Celebrities and their reps consider many angles when structuring compensation for a project. If you’re considering the sale or acquisition of a company, you should do the same. Why? Because it is not only what but how you present your assets to the other party, along with the terms for which you negotiate a transaction, that can make all the difference. See what these stars did that worked.
Sylvester Stallone Insisted on More Than Money – Stallone wrote Rocky but allegedly refused to sell the script until he was allowed to star in the film. As an unknown actor at the time this was pretty risky, but it all came down to what he ultimately wanted from the deal. Instead of achieving success as a storyteller alone, he built a longstanding career as a blockbuster action star. Deal Tip: Consider what you want to get out of a deal, financially and otherwise. Are you looking to retire with a comfortable nest egg? Expand your service line? Know your real motivations.
Sandra Bullock Leveraged Her Market Success – Coming off her Oscar win and box-office success from the Blind Side (an actor’s EBITDA equivalent), Bullock allegedly negotiated a deal that included $20 million first and then an additional 15 percent of first-dollar gross for Gravity. The film took in an estimated $723 million in world box office sales, that potentially netted the star another $70 million. Deal Tip: When coming to the table, consider tangibles and intangibles such as brand power, client lists, in-house talent, market share, industry trends, proprietary processes and more.
Cameron Diaz Took Less Up Front for a Bigger Payout Later – For her role in the little-remembered but profitable film Bad Teacher, Cameron Diaz agreed to accept much less than she would normally command. She took $1 million up front in return for a percentage of box office sales, which ended up bringing her $42 million. Deal Tip: Factor in your needs and tax situation before structuring a lump sum payment, distribution over time, partial ownership or other option.
Van Halen Put the Devil in the Details -Legend has it that should Van Halen have found even one brown M&M backstage in a bowl required by contract, he could legally cancel a scheduled appearance. As the rockstar explains here, the line-item stipulation (no brown M&Ms) was inserted deep into contracts to ensure promoters were reading them closely and therefore clear about the extensive physical requirements and safety measures needed for such a colossal show. Deal Tip: Go over “details” such as the future roles of company staff and other points that could make a smoother transition.
Celebrities wouldn’t think of going it alone in the complex deal process, and you don’t have to, either. Experts like those at Talley LLP who’ve negotiated hundreds of M&A transactions can help you make the most of a transaction based on your goals and priorities. 

General Electric recently announced the company would spin off its health-care business and unload its ownership in Baker Hughes, an oil services company, as part of a restructuring that will transform the corporate giant. GE’s CEO John Flannery could gain some insight on how these types of moves can play out by giving former Hewlett Packard CEO Meg Whitman a call.

In the corporate world, breakups are common but don’t always go as planned.

When HP, then with $100 billion in revenue, underwent its massive breakup, it was a smaller, tech version of GE. It was involved in nearly every part of the tech business: PCs, printers, servers, supercomputers, software, storage, networking, services and other businesses. But in 2014, the then-struggling giant was faced with questions of what business it was really in and decided to split itself in half.

The theory behind HP’s restructuring was that its PCs and printer businesses, separated into HP Inc., would focus on generating cash instead of growth, while Hewlett Packard Enterprise, consisting of HP’s software and services, would be the growth business. However, after the dust settled on the spin-off, the two businesses found themselves on opposite paths.

Today, HP Inc.’s market cap is about $37.2 billion, while HP Enterprise has a market value of about $22.8 billion. HP Enterprise has continued to struggle since the breakup, only recently starting to show signs of improvement. In contrast, HP Inc. has shown both signs of innovation and growth, such as its efforts in 3D printing and pulling its printer business out of a slump.

Meanwhile at GE, fresh off being removed from the Dow Jones Industrial Average, Flannery is proceeding to put the company through a major overhaul, including selling off assets. Flannery plans to focus the core GE on aviation, power and renewable energy. While spinning out healthcare and getting out of oil could potentially help cut GE’s debt load, the company should be prepared for unforeseen challenges and opportunities along the way.

Talley LLP understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability or build your brand through a business transaction or capital raise, Talley is the premier consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

As fans of the hit show “Shark Tank” can attest, it’s not easy securing funding for your small business.  Since debuting in August of 2009, millions of viewers have watched entrepreneurs try to convince one of the five “sharks” to invest in their business, not just financially but also with advice for long-term growth.  To quote head-“shark” Kevin O’Leary, “Building fast-growing, globally competitive companies is tough.”

In each episode small business owners make their pitch to the five sharks, all well-known millionaires who started out as entrepreneurs themselves, including Mark Cuban (entrepreneur/owner of the NBA’s Dallas Mavericks) and Daymond John (founder of the FUBU clothing line), to convince at least one of them to invest their money and time.  But that isn’t easy.  Like all investors, the “sharks” have heard it all – from failures like the Life Caps Survival Pill (a vitamin and mineral pill that allows you to live without food for up to two weeks) to successes such as Ava the Elephant (an effective medicine dropper for children). Many contestants on the show get eaten alive by the “sharks” for the same reasons entrepreneurs outside of the reality TV show, by not having their financials in order or having a well-thought-out business plan.  As one “shark” put it, “Just because you have a hobby, doesn’t mean you have a business.”  This is a reality show that really is, well, real.

Whether you’re appearing on “Shark Tank”, seeking angel investors, or acquiring financing, you’ll need to do your research and be prepared. Talley LLP can assist you throughout the entire process.  From reviewing and preparing financial statements in a way that interests potential buyers/investors, to uncovering value from areas financials alone won’t reveal, the experts at Talley are here to help your business ventures succeed.

Disney on Thursday announced that it is buying a huge chunk of 21st Century Fox in a deal that promises to reshape the media industry and help the entertainment giant fend off digital rivals such as Netflix. The $52.4 billion deal will combine two of Hollywood’s biggest juggernauts.

As part of the transaction, Disney is also acquiring cable channels FX, National Geographic, and get Fox’s stakes in Hulu and European pay-TV provider Sky.

Prior to the deal closing, 21st Century Fox will separate the Fox broadcasting network, Fox News Channel, Fox Business Network, and some national sports networks into a new company that will be spun off to its shareholders. The remaining properties would ideally in the coming years merge with News Corp., from which they split in 2013, Fox’s Rupert Murdoch said on Fox Business Thursday morning.

Disney, which counts ESPN among its crown jewels, has suffered as consumers switch off their TVs and spend more hours watching streaming services such as Netflix that are distributed directly to consumers.

The deal allows Disney to expand its content, especially for streaming services. In addition to a majority stake in Hulu that it will have once the deal closes, Disney is preparing to launch two separate streaming services, one for sports and another focusing on entertainment. And it is pulling its content from Netflix in preparation for the launch. Adding Fox’s television and movie studios and the content they own means adding to the stable of must-watch content it can offer directly to consumers, bypassing their streaming competitors’ platforms.

The deal will need to undergo regulatory review and will likely take at least a year to close.

Talley LLP understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability or build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

 

Source: www.cnn.com 12/15/17

It was already a rough year for Steely Dan fans: Walter Becker, the band’s co-founder and guitarist, died in early September. Now the surviving member, Donald Fagen, is embroiled in a complicated legal feud with Becker’s estate.

At the center of the suit is a buy/sell agreement signed in 1972, the year the band formed, which stated that upon the death or departure of a Steely Dan bandmember, the group would purchase that member’s shares. By 1975 Steely Dan was effectively a duo, with Becker and Fagen accompanied by session musicians.

Fagen’s suit is apparently an effort to head off a move from Becker’s estate: He alleges that four days after Becker’s death from esophageal cancer on September 3, he received a letter that said: “We wanted to put you on notice that the Buy/Sell Agreement dated as of October 31, 1972 is of no force or effect.” The letter also reportedly demanded that Becker’s widow, Delia, be appointed a director or officer of the group, and that she was entitled to 50 percent ownership of Steely Dan.

The buy/sell agreement, if enforceable, would entitle Fagen to purchase Becker’s 50% ownership of the band and, therefore, be the sole owner and retain 100% control of the band. While Becker’s estate says the suit is “riddled with half-truths and omissions,” and regardless of the ultimate outcome of this dispute, there is a lesson both aspiring bands and entrepreneurs can learn from this story:

Estate/Legacy Plans Need To Be Updated Frequently. The buy/sell agreement in question in the Steely Dan lawsuit was apparently executed just before the release of their first album. In other words, it was done when Steely Dan was relatively unknown and had not achieved international success or amassed such a large catalog of music and other properties and rights. At the time, it was a fairly forward-thinking move (most bands have no agreements in place when they first start out). The problem is, however, it was never updated. The structure and governing documents through which a band (or any organization) operates need to be treated as a plan that can and will evolve over time as the band itself evolves. A legacy plan requires continual oversight and must be proactively implemented on an ongoing basis to truly work in the best interest of all parties involved. Bottom line: having an agreement that is 45 years old still govern any type of relationship is usually not a good idea.

Talley LLP understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability or build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

Players like Lebron James are renowned for their smart decisions when it comes to their money, whereas others like Allen Iverson serve as a cautionary tale. Over the course of his career, Iverson earned approximately $200 million: $155m from his NBA salary and another $40-$50m in endorsements. His lavish lifestyle during his NBA career foreshadowed the financial woes we would experience during his retirement.

How did Iverson manage to go broke?

Aside from showering his entourage with gifts he couldn’t afford and including them in a lifestyle fit for a king, Iverson apparently had a habit of keeping his money in dozens and dozens of garbage bags around his mansion. Some would occasionally go missing. At one point in his career, Iverson arrived back at an airport and had forgotten where he parked his car. Rather than spend time searching the parking lot for his vehicle, he simply found a ride home and bought a new one.

Allen’s financial situation came to light in 2012 after a judge in the state of Georgia ordered him to pay $900,000 to a jeweler. In a December 2012 court filing, Iverson told the judge that his monthly income was $62,500 and his expenses were $360,000. According to the court filing, Iverson monthly expenses consisted of such notable items as $125,000 going to various creditors and mortgages, $10,000 on clothes, $10,000 on restaurants/entertainment and $10,000 on groceries.

So how has Reebok helped Iverson?

Iverson made a decision in 2001 that would inevitably save him from his future self. He signed a unique endorsement deal with Reebok. In addition to paying $800,000 a year for life, Reebok set aside $32 million in a trust fund that Allen will not be able to access until he turns 55 in the year 2030. The deal came to light when Allen’s ex-wife filed for divorce.

Regardless if it is a challenge for Iverson to live with a budget far less than what he was used to during his playing days, someone had the foresight to protect the man from himself.

Whether an endorsement contract or an M&A transaction, every negotiation is unique and needs to be approached with the proper strategy and insight. Talley LLP is uniquely equipped to provide the technical and managerial expertise to help you plan, negotiate, structure and execute on your buy-side or sell-side strategy.

Depending on where you call home, you may have noticed Amazon’s fleet of plain white trucks delivering packages around town.  Amazon is experimenting with a new delivery service intended to make more products available for free two-day delivery and relieve overcrowding in its warehouses, which will push the online retailer deeper into functions handled by longtime partners UPS and FedEx.

Amazon will oversee pickup of packages from warehouses of third-party merchants selling goods on Amazon.com and their delivery to customers’ homes, cutting into the work that is now often handled by UPS and FedEx. Amazon could still use these couriers for delivery, but the company will decide how a package is sent instead of leaving it up to the seller.

The project underscores Amazon’s ambitions to expand its logistics operations and wean itself off the delivery networks of UPS and FedEx. A rush of last-minute holiday orders in 2013 forced Amazon to issue refunds to shoppers who didn’t get gifts in time, highlighting the perils of being overly dependent on partners for an integral component of its business pledge — quick, reliable delivery. Taking over some responsibility for delivery enables Amazon to protect that edge as rivals like Wal-Mart Stores Inc. enhance their own delivery operations.

Amazon’s latest move should not surprise many, as the company has demonstrated its ability to disrupt industries time and time again.

With over 25 years’ experience consulting with industry-leading companies, Talley understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

Launched just seven years ago, Uber Technologies Inc. is an app-based transportation company headquartered in San Francisco, California. It operates in about 270 cities and more than 60 countries worldwide. As of this June, Uber completed 5 billion total trips. Uber’s recently appointed Chief Executive Dara Khosrowshahi told employees on Wednesday the ride-service company may go public in 18 to 36 months. Will Uber become the next hottest IPO?

Uber Faces Increased Competition

Companies like Lyft, Curb, Southeast Asia-based Grab, India’s Ola, and especially China’s Didi Chuxing are all eating into the ride-hailing market share, becoming huge competitors of Uber. Didi was arguably Uber’s biggest threat overseas, and the ride-sharing giant finally conceded defeat last August, selling its China operations to Didi and ending an expensive, bruising battle between the two companies.

Even Alphabet Inc. (Google) is becoming a threat to Uber with plans to make its self-driving cars unit a stand-alone business. This initiative could put the company in direct competition with Uber since eliminating the need for a driver would keep costs down in the long-run.

But Uber is right on Google’s heels. They’re beefing up their business strategies and focusing on autonomous driving. In September of last year, Uber began testing its self-driving Ford Fusions in Pittsburgh; engineers rode in the driver’s seat, ready to take over whenever things got tricky.

Controversy

While Uber has seen great success, the journey hasn’t been without its bumps. The company has been in and out of the news for years tackling legal battles and dodging scandal. Alphabet is currently suing them for theft of its self-driving car technology. Uber also came under fire earlier this year for sweeping allegations of sexual harassment under the rug. The resignation of Former CEO Travis Kalanick, who many believed the main architect of Uber’s toxic culture, is acknowledged as a step in the right direction for Uber. But, it remains to be seen how the recent hiring of Dara Khosrowshahi will play out.

Uber’s IPO Potential

An IPO for Uber could be massive for both the company and Wall Street. Its current value is around $68 billion after a total of 16 rounds of funding worth $11.56 billion since its launch. And thanks to Uber’s structure—a unique combination of transportation company, mobile Internet company, and real world engineering—the company is touted as one of the best future IPOs.

With over 25 years’ experience consulting with industry-leading companies, Talley understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

With its $13.7 billion acquisition of Whole Foods Market, Amazon went from testing the waters with its grocery-retail concept store, Amazon Go, to carving a direct path to becoming a major U.S. grocery retailer. While the e-commerce giant doesn’t need to be the biggest grocer in the country, Amazon is aiming to be among the top grocers in key cities, experts say.

Even though their grocery delivery service, AmazonFresh, was launched a decade ago, brick-and-mortar grocery retail is  a category that Amazon has been carefully working its way into over time. By acquiring Whole Foods, Amazon has bought a well-known grocery brand whose customer base overlaps with Amazon’s shoppers, creating a whole that is greater than the sum of its parts. 

For Amazon, the deal marks an ambitious push into the grocery business, an industry that accounts for $700-$800 billion in annual sales in the U.S. With Amazon, Whole Foods gets an owner with significant technological expertise and a willingness to invest aggressively in the grocery retailer’s success.

“The Whole Foods customer is the Prime customer,” said Cooper Smith, director of Amazon research at L2 Inc., a business intelligence firm., who defines the demographic as “high- earning, young millennials.” Amazon is asking itself how it can “capture as much of their wallet as possible.”

To that end, it’s not Amazon’s goal to necessarily be the top grocer overall in the U.S. Rather, according to Smith, Amazon wants to be among the top five in its core markets, places where these affluent millennials can be found: San Francisco; New York City; Boston; Austin, Texas; and Philadelphia.

This acquisition will have an effect beyond these five geographies, experts say. Major players in the grocery space are now in Amazon’s cross-hairs: including Kroger, which had already closed down nearly 19% in Thursday trading and is down again in Friday trading, Target Co. , which discussed the need to transform its grocery business during its analyst event earlier this year, and Costco Wholesale Corp., which has certain pricing advantages but has yet to fully capitalize on them, according to analysts.

“As other brick and mortar retailers have come to realize the hard way that competing with Amazon is a formidable challenge, supermarkets will now have to contend with not only competition with each other and nontraditional grocers like Walmart and Target, but with a retailer like Amazon which has the financial capacity to price aggressively, and the smaller regional supermarket chains and independents will bear the most pain,” said Moody’s Vice President Mickey Chadha, who expects that there will be additional consolidation in the supermarket sector.

Amazon shares were up more than 3% in Friday trading, while Whole Foods shares have skyrocketed more than 27%. Year to date, Amazon is up 32.5% and Whole Foods is up 36.6%.

Growth through acquisition is often mistakenly considered the exclusive domain of the largest companies. However small and midsize company looking to achieve substantial growth can benefit just as well. For more information about how Talley can help you plan, negotiate, structure and execute on your growth strategy, contact us today.

 

Last year, non-tech companies spent nearly $10 billion on venture capital-backed businesses. These days large companies are increasingly partnering with, investing in, and acquiring startups that disrupt their own core business -and doing so at a price premium. Here are several examples of corporate giants thinking outside of the box that provide a lesson to both startups as well as entrepreneurs looking to sell their businesses.
Wal-Mart’s Acquisition of Jet.com
At $3.3 billion, Wal-Mart’s acquisition of Jet.com in the largest deal to date for an online startup. Jet, despite its promised $1 billion run rate, is still burning cash and often not making a profit on sales.
What we miss when we focus just on the above is that Jet is a way for Wal-Mart to counter its greatest weakness and make a play against one of its strongest competitors—Amazon. Despite six decades of success as a brick-and-mortar retailer, Wal-Mart has consistently had issues competing online.
Jet is a real innovator, incorporating dynamic pricing based on warehouse location into its model and incorporating the best of AI to ensure that the client experience is exemplary—a very different selling point than Walmart has traditionally focused on.
The lesson for entrepreneurs: Pay attention to the weak spots of would-be acquirers. How would your strengths complement their weaknesses? If you can identify and demonstrate the ways you can help them patch those holes, you instantly become a more attractive acquisition candidate.
General Motors Acquisition of Cruise Automation
Last spring, automotive giant GM closed on its $1 billion acquisition of Cruise Automation, a startup that hadn’t even launched a product yet. The San Francisco-based startup develops software for self-driving vehicles, a technology that on the surface threatens GM’s core business as a legacy automobile manufacturer.
Some might say GM didn’t have much choice but claim a stake in the self-driving vehicle industry. Its competitors are working to develop new technology for autonomous cars—with Cruise, GM at least has a chance to compete against front-runners like Google and Tesla. GM has high hopes for its self-driving vehicle initiatives. Last January it entered into a partnership with ride-sharing service Lyft that it hopes will result in a fleet of robo-taxis—a pilot program for driverless non-taxi cars to come.
The lesson for entrepreneurs: Don’t be afraid to compete with the big names in your industry—even if they have a head start. When Cruise was founded, Google had already been working on self-driving cars for more than 5 years. But automakers are hungry to own the technology that they see as the future of their industry, and buying Waymo from Google is not an option. It’s no surprise that Cruise got such a high price even in a crowded field.
With over 25 years’ experience consulting with industry-leading companies, we understand the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

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