Will Fischtein and Alex Shteriev are managing partners at Beacon Mergers & Acquisitions, a leading M&A advisory and business brokerage firm with offices in Toronto and Washington, DC. As a commercial litigation lawyer, business intermediary and serial entrepreneur, Fischtein brings over twenty years of experience in deal facilitation. At Beacon, he specializes in business valuations and sell-side engagements. Shteriev brings his international experience in real estate consulting and direct investment. He specializes in deal negotiation and structuring processes at Beacon. The two founded the advisory in 2010 with a goal “to help entrepreneurs while being an entrepreneur,” Shteriev explains. They wanted to help business owners who were looking to gain advice from people in similar situations, who could “really spend the time and understand their specific business and how to assist in the process of selling.”
A Firmex client since 2011, Beacon serves small and medium-sized family-owned businesses that are looking for an advisor to assist them in what Shteriev calls “ a true marathon” that “takes an entire team to win” — the sale of a business. He adds that with the assistance of partners like Firmex, Beacon has evolved into a technology-driven business and has assisted over 150 companies in successful transactions. For Fischtein, an important part of the process is getting to know their clients and understanding their goals and motivations. Especially in the context of “a very challenging and interesting marketing environment” that has evolved due to the changes in technology over the last 15 years. This has made the sales and marketing aspects of his work all the more rewarding.
“It’s definitely not something you get into if you don’t like a challenge because every day is different.”
— Alex Shteriev
Beacon takes a generalist approach and will consider any opportunity that is presented. After taking the time to properly evaluate their ability to be successful in the deal, “more often than not, we’ll accept the challenge,” Fischtein says. “It’s definitely not something you get into if you don’t like a challenge because every day is different,” adds Shteriev. Since their office is based on a team approach, everyone at the company has the opportunity to provide input on whether or not a deal is right for Beacon. Despite working across various industries, “the challenges, common issues and opportunities, and the way that we look at transacting those companies and extracting maximum value is pretty similar,” Shteriev says.
Across industries, business owners come to Beacon often with the same question, and that’s if it’s a good time to sell. Fischtein’s answer is always the same: “It depends on you.” There are so many variables that business owners need to take into consideration when considering a sale, he explains. The two main stumbling blocks that Beacon sees most often are balance sheet issues and post-transaction tax implications. A seller has to ensure that the balance sheet is in a sellable condition, excluding assets that won’t be included in the sale, like marketable securities or real estate that the business owner has added to the company over time. Then, a seller will want to ask themselves if they’ll be taking advantage of a small business capital gains exemption. This will dictate whether they’ll be selling the shares or assets of the company. Fischtein adds that in terms of post-transaction tax implications, business owners should start looking into these at least two years prior to considering a sale.
Shteriev adds that another question he’s asked is about likely buyers. There isn’t one answer for who the right buyer may be, because a buyer’s interest is impacted by a variety of market factors. “The market is the one to dictate all of this,” he says, and in an ever-shifting market, Beacon’s role is to “extract the most value” by exposing a company “in the right confidential and professional way to that market.”
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When should a seller start asking these questions? Beacon suggests beginning to plan for a sale at least two years in advance of your target date. In their view, this is also a good time to start engaging with advisors. Beacon likes to have an initial conversation as early in the process as possible. “I love getting to know people and understanding what their motivation is,” Fischtein says. That way, there’s ample time to establish and execute what needs to be done to be sale-ready. “For us it’s formulaic” he acknowledges but understands that for most, selling their company is a once-in-a-lifetime event.
With so much at stake for first-time sellers, choosing an advisor that’s the right fit is important. Fischtein shares that for the scale of business that Beacon works with, it’s not so much industry-specific experience that drives a deal, but an advisor’s ability to drive the deal forward, find and connect with a buyer who will carry the torch, and know how to coordinate with both parties to close successfully.
When asked about valuations in the context of world events and their macroeconomic impacts, Shteriev referenced the effects of government subsidies and valuations, and how we’re now starting to see to what extent companies are able to bounce back to pre-pandemic bottom lines. On whether or not they view the subsidies as a temporary patch to businesses, Shteriev explained that for some industries he does, while for others, subsidies have simply reflected a temporary loss of revenue.
“There’s always opportunities when markets shift.”
— Alex Shteriev
What opportunities are resulting from these macroeconomic trends? According to Shteriev, “there’s always opportunities when markets shift.” He’s seen more interest in local businesses versus global ones and a shift in attention to businesses that are generating good amounts of cash flow in regions that appear stable and somewhat insulated from macroeconomic disturbances. At the same time, he’s noticed a demand for global businesses free from significant investment in infrastructure or assets, especially IT and SaaS companies, “and that has to do with the major advantage of global businesses, which is diversification,” he explains.
Typically Beacon has attracted distribution, manufacturing, service, and contracting businesses, but has seen this recent shift towards technology and SaaS companies. Why? Companies that emerged after the 2008 meltdown have come to maturity, as well as the fact that “technology has permeated industries that were adverse to technology,” Shteriev says. “When we say a technology business, all of a sudden we’re not just talking about a software development business,” and because the applications of technologies are so diverse, more companies are able to position themselves as technology-driven than ever before.
Beacon saw the value in tech-enabled advisory when they started to use Firmex over a decade ago. “We implemented this very early on as part of our offering and unique service,” Fischtein says. He recalls that at a previous organization, there was a person whose only responsibility was to print and fax out NDAs, “so, things have come a long way with all the technology that surrounds this business.” Despite these changes, Beacon still saw a bias towards in-person communication with business owners, but that too has shifted. Through the pandemic, even those historically averse to conducting business remotely have come to see the merit in technology-based tools. “I certainly think that the comfort level of people dealing remotely will remain,” Shteriev says, especially as the ability to leverage remote tools becomes clear, like “the blurring of geographies and borders when it comes to team integration.”
Speaking about the impact of other current market factors, like historically low-interest rates, Fischtein notes that like many advisories, Beacon has seen increased multiples throughout the pandemic. Shteriev adds that “while the total valuation of a company goes up because of some of those increases in multiples, their capital structure changes disproportionately in favor of debt, which eats up into the equity value of the business,” which concerns him, since “businesses that have high leverage are a lot less likely to withstand significant economic or business impacts.” Whether it’s rising interest rates, the loss of a big client, or a delay in the supply chain, Shteriev emphasizes the importance of stress-testing against various factors.
As for some general advice for first-time business sellers, Fischtein says, “just remain flexible.” Shteriev adds to “be prepared” and to “keep in mind that there are always three parties to a transaction, the buyer, the seller and the government.” And one of the best things you can do to complete the sale? Put yourself in the buyer’s shoes.
