Exit and Growth Strategies for Middle Market Businesses

M&A News From the Food & Beverage Industry

By Terry Fick | Feb 23, 2017

food & beverageOn the public markets the Food & Beverage sector kept pace with the rest of the market experiencing a hefty post-election bounce. Conagra Brands, Inc. (NYSE: CAG) had a topsy turvy quarter taking a precipitous drop in November from $48/share to $34/share, but finished the year on an uptick at $39.14/share.

Faced with slowing sales in grocery stores and discount clubs, snack food manufacturers are looking to grow revenue online. E-commerce has become one of the fastest-growing avenues for purchases of ready-to-eat snacks as major food companies continue to increase their investments in the channel, according to NPD Group. Mondelez International recently launched a holiday-themed website to sell tins of Oreos directly to consumers, marking the first time the company is overseeing its own supply chain and shipping logistics, Bloomberg News reports. The snack food giant established a dedicated e-commerce team in 2016 and hopes to reach $1 billion in online revenue by 2020. The company will occasionally offer special limited-time promotions through its own website, but most of its products will ultimately be sold through third-party online retailers like Amazon. Some manufacturers have leveraged social media buzz to sell rare and premium varieties of snack foods that are unavailable in most brick-and-mortar outlets. Typical online snack food purchasers are households with incomes of $75,000 and above.

Industry Indicators

  • The consumer price index for food, an indicator of food product values, fell 0.2% in December 2016 compared to the same month in 2015.
  • US nondurable goods manufacturers’ shipments of food products, an indicator of demand for food manufacturing, rose 0.4% year-to-date in November 2016 compared to the same period in 2015.
  • US retail sales for food and beverage stores, a potential measure of food demand, increased 2.4% during 2016 compared to 2015.

Posted by Terry Fick.

Read the Entire Food & Beverage 1st Quarter Newsletter Here

Construction & Engineering Sector | M&A News

By Jeff Johnson | Feb 15, 2017

construction & engineeringNew US infrastructure projects such as repaving roads, shoring up bridges, and expanding busy highways with toll roads – a key source of demand for contractors – are predicted to rise in value in 2017 compared to the year before, according to Dodge Data & Analytics. The value of new public works construction & engineering projects, which include highway, street, and bridge construction as well as natural gas and oil pipelines and environmental work, is expected to rise 6%. The forecast represents improvement over 2016, when the value of new public works projects fell by 3% year over year. Demand is being driven in part by highway and bridge work funded by the new federal transportation bill.

New US regulations make it easier for companies that construct highways, streets, and bridges to begin or expand their use of drones. The FAA in mid-2016 issued commercial drone regulations that allow construction companies to begin using drones within days, rather than weeks or months. The infrastructure sector, along with the engineering & construction sector, leads in the number of exemption applications since the FAA began granting exceptions to its ban on the commercial use of drones. According to the Association for Unmanned Vehicle Systems International, nearly 40% of FAA-approved exemptions so far have come from these sectors.

Industry Indicators

  • The value of US nonresidential construction spending, a demand indicator for builders, rose 4.1% year-to-date in November 2016 compared to the same period in 2015.
  • US steel mill product prices, an indicator of commodity steel product costs used in construction, rose 8.7% in December 2016 compared to the same month in 2015.
  • The spot price of crude oil, which affects highway construction costs for asphalt, bituminous concrete, plastic pipe products, and for running equipment fleets, rose 50.3% in the week ending January 13, 2017, compared to the same week in 2016.

Posted by Jeff Johnson.

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

4 Potential Value Killers of Your Business

By George Walden | Feb 08, 2017

In a video I posted on Vimeo, I explain about four of the many potential value killers of your business when it is time to sell. Click on the play button below to see the entire video.

Four of the many potential destroyers of value of your business when it is time to sell: Read more »

When Should You Sell Your Company?

By George Walden | Jan 09, 2017

When should you sell your company?  If you were to ask most business owners this question they would say, “When I am ready.” Not a very scientific approach for the wealth generating machine you have created. But let’s assume for the sake of argument you decide you are within 5 years of that decision.

In a video I posted on Vimeo, I explain about the indicators that let you know it is time to sell.  Click on the play button below to see the entire video.

Here are three indicators that let you know it is time to sell and when used correctly they may even raise the value of you company: Read more »

Print & Packaging M&A News Update

By Anthony Contaldo | Jan 06, 2017
Print & PackagingM&A activity for North American based target companies in the Print & Packaging sector for Q3 2016 included 54 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $401 million.
A transaction of note announced early in the quarter was Packaging Corporation of America (NYSE: PKG) announcing that it has entered into a definitive agreement to acquire substantially all of the assets of TimBar Corporation, a large independent corrugated products producer, in a cash-free, debt-free transaction for a cash purchase price of $386 million. PCA is the fourth largest producer of containerboard and corrugated packaging products in the United States and the third largest producer of uncoated free-sheet paper in North America. PCA operates eight mills and 90 corrugated products plants and related facilities.

US commercial printing industry sales are expected to increase between 1.5% and 3% in 2017, according to an industry report and forecast released in September 2016 by printing trade industry association Idealliance. In the first half of 2016, printing industry sales grew just 0.3% from the same period the year before, the weakest growth in three years. Commercial printing industry supply and production capacity continue to outstrip demand as the digitization of information has eroded demand for core services. However, nearly 49% of printers surveyed for Idealliance’s 2016 State of the Industry report said their profits rose in the first half of 2016 compared to the same period in 2015; about 27% said profits had declined. Gains in profitability were achieved mainly by controlling costs, increasing production efficiencies, and winning higher-margin work.

Industry Indicators

  • US corporate profits, an indicator for corporate demand for printing services, fell 4.9% in the second quarter of 2016 compared to the same period in 2015.
  • US nondurable goods manufacturers’ shipments of printed goods, an indicator of demand for commercial printing, rose 0.4% year-to-date in August 2016 compared to the same period in 2015.

Posted by Anthony Contaldo.

Read the Entire Print & Packaging 4th Quarter Newsletter Here

Logistics & Transport M&A News

By Doug Nix | Jan 06, 2017

logistics & transportM&A activity for North American based target companies in the Logistics & Transport sector for Q3 2016 included 55 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $197 million.

One of the largest deals of the quarter in the Transport & Logistics sector  took place in September when XPO Logistics announced it would acquire Con-way Inc., one of the country’s largest trucking companies, for $3 billion. XPO will launch a tender offer for all of Con-way’s outstanding shares at a cash price of $47.60 per share. All of the divisions under Con-way, which include Con-way Freight, Menlo Logistics, Con-way Truckload and Con-way Multimodal, are expected to be rebranded as XPO Logistics.

Developers of self-driving vehicles are moving closer to delivering technology that could improve safety, increase productivity, and reduce operating costs for trucking companies. Citing potential safety benefits, the US Department of Transportation issued federal policy for testing and deployment of automated vehicles in September 2016. The framework clarifies federal and state roles for the regulation of such vehicles, laying necessary groundwork for companies that plan to deploy self-driving cars and trucks. One such company, Otto, plans to start hauling freight with semi-autonomous vehicles sometime in 2017, according to Reuters. Commercial use of fully automated trucks is likely still many years away, and manufacturers will have to overcome significant challenges, including vehicle technology, inadequate infrastructure, and high development costs. However, Otto’s viability got a boost in August 2016: the company was acquired by Uber for $680 million.

Industry Indicators 

  • The average US retail price for diesel and regular gas, a major operating cost for trucking fleets, fell 2% and 0.9%, respectively, in the week ending October 17, 2016, compared to the same week in 2015.
  • Total US manufacturers’ shipments, an indicator of the volume of goods shipped by truck, fell 2.7% year-to-date in August 2016 compared to the same period in 2015.
  • Total US revenue for general freight trucking fell 1.4% in the second quarter of 2016 compared to the previous year.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 4th Quarter Newsletter Here


M&A News From the Plastics Industry

By Jim Zipursky | Dec 16, 2016

plastics industryA new process developed by Exxon Mobil and the Georgia Institute of Technology could eventually reduce the costs of manufacturing in the plastics industry while slashing energy consumption and greenhouse emissions. The process uses a new polymer-based membrane to filter para-xylene, a building block for polyester, from complex hydrocarbon feedstocks instead of the energy-intensive heating process currently used. If it proves to be commercially scalable, the technology could reduce the energy costs of plastics production by $2 billion annually. The process might also decrease carbon dioxide emissions by up to 45 million tons per year. More testing is required to determine of the membranes can withstand the rigors of real-world production conditions. If further research is successful, a pilot program may be put in place to test a plant-scale demonstration of the technology. The initial research was published in Science in August 2016.

Industry Indicators

  • US nondurable goods manufacturers’ shipments of plastics and rubber products, an indicator of plastic and rubber products production, fell 0.1% year-to-date in August 2016 compared to the same period in 2015.
  • The spot price of crude oil, a key raw material in plastic and rubber manufacturing, rose 10.0% in the week ending October 7, 2016, compared to the same week in 2015.
  • US nondurable goods manufacturers’ shipments of chemical products rose 2.3% year-to-date in August 2016 compared to the same period in 2015.

Posted by Jim Zipursky.

Read the Entire Plastics & Rubber 4th Quarter Newsletter Here

Healthcare Industry | M&A News

By Peter Heydenrych | Dec 08, 2016

healthcare industryHealthcare industry providers are consolidating to get a better handle on revenue streams, reduce costs and control risk. Federal programs looking to control costs may further alter payment systems if consolidation is found to increase medical spending. The number of US physician practices owned by hospitals is rising rapidly, as changes in medical payment systems prompt providers to seek efficiencies through new operational structures. Some 31,000 practices were acquired by hospital groups between 2012 and 2015, leading to an 86% jump in the number of hospital-owned doctors’ offices, according to a recent study from Avalere Health and the Physicians Advocacy Institute (PAI). Nearly 40% of physicians in the US are employed by hospitals or health systems.

A growing number of insurers and health providers are transitioning to value-based reimbursement methods, with the goal of containing costs and improving care. Healthcare providers must adjust processes to maintain efficient, high-quality operations during the transition period. While fee-for-service reimbursements are still the primary mode of payment for US health care providers, insurers are making progress on goals to switch over to value-based contracts. Value-based payment systems include quality incentives, accountable care models, network management, and bundled payments. The US Department of Health and Human Services (HHS) is on track to meet its goal of tying 30% of traditional Medicare payments to value-based payments by the end of 2016, as well as higher targets over the next several years. Commercial insurers are also adopting new payment models; Aetna is aiming for 75% of spending through value-based contracts by 2020. According to a recent survey by McKesson reported by Healthcare Dive, hospitals are about 50% along the continuum towards full value-based reimbursement. However, challenges remain in areas including process automation and payer-provider collaboration. A majority of surveyed hospitals were not yet meeting value-based reimbursement goals including lower costs, better care coordination, and improved patient outcomes.

Posted by Peter Heydenrych.

Read the Entire Healthcare 4th Quarter Newsletter Here

M&A News | Energy Sector

By Roy Graham | Dec 02, 2016

M&A News | Energy SectorM&A News | Energy Sector – Oil producers can better withstand downturns in oil prices by looking for efficiencies in their operations. As the oil industry continues to struggle, some bright spots are emerging as producers find ways to boost efficiency enough to make up for low per-barrel prices. Companies have to carefully manage well productivity to be sure per-barrel costs don’t exceed market value. Three shale producers recently surprised the market by announcing productivity gains without higher costs or concessions from vendors. Factors from linking cost cutting and executive pay to boosting the amount of sand used in fracking to design changes have led to doubled production and a 40% drop in costs, according to Reuters. While rig count has fallen in North Dakota’s Bakken Shale oil region in the last six years, production per rig has risen from around 200 barrels a day in 2010 to just below 800 barrels per day in 2016, according to The Wall Street Journal.

New rules from the FAA authorizing drone flights for businesses, with limitations, could open up a whole host of uses for drones within the oil and gas field services industry. The rules require drones to stay in view of the operator but the unmanned craft could be used to inspect oil field equipment, help map fields, monitor assets, and take on dangerous tasks without risk. Oil and gas companies around the globe have increasingly been using drones for a variety of operations.

Industry Indicators

  • The average US retail price for diesel and regular gas, which influences profitability for oil and gas companies, fell 4.7% and 7.3%, respectively, in the week ending September 12, 2016, compared to the same week in 2015.
  • The spot price of crude oil, which affects profitability for oil and natural gas operations, rose 1.8% in the week ending September 9, 2016, compared to the same week in 2015.

Posted by Roy Graham.

Read the Entire Energy M&A 4th Quarter Newsletter Here

Risk Reduction is Value Creation

By George Walden | Nov 30, 2016

Business owners have asked me to advise them on what they can do to improve the value of their company. In a video I posted on Vimeo, I explain about how risk reduction is value creation.  Click on the play button below to see the entire video.

My favorite answer is to reduce risk for the buyer and the value should improve. The only way for a buyer to account for risk is to lower the price.

What are some of the areas a business can evaluate and make value improvements? Some things are relatively easy to change, some are not so easy. Here are some of the easier ways:

1.  Build an organized systemic approach to running your company: Companies should be systems based, not personality based. Clearly defined roles and a systemic approach to your operations make a company less dependent on any single individual. Systems range from IT to marketing, from employee development to operational implementation. The common thread throughout all systems is that they measure and provide information that allows the business to make decisions. This documentation provides a buyer insight into the company and removes risk from the loss of a single employee. Read more »