Corporate Finance Associates (CFA), an international middle-market investment banking services firm providing merger and acquisition, business valuation, capital resources, and financial advisory services, announced it advised in the management recapitalization of DeWayne’s Quality Metal Coatings by Acuity Capital Partners.  Recapitalization financing was provided by Acuity Capital Partners and Tenth Street Capital.

Established in Lexington, Tennessee in 1990, DeWayne’s specializes in providing environmentally sound and cost-effective metal finishing solutions to OEMs in a wide variety of industries such as agricultural equipment, automotive, fasteners, heavy truck, industrial, and lawn and garden equipment.  DeWayne’s prides itself on providing creative problem solving and the highest level of customer service possible for its clients.  The company employs approximately 110 full time employees. Read more »

Our client was faced with a serious challenge.  He has been in the food processing business for 23 years and has a great reputation.  His products are sold to broad line distributors, branded restaurants and major grocery stores around the country with some international distribution as well.  The recession of 2008 was challenging for the food service industry and his lender at the time used the downturn to really put pressure on him.  Sales declined, negatively affecting his company’s debt covenants.  In addition, a low appraisal significantly reduced the valuation of his business.  The bank used these unfavorable conditions as leverage to cut his credit line, increase interest rates and impose harsh fees and penalties on his company.  With the banking industry and financial markets in turmoil, it was difficult for our client to seek alternative solutions.

We advised him to refinance his mortgages using the new SBA 504 program.  Based on a more favorable appraisal, he successfully closed on loans funded by the SBA and his new lender.  As part of the refinancing, his debt service payments were reduced by $6,000 per month.  We were able to negotiate a refund of nearly $50,000 worth of related expenses imposed on his company by the previous lender.  In addition, a recalcitrant partner was bought out.  Our client now has a great relationship with his new bank and is enjoying record sales and profitability.

Posted by David Sinyard.

Today’s Wall Street Journal has a good article about being prepared to sell your private company.  It highlights a couple of issues that we frequently encounter with prospective clients for our services.

1.    Not separating yourself from the business.  In order for owners to sell and retire, there must be a management team that can run the company after you’re gone.  This is the #1 shortcoming we see most often.  It’s is never too early to begin hiring and training the team that will take over for you.  Otherwise the company owns you, not the other way around.

2.    Incorrectly valuing the business.  Your company isn’t worth exactly how much you need to retire, it isn’t worth the same as your cousin sold his company for in 2007, and it’s not worthy it’s “book value”.  If you ask too little, you’ll leave money on the table, if you ask too much, you’ll never complete the sale.  Ask an investment banker to give you an idea of what is a realistic value for you company before you start, and use an investment banker to manage a process designed to wring the best price from a competitive process.

3.    Falling for the “too good to pass up offer”.  We often have owners become clients after a failed exercise with a buyer that made a very attractive offer, only to try to “haircut” the seller right before closing.  Make sure you are talking to qualified, serious buyers and you understand that the price is fair and the buyer has the resources to close the deal.  The highest price is no price if the deal can’t get done.

To read the Wall Street Journal article, click here.

Posted by John Hammett.

Corporate Finance Associates, a leading middle-market mergers and acquisition firm, is pleased to welcome Michael Weiss as Managing Director of CFA’s new office in Seattle, Washington.  CFA Seattle provides M&A advisory services to middle market companies in the Pacific Northwest.

Michael is an 18 year veteran of the middle-market M&A industry, representing clients in all areas of mergers,  acquisitions and corporate finance.  As a current owner of two manufacturing companies and a former CPA, Michael is uniquely positioned to understand the complex issues facing today’s business owners.  CFA Seattle offers a full range of investment banking services including business sales, capital raises, partial liquidity events and family transitions. 

“We are pleased to welcome Michael Weiss to our organization.  Michael’s extensive business background and M&A and corporate finance experience will be of great benefit to CFA clients,” said Peter Heydenrych, Chairman and CEO of Corporate Finance Associates.

For most business owners managing a company is all about managing risk…calculated risk.  And, when a business owner begins the selling process, it’s also about managing risk.  As a veteran of the middle-market M&A industry, I’ve had the good fortune to work with many private business owners as they begin the selling process.  If I had only one piece of professional advice to impart it would be this:  “Holding out for a better price doesn’t always lead to a larger bank balance in the end.”  Too many times during the past five years business owners I’ve worked with have fallen into the timing trap.  When their businesses were booming and the economy was robust, they decided to delay a sale or partial sale in the hopes that by waiting, they would be able to cash out at a higher price.  “I’ll just wait a couple more years, and then I’ll sell.”  That was a risk they were willing to take.   For most of the “waiters”, that did not happen.  When the recession hit full force, many of those businesses simply didn’t make it or their businesses retracted significantly.  The cash out was zero or greatly reduced making a sale highly undesirable.  Read more »

Last week Ridge Global announced the appointment of CFA’s Gianpiero “ J.P.” Balestrieri to their board of advisors. Ridge Global is an international security, risk management and business consulting firm founded by Tom Ridge, the first Secretary of Homeland Security and 43rd Governor of Pennsylvania. According to the Ridge Global press release, JP brings his experience in corporate growth and development and joins a team of advisors which includes Lisa Gordon-Haggerty, General Barry McCaffrey and Herman Pirchner Jr. It is an honor to be so named and on behalf of CFA, I offer our congratulations to JP.

To read the entire press release, please click here.

With nearly half a billion dollars to invest, US Private Equity firms are a major source of capital for middle market business owners…both those seeking growth partners and those interested in divestiture.  This quarter’s Capital Ideas takes an open, candid look at the types of private equity firms in the private equity space and examines why you may want to take a careful look at a potential private equity partner before you sign on the dotted line.   Not all private equity firms are created equal…so as the article suggests…seller beware.  You can read the article in its entirety by clicking here.

Posted by Greg McKinley.

In the last four blog posts I have discussed the different types of middle market business buyers in the market today, how they differ and what they look for when they invest.  Now that we know about the buyers…is there anything the seller can do to make sure the transaction runs smoothly?     

If all the prerequisites have been properly put in place, the seller has at least one more tool to extract the highest price and best terms from the PEG marketplace. That is a well constructed, competitive sale process consistent with the protocols and expectations of the PEGs. As with selling to any third party, competition among potential buyers can help maximize the outcome for the seller. Read more »

This series of posts has examined the different types of buyers of middle market companies, focusing on selling to a third party.  Learning more about how the financial buyer makes investment decisions is important to anyone considering a business sale.

Although, as previously discussed, each Private Equity Group (PEG) has its own specific investment criteria, most of them are attracted to acquisition targets with certain general characteristics that independently and, in aggregate, help reduce the risk of their investment. Therefore, sellers interested in exploring recap opportunities should be aware of these and put as many as possible into place before marketing themselves to the PEG community. Read more »

This series of blog posts examines the exit options of middle market business owners as they contemplate the sale or recapitalization of their companies.  My first two posts in the series described the seven primary ways owners leave their businesses – sales of assets, sale to partners, sale to children, management, employees, to the public and a third party… and the ramifications when the third party is a strategic buyer.  The third party financial buyer is another option that may be worth consideration.

A financial buyer, for this discussion, is a private equity group (PEG). This is a type of investment manager that raises funds specifically to be invested in the private equity of operating companies in accordance with a limited partnership agreement between it and its sources of those funds (e.g. pension plans, universities, insurance companies, foundations, endowments, and high net worth individuals). The funds typically have a ten year life, during the first half of which, capital is invested into companies and, during the second half of which, that capital and any appreciation thereon is harvested back out through the resale or IPO of those companies. Read more »