Exit and Growth Strategies for Middle Market Businesses

Aviation, Aerospace and Defense Industry News

By Joe Contaldo | Mar 27, 2015

Jet PlaneAmong aviation, aerospace and defense companies in 2014 divestitures and spin-offs were strong, in part, due to the desire to exit businesses directly impacted by sequestration. There was also strong transaction activity in the fragmented and high-margin maintenance, repair, and overhaul (MRO) business supported by rising passenger traffic and higher utilization rates in growing regions.

According to First Research, an industry research organization, Aircraft makers based in China and Japan are taking on longtime incumbents Embraer and Bombardier in the regional jet market. Mitsubishi Aircraft expects to begin test flights of a 76 to 88-seat regional jet in the second quarter of 2015, with deliveries beginning in 2017. The company has set the goal of attaining 50 percent of the global market for regional jets over the next 20 years, according to The Wall Street Journal. Commercial Aircraft Corporation of China (COMAC) is also readying a new regional jet; the company recently took new orders for a 75- to 90-seat aircraft that is expected to be certified by 2015. COMAC hopes to capture booming demand for regional jets in China, a market that Embraer recently forecast will account for 16 percent of the global market for 70 to 130-seat jets by 2033.

Posted by Joe Contaldo.

Read the Entire Aviation, Aerospace & Defense M&A 1st Quarter Newsletter Here

Investment Bankers vs. Business Brokers – It’s Not Just About Size

By Dan Vermeire | Mar 25, 2015

Question marksThe Differences Between Investment Bankers and Business Brokers

You may hear the words “Business Broker” and “Investment Banker” used interchangeably. Some people think they mean the same. That is not completely wrong – both professions are aimed at financial transactions for a business. But, by any other measurement, the two words mean very different things.

One common misconception is that it’s all about size. That is, if you’re a business owner and you want to consider a transaction for your business, then you choose a Broker or an I-Banker, simply depending on the size of your business. Many people think an arbitrary revenue number, such as $2M or $5M, will decide. If your business is smaller, then you use a Broker.

Size matters, of course, but only in general terms – and there are many exceptions. Business Brokers tend to operate in the lower revenue range, say $5M and below. Investment Bankers operate in the “Lower Middle Market” generally ranging from $10M to $250M. “Bulge Bracket” or Wall Street Investment Bankers operate at higher levels, say $500M and above. Read more »

News From the Plastics and Rubber Industry

By Jim Zipursky | Mar 20, 2015

Plastics and RubberPlastics and rubber M&A activity has been fueled by larger companies and private equity groups looking acquire new technology to add to existing divisions or portfolio companies. As the economy continues to grow the plastics and rubber sector should see continued M&A activity.

According to First Research, an industry research organization, US plastics and rubber manufacturers stand to benefit from the US boom in natural gas shale plays, according to Trib Total Media. US production of ethane, a natural gas liquid, has increased significantly from shale plays including the Marcellus, Utica, and Bakken shale formations. In processing plants called ethane crackers, ethane is produced from natural gas. Ethane is then used to produce ethylene, the key ingredient in polyethylene plastic. Royal Dutch Shell is reported to be considering the construction of a new ethane cracker in Beaver County, Pennsylvania, to process natural gas from the Marcellus Shale. The US division of Brazilian petrochemical firm Braskem is proposing construction of an ethane cracker in West Virginia.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 1st Quarter Newsletter Here


Engineering and Construction Industry News

By Jeff Johnson | Mar 13, 2015

Engineering and ConstructionM&A activity in the engineering and construction space has been driven in part by the desire to increase services and trades. General contractors have broadened their capabilities by acquiring specialty contractors but have also acquired design and consultancy firms as they look to offer a full-service value-added solution. A recent global example was Hill International, a global construction company, acquiring Cadogans, a U.K. engineering consultancy company, in November 2014.

The US is one of the top 10 most attractive national markets for investment in infrastructure, according to a recent report by engineering firm ARCADIS. But while the US needs to rehabilitate $3.6 trillion in existing infrastructure, government budgets are forecast to fund only about $2 trillion of this need by 2020, based on estimate by American Society of Civil Engineers. To fill the gap, investors and governments are exploring public-private partnerships (P3s) models that combine public money with private investment to fund needed infrastructure in engineering and construction.

Posted by Jeff Johnson.

Read the Entire Engineering and Construction M&A 1st Quarter Newsletter Here

Business Exit Planning – It Helps to Know What You Want

By Peter Ventre | Mar 10, 2015

Business Exit PlanningI am reminded that it helps to know what you want from life. Here in the Northeast last week was winter school vacation week. We took the opportunity to tour a handful of states looking at prospective colleges with my son, who like many 16 year olds has little notion of what he may want in a college or what lies ahead for him. We toured urban and rural schools, large universities and small quaint colleges, academically rigorous schools and school that were not so competitive, as everyone needs a back-up plan. Surprisingly by the end of a rather demanding travel week, even my son began to formulate opinions about what he liked and didn’t like. The trip will pay dividends next fall when he ultimately decides where to apply to college.

Many business owners seeking to exit their business remind me of my son. They are not sure what they want. Each owner has read or heard of industry friends who may have sold their business to an unrelated third party at high multiples, or transferred the business to their children, or sold the company to their employees through an ESOP structure or to members of their management team, or perhaps they sold a portion of the company to a private equity group and decided to stay on building the company further with an additional capital infusion. The right path forward to exiting a business is unique to each owner, their company and circumstances. What options best fit the company’s circumstances and also matches the desires of the owner, considering his personal situation. Are there options for the company at a price that would work for the owner to move on? Does the owner wish to retire immediately or do they wish to continue to work in some capacity for years to come? Are there other family considerations?

Business exit planning demands thought, planning, and knowing what you want as the owner.  Like many things in life, it helps to know what is important to you. If you are contemplating a business exit contact a Corporate Finance Associates representative, who would be happy to discuss the various options with you.

Posted by Pete Ventre.

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Technology, Media & Telecommunications M&A News

By Arun Batavia | Mar 06, 2015

technology, media & telecommunicationsM&A activity for North American based target companies in Technology, Media & Telecommunications (TMT) sector for Q4 2014 included 100 closed deals according to data published by industry data tracker FactSet, with an average enterprise value of $212 million. Among the three subsectors the most activity continues to be in the telecommunication space as the highly competitive mobile market drives consolidation.

In addition, smaller deals by companies looking to gain technology, media & telecommunications market share have boosted the deal environment.

Total US revenue for wireless telecommunications carriers, except satellite, rose 4.4 percent in the third quarter of 2014 compared to the previous year. US paging, cellular, and wireless telecommunications is forecast to grow at an annual compounded rate of 7 percent over the next three years.

Posted by Arun Batavia.

Read the Entire Technology, Media and Telecom 1st Quarter Newsletter Here

Does Industry Expertise Matter When Selecting an Investment Banker?

By Jeff Wright | Mar 04, 2015

Investment BankerSometimes a company owner insists that an investment banker must be an “industry expert” to maximize value. To the contrary, my experience leads me to believe that the real benefits of specific category experience may be small and the potential pitfalls, larger.

It may seem counterintuitive, but being narrowly focused in an industry may actually be a detriment to owners seeking to sell their companies for maximum value. Here are some reasons this might be so:

  1. An “industry expert” may approach the assignment just like his last deal and not apply innovative thinking to the assignment. There is a risk of “phoning in the work”. We know that every company and every situation is different and deserves fresh thinking.
  2. The “industry expert” may see a limited buyer universe because he thinks he already knows all the buyers in the industry. This kind of banker may not dig as deep or think as creatively to find buyers who may have strategic adjacencies, because they are not directly in the client’s industry.
  3. Worse, due to long standing relationships, the banker may owe favors to certain buyers in that industry and lose some objectivity, maybe even unintentionally.

Read more »

If You Are Going to Sell Your Business, Sell Now

By Marc Borrelli | Mar 02, 2015

Sell Your BusinessIf you are going to sell your business, sell now.  At the ACG Capital Connection in Atlanta two weeks ago the common theme from the Private Equity Groups I spoke to was that multiples are back at 2007 levels. They were lamenting the fact that they didn’t have more portfolio companies ready to sell.

Jeff Mortimer, Director of Investment Strategy at BNY Mellon, further reinforced this notion during a presentation I attended today. Jeff said that any private company owner who is looking to exit should sell now. In Jeff’s opinion, the bull market has maybe up to 24 months to run; however, multiples will fall before the end of the market as buyers see the impending downturn and won’t pay for the growth that has passed. Thus in his view the selling usiness window could close anytime in the next 6 – 18 months and if an owner were to miss it, it would be another 8 to 10 years before multiples were to return to this level.

To paraphrase Oscar Wilde, “To ignore one sign, Mr Worthing, may be regarded as a misfortune; to ignore both looks like carelessness.”

Posted by Marc Borrelli.

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Energy Sector News

By Roy Graham | Feb 27, 2015

Energy Sector NewsAccording to First Research’s energy sector news,  the recent drop in crude oil prices is putting pressure on larger US producers to scale back on fracking operations. Fracking has been a huge boon to US oil production in recent years, but as prices fall, costs remain high, and the return on investment has diminished. ConocoPhillips recently announced it will cut back drilling operations and exploration spending. Shell also plans to reduce spending and cut employment. Smaller oil companies with lower cost structures are continuing to profit from fracking, but margins may be squeezed if oil prices continue downward, a scenario some experts say is likely given Saudi Arabia’s plan to keep production high. Unlike US producers, Saudi Arabia is able to profit from oil even if prices reach $30 per barrel, according to Forbes.

New Canadian rules for rail transport of oil and ethanol could boost operating costs for oil producers. Tighter regulation came nearly a year after a train derailment in Quebec killed 47 people, prompting regulators in Canada and the US to pursue tighter regulation of oil tank cars. The new Canadian rules, issued in April 2014, call for railroads to develop emergency plans for responding to explosions; the rules also fast-track the retirement of older tank cars and require the adoption of stronger tank cars within the next three years. Prompted by Canada’s moves, regulators in the US are working to update their tanker rules, which have been in dispute for years. US regulations are likely to call for stronger tank cars, reduced speeds for trains carrying oil or ethanol, and safer routes for trains carrying more than 20 tank cars.

Posted by Roy Graham.

Read the Entire Energy M&A 1st Quarter Newsletter Here

It’s Always Something in Exit Planning

By Jim Gerberman | Feb 23, 2015

Exit PlanningThe recent production of “Saturday Night Live 40th Anniversary Special” brings back some great memories of the original “Not Ready for Prime Time Players” and the creativity that they and the SNL writers brought into our homes in those early years of the show. And, the stories that we would later share about “Killer Bees”, “Coneheads”, “Samurai” and the like became a routine part of our culture. I have a particular favorite character – introduced by Gilda Radner (rest in peace) in the form of Roseanne Roseannadanna…and her catch-phrase “It’s Always Something”.

Many of us can relate to the challenge of overcoming inertia…of going against the grain. This is particularly true when dealing with a subject that is rather easy to put off or that is rather difficult to address. The subject of “exit planning” is one such subject for many business owners. Accordingly, some questions.

Firstly: Why is exit planning hard to do? For the most part, the daily life of a business owner is dealing with things that are urgent and demand our immediate attention. It’s natural for these to get precedence. The discipline required to effectively address exit planning (or any planning, for that matter) necessitates putting a number of these “urgent items” into proper perspective and giving priority to those that are truly important. In his classic book The 7 Habits of Highly Effective People, Steven Covey called this “Putting First Things First”. Otherwise, as Roseanne Roseannadanna would say: “It’s Always Something”. Read more »