InSight

Exit and Growth Strategies for Middle Market Businesses

Archive for 2017

M&A News In The Aviation, Aerospace and Defense Industry Sector

By Joe Contaldo | Dec 13, 2017

The report below gives a good overview of the fourth quarter M&A activity in the Aviation, Aerospace and Defense Industry Sector. M&A activity for North American based target companies in the Retail and Consumer sector for Q3 2017 included 18 closed deals, according to data published by industry data tracker FactSet.
Private equity has been active in defense of late as evidenced by Odyssey Investment Partners LLC acquiring CPI International LLC, a portfolio company of Veritas Capital Fund Management LLC, for a reported value of US$800 million. The acquisition enhances the growth strategies of CPI International. CPI International manufactures and designs satellite communications. Its defense applications include radar, electronic warfare and communications end markets.
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M&A News In The Consumer and Retail Industry Sector

By Joe Sands | Dec 12, 2017

The report below gives a good overview of the fourth quarter M&A activity in the Consumer and Retail Industry Sector. M&A activity for North American based target companies in the Retail and Consumer sector for Q3 2017 included 93 closed deals, according to data published by industry data tracker FactSet.
E-commerce is continuing to dominate retail and e-commerce solutions have been a big spark for M&A. In September Pitney Bowes, Inc. acquired Newgistics Inc., a portfolio company of Littlejohn & Co LLC, for US$475 million in cash. Newgistics, Inc. provides e-commerce services to retailers. It offers end-to-end e-commerce solutions that integrate every step in the order life cycle from customer acquisition through fulfillment, delivery and returns.

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M&A News In The Healthcare Industry Sector

By Daniel Sirvent | Dec 11, 2017

The report below provides a good overview of the fourth quarter M&A activity in the Healthcare Industry Sector. M&A activity for North American based target companies in the Healthcare sector for Q3 2017 included 183 closed deals, according to data published by industry data tracker FactSet.

National health expenditures are projected to grow at a rate of 5.6% on average per year according to the U.S. Office of Actuary. The country’s aging population is expected to contribute significantly to that spending growth.

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M&A News In The Transport, Logistics and Supply Chain Industry

By Peter Heydenrych | Dec 11, 2017

The report below provides a good overview of the fourth quarter M&A activity in the Transport, Logistics and Supply Chain Industry Sector. M&A activity for North American based target companies in the Transportation and Logistics sector for Q3 2017 included 41 closed deals, according to data published by industry data tracker FactSet.

There has been significant consolidation in the supply chain technology sector, which has a substantial impact across the supply chain and logistics sector. Case in point, in September of this year HighJump, a global provider of supply chain management solutions, announced that it acquired Wesupply, a United Kingdom-based premier provider of supplier enablement and B2B integration solutions across multiple industries including retail, building, CPG, energy and manufacturing. With this acquisition, HighJump further expands its global footprint and extends its growing position in the market.
E-commerce giant Amazon continues to be a leader in supply chain and logistics with more than 200 fulfillment centers across the United States.

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“In Selling Your Business, It’s Not What You Get, It’s What You Keep”

By Jim Gerberman | Nov 29, 2017

After defeating the Romans in southern Italy at the Battle of Asculum in 279 BC, King Pyrrhus of Epirus, whose invading army had suffered irreplaceable casualties, responded to congratulations by saying: “If we are victorious in one more battle with the Romans, we shall be utterly ruined.” To this day, the phrase “Pyrrhic victory” has been used in business, sports, politics, warfare and other settings as an analogy for victories that come at a great cost. Winning the battle- but, losing the war.

Like many business owners, you’ve built a very nice business that has provided a great lifestyle. You’ve set the direction, funded the growth, shouldered the risk. However, in order to pursue further growth, you’ll need to spend more and assume additional risk. Through the value that you’ve built, your net worth is considerable but your assets are not very liquid. Whether you’re contemplating taking a few chips off the table by selling a piece of the business, transferring ownership to employees, your children or your partner, or selling outright to a third party, the associated transaction may likely result in your future livelihood being supported by the proceeds (what you keep) from the transaction.

Starting with the end in mind, it’s important for you and your trusted advisor team to understand what a successful outcome looks like.

  • What proceeds do you need in order to have the lifestyle you desire?
  • What role in the business do you prefer going forward?
  • What kind of acquirer(s) will need or want what you have?

An earlier article about Business Readiness® describes how to prepare both you and your business to optimize that outcome. By starting early in putting together your team of trusted advisors and by addressing and mitigating those areas of risk that will devalue your business in the eyes of a potential buyer, you set the stage for achieving a successful outcome. More importantly, you set the stage for dealing with the vicissitudes and uncertainties that occur along the path. Inevitably, things happen that can potentially derail the best of plans. As the boxer Mike Tyson has been known to say “Everyone has a plan until they get punched in the mouth”. It’s important for you and your team to know what battles are worth winning- more so than attempting to win every battle (especially those that come at a great cost).

Back to “what you keep”. Too many business owners define their desired outcome in terms of the “selling price”. Even worse, their idea of the right selling price may be influenced by something they’ve heard from a colleague who sold their business, the sentimental value that naturally derives from years of sweat equity, or based upon some other form of intrinsic value that they’ve developed…is it realistic? Will this provide what I need? If not, we have work to do. We need to begin with realistic expectations about the value that the market will place on the business. We also need to understand that there are many aspects (not related to the selling price) that can add to or erode your proceeds from a transaction. Some examples:

  • Deal structure, timing and basis of payments
  • Structure and basis of contingent payouts
  • Holdbacks, escrows, assumed liabilities
  • Working capital adjustments
  • Key people retention
  • Where applicable, taking advantage of gifting or other tax benefits…well ahead of initiating any process leading to a transaction

Which battles are worth fighting? To be clear, you do not need to win every battle to come out well ahead- particularly if the transaction is one where you as the selling business owner will now have a new financial and operational partner while remaining in a leadership role with the business going forward- either in a short, defined transition period or as a co-investing minority shareholder as described in a 2-step or “second-bite of the apple” process. As advocates for your cause, your trusted advisor team can help you make informed decisions about what to fight for…and how- achieving the results you desire while preserving important relationships. In the spirit of the early 20th century Italian diplomat and author- Daniele Varè, “Diplomacy is letting others have your way.”


M&A News In The Plastics and Rubber Industry Sector

By Jim Zipursky | Nov 20, 2017

Sell your Plastic BusinessThe report below provides a good overview of the fourth quarter M&A activity in the Plastics and Rubber Industry Sector. M&A activity for North American based target companies in the Plastics and Rubber sector for Q3 2017 included 18 closed deals, according to data published by industry data tracker FactSet.

Plastics manufacturers that serve the retail sector have seen steady growth with online retailers, according to Plastics News. Nonstore retail, which primarily includes online retailers such as Amazon, saw sales growth of nearly 11% in the first four months of 2017. While online sales are expected to continue to drive demand for foam packing peanuts and bubble wrap, nonstore retail should also spur demand for specialized durable and reusable plastic shipping containers.

Demand for plastics and rubber in the manufacturing sector has been a guy driver for sector growth throughout 2017.

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M&A News In The Technology, Media and Telecom Industry Sector

By Dan Vermeire | Nov 17, 2017

The report below provides a good overview of the fourth quarter M&A activity in the Technology, Media and Telecom Industry Sector. M&A activity for North American based target companies in the Technology, Media and Telecom sector for Q3 2017 included 266 closed deals, according to data published by industry data tracker FactSet.

One of the more notable deals of the quarter was announced in September when Internet Brands, Inc., a portfolio company of Kohlberg Kravis Roberts & Co LP, acquired WebMD Health Corp for US$2.5 billion in cash. Under the terms of the agreement, Internet Brands paid US$66.5 in cash for each share of WebMD Health Corp. The transaction enhances the business portfolio of both companies.

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M&A News In The Print and Packaging Industry Sector

By Anthony Contaldo | Nov 16, 2017

The report below gives a good overview of the 4th quarter M&A activity in the Print and Packaging Industry Sector. M&A activity for North American based target companies in the Printing and Packaging sector for Q3 2017 included 29 closed deals, according to data published by industry data tracker FactSet.

One of the largest middle market deals closed in July when West Fraser Timber Co. Ltd. acquired Gilman Paper Co, trading as The Gilman Cos, from The Howard Gilman Foundation, Inc. and other shareholders, for US$418 million in cash, subject to certain post-closing adjustments. The acquisition enhances West Fraser Timber’s portfolio of paper businesses. According to data from Smithers Pira the corrugated board packaging market is projected to top $67 billion this year.

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M&A News in the Metal Fabrication Industry Sector

By Robert Contaldo | Nov 15, 2017

The report below provides a good overview of the 4th Quarter M&A activity in the Metal Fabrication Industry Sector. M&A activity for North American based target companies in the Metal Fabrication sector for Q3 2017 included 34 closed deals, according to data published by industry data tracker FactSet.

One of the largest deals of the quarter was announced in July when Schneider Electric SE acquired ASCO Power Technologies LP from Vertiv Co, a subsidiary of Vertiv Group Corp, for US$1.3 billion in cash. The acquisition will further expand Schneider Electric’s EcoStruxure Power Platform globally, especially in North America. ASCO Power Technologies manufactures and designs solenoid valves. The company is headquartered in Florham Park, NJ.

Import prices for iron and steel have continued to rise throughout 2017 as businesses affected by the prices remain cautious.

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M&A Quarterly News | Engineering and Construction Sector

By Peter Heydenrych | Nov 10, 2017

The report below gives a good overview of the fourth quarter M&A activity in the Engineering and Construction Industry Sector. M&A activity for North American based target companies in the Engineering and Construction sector for Q3 2017 included 52 closed deals, according to data published by industry data tracker FactSet.

The nonresidential building market is expected to be among the weakest-performing segments of the overall US construction market over the next few years, according to a July 2017 forecast by ConstructConnect and Oxford Economics. US nonresidential building construction activity fell nearly 18% in the second quarter of 2017 compared to the same period a year earlier.

Second-quarter activity was particularly weak for retail and parking garage segments. Between 2017 and 2021, nonresidential building construction starts are forecast to see annual growth of less than 2%. While starts were weak in the second quarter 2017, construction projects in the manufacturing sector could be a bright spot moving forward amid low energy costs, technical expertise in competitive world markets, and pressure from the Trump administration to keep manufacturing jobs in the US. Manufacturing-related construction starts are expected to drop more than 11% in 2017, then rise more than 9% in 2018. After a slight rise in 2018, commercial starts are forecast to gradually decline through 2021, but institutional projects should see modest annual upticks in activity.

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