When two companies combine to form a single new entity. Both companies cease to exist independently, and their assets, liabilities, and operations are consolidated. True mergers are rare—most "mergers" are actually acquisitions.

Types:

• Horizontal: Companies in same industry (two competing firms)
  
• Vertical: Companies at different supply chain stages (manufacturer + supplier)
• Conglomerate : Unrelated businesses combining for diversification

A licensed professional who facilitates the sale of small businesses, typically under $2 million in value.

Characteristics:

• Usually requires real estate license
  
• Lists businesses on marketplaces and databases
  
• Works with multiple buyers simultaneously
  
• Transaction-focused approach
  
• Lower commission rates (8-12% typical)
  
• Best for "Main Street" businesses (restaurants, retail, service businesses)
• Limited strategic guidance

A strategic partner who guides business owners through complex transactions, focusing on maximizing value and ensuring optimal outcomes.

Characteristics:

• Professional credentials (CBI, M&A Master Intermediary, industry certifications)
  
• Provides comprehensive strategic counsel throughout the process
  
• Conducts targeted, confidential buyer searches
  
• Relationship and advisory-focused approach
  
• Professional fees reflecting strategic value
  
• Focus on established businesses and middle-market companies
  
• Provides valuation analysis, deal structuring, negotiation support, and transition planning
• Partners with you through the entire journey

Brokers list and hope. They put your business on a marketplace and wait for buyers to respond. It's transactional.

Advisors strategize and execute. We develop a comprehensive strategy, identify the right buyers, position your business for maximum value, and guide you through every decision. It's transformational.

Think of it this way:

• A broker is like listing your house on Zillow
  
• An advisor is like having a strategic partner who prepares your house, finds the perfect buyer, negotiates aggressively on your behalf, and manages every detail through closing
  

When you work with Trusted Business Transaction Advisors, you're getting strategic counsel, not just sales facilitation.

We focus on:

• Protecting your confidentiality
  
• Maximizing your business value
  
• Finding the RIGHT buyer (not just any buyer)
  
• Guiding you through complex negotiations
  
• Ensuring deal structure protects your interests
  
• Supporting you through the transition
  

You aren't a transaction. You're a transition.

Best for: Small businesses with owner-operators (typically under $2M value)

Definition: The total financial benefit a single owner-operator derives from the business.

Includes:

• Pre-tax profit
  
• Owner's salary and benefits
  
• Owner's discretionary expenses (personal vehicle, meals, etc.)
  
• Interest expense
  
• Depreciation and amortization
  
• One-time or non-recurring expenses
  
  

Formula:

Net Profit Before Tax

+ Owner's Salary & Benefits

+ Interest Expense

+ Depreciation & Amortization

+ Owner's Discretionary Expenses

+ One-Time Expenses

= Seller's Discretionary Earnings (SDE)

Best for: Established businesses with professional management (typically $2M+ value)

Definition: A measure of operating performance showing how much cash profit a business generates from core operations, before accounting for financial structure, taxes, and non-cash expenses.

Why It Matters:

• Valuation Standard: Most middle-market businesses are valued as a multiple of EBITDA
  
• Comparable Metric: Allows comparison between businesses with different structures
  
• Cash Flow Indicator: Shows ability to generate cash from operations
  
  

Example Calculation:

Revenue: $2,000,000

Cost of Goods Sold: -$800,000

Operating Expenses: -$600,000

___________

Operating Profit (EBIT): $600,000

Add Back Depreciation: +$50,000

Add Back Amortization: +$25,000

___________

EBITDA: $675,000

When to Use Which:

• SDE: Owner-operated businesses, single owner taking significant salary
  
• EBITDA: Businesses with management teams, multiple stakeholders

The buyer purchases specific assets and liabilities, not the legal entity itself.

Buyer Advantages:

• Choose which assets and liabilities to acquire
  
• Avoid unknown liabilities
  
• Tax benefits through asset depreciation
  
• Start with clean legal slate
  

Seller Disadvantages:

• Higher tax burden (ordinary income vs. capital gains on some assets)
  
• Must transfer contracts and licenses individually
  
• May lose certain tax attributes
  

Most Common: 90%+ of small business sales are asset sales

The buyer purchases the ownership shares/interests in the company entity itself.

Seller Advantages:

• Lower tax burden (capital gains rates)
  
• Simpler legal transfer
  
• Maintains existing contracts and relationships
  

Buyer Disadvantages:

• Inherits all liabilities (known and unknown)
  
• Less favorable tax treatment
  
• Assumes more risk
  

Most Common: Larger transactions ($10M+) or when entity continuity is critical

The number by which EBITDA is multiplied to determine business value.

Example:

• Business EBITDA: $500,000
  
• Industry multiple: 5x
  
• Estimated value: $2,500,000
  

Typical ranges:

• Higher multiples (5x-8x+): SaaS, technology, healthcare services, recurring revenue businesses
  
• Mid-range (3x-5x): Established services, distribution, light manufacturing
  
• Lower multiples (2x-3x): Restaurants, retail, owner-dependent businesses

The estimated worth of a business based on financial metrics, comparable sales, and market conditions.

Common Valuation Methods:

1. Multiple of EBITDA (most common for established businesses)
   
2. Revenue Multiple (common in certain industries like SaaS)
   
3. Asset-Based Valuation (for asset-heavy businesses)
   
4. Comparable Sales (based on recent similar transactions)
   
   

Factors That Affect Valuation:

• Revenue growth trend
  
• Profit margins and consistency
  
• Customer concentration
  
• Industry growth potential
  
• Management team quality
  
• Competitive advantages
  
• Market conditions

An independent analysis by accountants to verify and adjust a company's earnings, identifying unusual items or accounting practices.

Purpose:

• Validates seller's financial representations
  
• Identifies add-backs that are truly discretionary
  
• Reveals unusual income or expense items
  
• Provides buyer confidence in normalized earnings
  

Typical in: Transactions $3M+ in value

‍Cost: $15,000-$50,000+ depending on complexity