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Tuesday, Mar 19, 2024

Mergers & Acquisitions

Calvin Hedman President Hedman Partners Valencia As president of the firm, Calvin Hedman is responsible for all aspects of quality assurance and client service at Hedman Partners. The accounting firm has an affiliate, Hedman M&A Advisors, that is a boutique investment banking firm primarily representing sellers of companies with $500,000 to $5 million of EBITDA. Hedman and partners started this affiliate because they found many transactions of this size were not well represented and sellers did not maximize their net proceeds. Hedman serves on the board of the Santa Clarita Valley Economic Development Corp. Hedman Partners ranks No. 28 on the Business Journal list with 13 CPAs on staff. Question: Who are your clients?  Closely-held middle market companies with revenues between $10 million and $150 million. They hire us because we are entrepreneurs helping entrepreneurs grow the value of their business. Our expertise in tax and accounting coupled with M&A and estate planning allows us to focus on both the short-term and also the long-term plans of our clients. Many times, that will be the sale of their business and we want to make sure they are prepared for the “big event” whenever it occurs. Most interesting part of job? M&A is very interesting as no two deals are exactly the same and it can be challenging to work through the various issues that arise. It is very satisfying to be part of the professional team that attains the best result for our client, allowing them to achieve their goals. Biggest challenge? Sometimes the other party can be unreasonable in their position, which can raise tempers or cause a deal to fall apart. By being creative and properly managing expectations, we can many times overcome obstacles that arise during the negotiations and allow the deal to be completed. Example of how expertise helped a client: We assisted one new client in the cosmetic industry who was doing a consolidation of distributors. They presented a deal to us for review that was similar to how they had done previous deals. The deal structure was complicated and cumbersome to close. We suggested an alternative structure that not only made the deal more operationally efficient, it also produced better tax results for our client and the seller. Because of this, the client used this structure on their subsequent roll-up acquisitions. How does your personality help in this industry? As mentioned earlier, tempers can be heightened during negotiations and following due diligence. By being a patient individual (quick to listen and slow to speak), I have been able to work through most – but not all – situations and help get the deal to the finish line. How has M&A accounting changed in recent years? Tax law changes and tax court cases have affected how deals are structured in order to maximize the tax benefits to either the seller or buyer, depending on who we are representing. In addition, with more private equity buyers than in the past, the structure of deals can be more complicated and requires the CPAs to be experienced in M&A to properly advise a client on complex tax and accounting issues. What do you see in the future for M&A accounting? As has been predicted for the last 10 years, we are seeing increased activity in M&A as baby boomers decide to sell their business and retire. As long as the economy continues to be strong and interest rates remain low, this trend should continue for the next few years. However, as we experienced with the great recession, the market can turn quickly and M&A activity can go into hibernation when a downturn and uncertainty enters the market. What can your experience in M&A accounting teach people in other industries? Plan ahead and take advantage of opportunities when they appear. Don’t expect that things will stay the same. Keep on top of current issues and always look to grow in whatever you do. Advice to clients? For sellers, the highest price is not always the best deal. What are the terms? Are the buyer’s plans in line with what you want for your company and employees? For buyers, lack of cash flow has killed many businesses, so make sure the deal is structured to allow for success even if projections aren’t met. Sometimes it is better to walk from a deal if there is a concern.

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.

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