InSight

Exit and Growth Strategies for Middle Market Businesses

Archive for 2012

Energy Update

By Lee Crawley | Mar 02, 2012

Oil RigWith the high price of gasoline at the pumps the headline story on every nightly news broadcast, CFA’s current quarterly energy newsletter is relevant reading.  Bud Boles, a prominent member of our Energy Industry Practice Group and oil industry veteran, writes a compelling newsletter every quarter analyzing the industry trends and provides insight into what’s in store on the energy front.

The current issue discusses global energy supply and demand, pricing, exploration and recent M&A deals in equipment and services.   I suggest you read the newsletter in its entirety for an in depth summary of the energy sector.   You can download the Q4 2011 Energy Industry Newsletter by clicking here

Posted by Lee Crawley.


Corporate Finance Associates Advises in Recapitalization of Abacus Plumbing by Berkey’s Plumbing and Air Conditioning

By Eduardo Berdegué | Feb 24, 2012

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 Abacus Plumbing by Berkey’s Plumbing and Air Conditioning of Southlake, Texas.  Recapitalization financing was provided by Berkey’s investors, Alpine Investors and Skylight Capital. Read more »


CFA Advises Barton Manufacturing in Sale to Tag Holdings and Seneca Partners

By Robert Contaldo | Feb 21, 2012

Barton TombstoneWe are pleased to announce that Corporate Finance Associates was the exclusive advisor to Barton Manufacturing, Inc. on its successful sale to TAG Holdings and Seneca Partners.

Barton Manufacturing, Inc. (Barton), based in Decatur, Illinois, is a Tier 1 supplier providing metal fabrication and precision machining of large weldments to Fortune 100 companies. Founded in 1950, the Company specializes in large part machining and welding and is capable of manufacturing parts with a cube size up to 60″ x 60″ x 120″ and weighing up to 3,000 pounds. Product examples include brake system components, track links, axle assemblies, engine supports, wheel hubs, hydraulic covers, and more. Additionally, the Company manufactures high volume small to medium sized precision parts such as industrial valve bodies and other components for a variety of applications. Barton is ISO 9001:2008 certified. Read more »


Meet the Buyers

By Marc Borrelli | Feb 17, 2012

The first time that many sellers meet the potential buyer of their company is during due diligence when the buyers attend a presentation by the company on its strategy, plans and performance. At these events, the potential buyers are seeking to learn about the company and gain insight into the “human” side of the business, in addition to the Information Memorandum that they have been supplied.

Business MeetingA key factor in determining the demand for a company, and thus the price realized, is the involvement of the management team in the day-to-day operations of the company and the execution of the business plan.  If the management team does not fill these requirements, then the owner is basically doing everything and the management team is  management in name only…in reality they are just employees who perform but don’t lead or manage. As I tell potential clients, “You can sell a company, but you cannot sell a job!”  So,  if the management team doesn’t manage, then in reality there is no company and the owner just has a job.

In addition, most owners are looking to exit the business within a reasonable time of selling. In order for any buyer to allow the owner to exit, the owner needs to have a management team that can run the business in his absence and thus be a redundant cog in the company.

Given that perception is reality, when meeting the management team the key requirement is for the management team and owner to create the impression that the owner is redundant and that the management team can operate the business effectively without him. To that extent, it has always been our advice to clients that the owner’s sole role at the management presentation should be limited to welcoming the potential buyers, informing them of the agenda and procedure for the meeting. After that, the owner should sit down and allow his management team to present and answer all questions. The better the management can handle this process, the greater the confidence the buyer will have in them and their ability to run the company in the absence of the owner.

 

7 Step Guide to Business Exit Planning

 

Posted by Marc Borrelli.


5 Reasons to Hire an M&A Professional to Sell Your Business – Reason #5

By John Hammett | Feb 15, 2012

Part 5

This is my last in a series of posts discussing reasons why hiring an investment banker when selling a business can make good economic sense.  Entrepreneurs are successful because they are versatile and are unafraid to take on the challenge of doing what needs to be done at each stage in the life cycle of their company.  So it’s natural for company owners to want to take on the task of selling their company as one more personal challenge that they can do as well as an outside expert.

There are a number of reasons why smart owners hire investment bankers to manage the process and represent their interests in the sale of their companies.  An outside M&A advisor stays focused on the deal while the owner stays focused on running the company’s day-to-day operations.  An investment banker also provides a level of experience and sophistication when dealing with potential buyers.

Reason #5

PROCESS AND PROFESSIONALISM.  Good M&A firms manage the sale process systematically.  They have a schedule for documentation, early indications of value, management meetings, letter of intent, due diligence, and closing.  The advisor will keep the company on schedule and will use the schedule to manage the relationships with the buyers. 

Experienced buyers appreciate the professionalism of an advisor-managed transaction.  Buyers can spend up to $200,000 to close a deal.  Having an investment banker representing the owner means that the buyers’ time and money will be well spent and the process will go smoothly.

BOTTOM LINE.  Company owners are resourceful and committed individuals.  There is no question that most company owners can manage the sale of their company to a closing.  The question is whether they can commit the time and whether their lack of experience will affect the price and terms. 

Working with a professional dealmaker can significantly improve the overall valuation and the terms of the transaction.  In addition, the involvement of an experienced dealmaker will significantly improve the likelihood of a successful closing.

Download the 10 Biggest Mistakes Sellers Make.

Posted by John Hammett.

 


How Do I Know It’s Time to Sell My Company? Part 5

By Robert Contaldo | Feb 06, 2012

Part 5

After selling companies for over thirty years, I have found that it is near impossible to convince a business owner to sell until the business and personal reasons align. But once they do, no good ever comes from delaying a sale. Over the past few weeks, my blog posts have focused on signs it may be time to sell your business… from boredom and a changing market place to risk intolerance. Another good reason to consider selling is a plethora of motivated buyers.

Sign #5 – It’s a Seller’s Market – Always

The three principal buyer groups are Private Equity Groups, strategic acquirers, and high net worth individuals.

Private Equity Groups have become the new conglomerates with overflowing levels of investment capital. With 2,500+ Private Equity Groups in the United States and a like number overseas, competition to buy companies remains robust among financial buyers. Multiple offers can be a reality for even some marginal or smaller companies. Premiums are being paid for companies as demand exceeds supply for those performing well in these tough economic times.

Strategic acquirers see growth through acquisitions as the preferred way to gain market share quickly, add product lines, augment human resources, enhance management, and stay competitive.

Strategic acquirers flush with cash have led the charge to buy companies particularly as banking has tightened for financial buyers.

High net worth individuals and family funds can be worthy suitors. These individuals bring significant personal finances, outside private investment capital, experience, contacts, expertise, and many times a unique investment strategy to the mix.

Perhaps you have been approached by one of these bona fide buyers who is large, cash heavy, willing to pay generously… and inebriated with the desire to own your company. (We can dream can’t we?). This may be a sign it’s time to sell.

 

 

Posted by Bob Contaldo.


5 Reasons to Hire an M&A Professional to Sell Your Business – Reason #4

By John Hammett | Jan 24, 2012

Part 4

Business PlanningEntrepreneurs are successful because they are versatile and are unafraid to take on the challenge of doing what needs to be done at each stage in the life cycle of their company.  So it’s natural for company owners to want to take on the task of selling their company as one more personal challenge that they can do as well as an outside expert.

As I have mentioned in my last few blog posts, some company owners chose to handle the process of selling their company themselves.  Some of these owners successfully sell their company for a high valuation.  Many of them successfully sell their company, but for a lower price or on weaker terms than they may have deserved.  And too many of them aren’t successful at selling at all.

There are a number of reasons why smart owners hire investment bankers to manage the process and represent their interests in the sale of their companies.  An outside M&A advisor stays focused on the deal while the owner stays focused on running the company’s day-to-day operations.  An investment banker also provides a level of experience and sophistication when dealing with potential buyers.

Reason #4

MARKET VALUE & TERMS.  Many companies are sold to buyers that make many acquisitions.  These experienced buyers are accustomed to the standard valuations, terms, and conditions in the marketplace.  An experienced advisor can tell the seller what is expected in the marketplace and what provisions the buyer is asking for that are beyond the limits of accepted practice.  The investment banker will protect the seller’s interests.

The contracts that document the sale of the company add up to more than 100 pages.  The price is in one place on one page of those documents.  The remaining terms and conditions are vitally important to the seller.  An experienced dealmaker can advise on what is acceptable and what provisions may be detrimental to the seller.  The end result is a better sale on better terms.

 

7 Step Guide to Business Exit Planning

 

Posted by John Hammett.

 


Taxes – The Key to Keeping More In The Sale of Your Business

By Roy Graham | Jan 12, 2012

Money BlocksThey say nothing’s certain but death and taxes…but I’m not quite sure how certain taxes really are.  Don’t get me wrong.  I know they’ll always exist.  But tax laws are constantly changing.  And, taxes become very relevant when we contemplate large life events – like selling one’s business.

One of my colleagues, David DuWaldt, wrote a great piece about how taxes and M&A deal structure work hand in hand.  David does a great job explaining why the tax interests of the buyer and those of the seller are often at odds with one another and how a resourcefully structured transaction can bridge the gap between the two.  I suggest you read David’s full article here.

Because the laws are constantly changing, it’s important to work with a trusted team of advisors including your accountant, lawyer, financial planner and investment banker to design the M&A deal structure that provides the best liquidity outcome for you.  Remember…it’s what you keep that counts.

Posted by Roy Graham.


How Do I Know It’s Time To Sell My Company? Part 4

By Robert Contaldo | Jan 05, 2012

Part 4

Business ChartSelling your business, which is perhaps your largest asset, can be a difficult decision. It has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands.

When the cycle of business and our personal circumstances begin to herald the transition, it should be addressed in order to realize the financial security for which it was created.

In this series of blog posts I’ve been discussing the 10 signs that it might be time to sell your business.   The first sign is when the enthusiasm for the business has diminished.  A changing marketplace can also be a sign it’s time to exit, as can a risk/reward imbalance.

Sign #4 – A Change Would Be Good For the Family

Many have experienced the challenges of a family run business. As the succeeding generation grows into personal and business maturity, it may be time for a generational transfer of ownership. A recapitalization with a Private Equity Group as a financial partner can allow the founding shareholders to take the lion’s share of the business value in cash at closing, while the succeeding generation reinvests (through a small amount of the proceeds) for a meaningful share of the company going forward. The company would also have access to growth capital. How great would it be to again have a family relationship that is not encroached upon by business? Is the business stealing time from your kids? Are you trading memories for dollars? Many business owners have delayed a sale in spite of the concerns of a loving spouse who desires a different and better life for themselves.

 

Middle Market Pulse

 

Posted by Bob Contaldo.