growth while more developed and leveraged economies struggle in the wake of the pandemic. The US currently has a debt-to-GDP ratio of over 100%; in Saudi Arabia and the UAE, the debt-to-GDP ratio is only 20%, meaning those governments will have spending power well into the future for public and private projects.
China is busy building deeper links in the region, where doing business is more important than talking politics. It is important to Biden’s legacy that US policymakers and investors do the same, and foster both cultural and economic connections to the new Middle East rather than allowing themselves to be crowded out.
To this day, too many American political and business leaders are driven by the impulses that impacted actions between them and the Middle East at the start of the millennium. Twenty years on, the White House should look to the future. It must adapt to the rise of China by utilizing the Middle East’s neutral ground to increase cooperation with Beijing.
It’s high time an American president looked to the Middle East for its entrepreneurship, adaptability, and its e-governance, rather than simply for its oil.
Joshua Jahani is a Cornell alum, public speaker, and an investment banker with a focus on the Middle East and Africa.
Using Intangibles to Make Better Buy-Side Decisions
Jahani and Associates analyzed over 60 health insurance M&A transactions to determine the most important assets for the buy-side strategy. The results show customer relationship intangibles matter most for health insurance M&A.
Part 3
Monetizing Intangibles in Ad Tech M&A Value
In this article, we will briefly explain how to monetize intangibles.
In the first two articles of this series, Identifying Intangibles in Ad Tech M&A Value and Developing Intangibles in Ad Tech M&A Value, we specified how you, the business owner, can identify and develop your company’s most valuable intangible assets to maximize your value.
In any M&A deal, sellers highlight the importance of their intangibles so the buyer can use them to create a competitive advantage. The third step in this process, learning how to monetize your business’ intangible assets, is where you reap the fruits of your labor. This step occurs when the buyer pays a price for the intangibles you have identified and developed. This includes the steps leading up to the sale, such as valuation, negotiation, pitching, and due diligence. So how do you monetize intangibles?
How to Monetize Intangibles When Selling Your Company
An M&A valuation can be conducted in several ways, including through a business appraisal or the valuation of a public company’s stock. The valuation of your company often amounts to a number that is negotiated between the seller and the buyer. Middle-market companies in particular possess a range of values based on the buyer’s profile. Fair market valuation is the most common valuation technique.
Fair market valuation occurs when you determine how similar businesses have sold based on multiple types and multiple factors. Multiple types include earnings before interest, taxes, depreciation, and amortization (EBITDA), annual recurring revenue (ARR), and, in some cases, book or tangible asset value. Multiple factors (referred to as 3X, 4X, or 10X) simply identify the number you agree to multiply the selected factor by to determine the valuation number.
Obviously, multiple types and factors depend on industries with similar characteristics to the company being valued. For example, industry growth, the strength of the management team, competitive advantages, access to suppliers, and access to buyers can all influence multiple types and factors.
How to Use ASC 805 to Maximize Your Valuation
The Accounting Standards Codification (ASC) 805 allows the business owner to understand how the expected purchase price can be broken down based on the transaction’s fair market valuation and associated purchase premium or goodwill. In the ad tech industry, the amount paid for goodwill makes up, on average, 70% of the purchase price. This means, for example, that a company with a fair market valuation of $100 and 70% goodwill was purchased for $170.
At J&A, our banking practice conducts detailed M&A studies of goodwill and purchase price allocation to understand why companies command a premium and how business owners can make sure they land at the top of valuations when selling their businesses. After looking at over 500 M&A transactions executed by technology giants over a six-year period, we segmented purchases by industry and certain goodwill parameters, narrowing our study to 34 purchased companies. These 34 ad tech M&A transactions completed at the greatest premiums had the following two things in common: the target company increased the data interfaces of the acquiring company and the target company increased the data processing power of the acquiring company.
Data interfaces and data processing power are both intangible assets. These intangibles were systematically identified and developed by the business owners over time before they sold their companies. The monetization of those assets became effective when the companies were purchased at higher than average premiums.
This analysis becomes the cornerstone of an effective M&A strategy. Armed with the framework of identifying, developing, and monetizing intangible assets, business owners have a predefined plan they can take to increase their company’s value.
As a business owner, you should always study different purchase premiums in your industry to identify drivers that will create the highest return for your business. Using ASC 805 principles to uncover M&A value allows you to create a roadmap that will help you land on the high end of valuation because it is a scientific way to tie your valuation to intangible assets.
The Takeaways of Intangible Asset Monetization
Intangible assets can only be monetized if you have measured them in-depth. There is an infinite number of intangible assets you can identify, develop, and monetize.
As a business owner, you must determine which ones you can leverage most effectively. Trusted advisors can help you create a clear vision and strategy to maximize your company’s value. The role of intangible assets in M&A markets will increase over time. The most successful companies will use the information presented in these articles to maximize the value of their company.
Part I: Identifying Intangibles in Ad Tech M&A Value >
Part 2: Developing Intangibles in Ad Tech M&A Value >
Photo by Vincent Tantardini on Unsplash
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