Exit and Growth Strategies for Middle Market Businesses

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Still a Sellers’ Market, But Not Forever

By Eduardo Berdegué | Jun 09, 2015

watch on armOn June 1st, Ferrellgas Partners (NYSE:FGP) announced the acquisition of Bridger Logistics LLC for $837 million, a valuation representing 8.3 times future EBITDA of the Dallas-based crude oil hauler. The transaction is further evidence that activity in the energy sector is healthy despite the dramatic reduction, and subsequent less dramatic though reassuring re-bouncing in the price of oil that has impacted the sector over the past several months.

The transaction also illustrates that, despite a moderate decrease in middle-market M&A activity in 1Q2015 compared with the record-breaking trends of 2014, we are still in a sellers’ market…for now.

Yes, Ferrellgas is a NYSE traded company implementing an aggressive diversification strategy; yes, the transaction was structured to include a mix of cash and stock; and yes, Bridger Logistic has experienced extraordinary growth (the company was named Inc. Magazine’s fastest growing energy company in 2013), but with only 5 years in existence, Bridger has yet to prove its model in a non-boom environment.

Valuations are high because cash is plenty available in the coffers of strategic acquirers and of Private Equity groups which held close to a record $1 trillion in dry powder in 2014 fully cognizant that, if not deployed dry power gets wet. Cost of borrowing is at record lows, and many lenders are increasingly willing to tolerate higher leveraged deals. Quality targets are aggressively pursued by competing investors, especially in the middle and upper middle-markets, but with 800-900 quarterly PE-backed transactions between 3Q2013 and 4Q2014, quality is becoming increasingly scarce.

This situation clearly represents a window of opportunity for sellers getting ready to go to market, and for would-be sellers to join them. However, the rate at which Private Equity is raising new funds is slowing down, which could be read as either a saturated, or a fatigued environment, both of which may translate into an end of the current cycle and its fat valuations.

Posted by Eduardo Berdegué.

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The Right Time to Sell Your Business is Always NOW

By Eduardo Berdegué | May 15, 2013

Money GraphTrying to read the markets to determine when is the best time to sell your company, or buy one for that matter, can be confusing.  Q4 of 2012 showed the strongest M&A activity in 4 years. Q1 of 2013 was much weaker than anticipated.  Low interest rates should make it attractive for Buyers to finance their acquisitions, but it may also be interpreted as an economy not quite out of the IC unit yet. The historically high levels of cash in the balance sheets of corporate America and at Private Equity’s disposal suggest that sellers should be having a field day sorting potential buyers for their companies; however, the same data could be seen as unequivocal sign of inflation in the horizon.  The stock market appears to be back on record-breaking mode… not unlike what happened in 2000 and 2008.

I am not a pessimist, quite the contrary! I do believe we are past the bump and well into a period of responsible expansion. My point here is that data can be read and interpreted in different ways and that many variables, often subjective, will affect how one views his/her options.

Selling your company is a business decision surrounded by emotions. If, over the past year or two you have taken the steps to prepare yourself and your company for that moment, and now you feel that your time is right, then embrace your decision and go to market with confidence. You will be successful. Read more »

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 »

Selling Your Company – Think International

By Eduardo Berdegué | Sep 16, 2011

Overseas Investors See Value in US Middle-Market Businesses

In an earlier blog, I made the suggestion to look beyond our borders for possible acquisition targets, specifically in Brazil, where capital from the US as well as from European and Asian nations had been flowing at increasing rates over the recent years. This time, I would like to call your attention to the opposite phenomenon, one that has already been tagged by some investment bankers as a type of “reverse colonialism”.

GlobeWhile the economies of the developed world are still weak after the 2008 banking crisis in the US and the debt crisis that started in Europe in 2010, the emerging economies have been thriving, blessed with a continuous rise in commodity prices and their surprisingly sound fiscal condition.  This has created an unusual appetite for acquisition in the US and Europe by investors from countries such as Brazil, India, or Mexico among others. In fact, according to the World Bank the US and Britain alone were the destination of over $320 billion in emerging-market acquisitions between 2000 and 2010. Read more »

Prepare in Advance To Sell Your Business

By Eduardo Berdegué | Aug 12, 2011

Seek professional advice to gain maximum value before selling your business.

As a good friend was getting ready to sell her home, she was advised to contact a Stager for assistance.  A Stager, I then learned, is someone with a good eye for home decorating and, especially, a good sense for homebuyer’s psychology, that helps preparing a house for sale.  Following her Stager’s advice, my friend bougPeople with Coffeeht some decorating accents, fixed minor defects such as leaking hoses, stained walls, and even changed the brand of light bulbs.  Always following the expert’s instructions, furniture was rearranged to increase flow and some pieces were simply removed to create a sensation of brighter and larger spaces.  So, a couple of weekends and less than a couple of thousand dollars later the house had effectively increased its appeal and soon afterwards it was sold!

If only preparing a business for sale were as simple…! Read more »

Selling – A Rewarding Exit Strategy

By Eduardo Berdegué | Jul 22, 2011

As business owners approach retirement at a faster rate than ever, many are finding out that exiting has been the one strategic aspect of their business they have paid least attention to.  Exiting requires planning.  Will the business simply be shut down and the employees laid-off when the owner no longer wants to work?  Will it be passed on to a family member? Is there a clear succession plan in place?  Will the business be sold and if so, to whom: a relative, an employee, a competitor, or to a yet unknown buyer? Is the owner willing to finance? Is he/she counting on the equity built into the business for retirement? Is that a realistic expectation?


Selling is one of the most common exit strategies and it can be the most rewarding too. Planning for the sale of a business  involves making a number of decisions both on a personal as well as on a professional level early on.  Decisions regarding adopting more efficient business practices, more effective reporting, better organized record-keeping, and, yes, decisions regarding delegating authority and building a reliable “second layer” of management, among many others. Read more »

Buying – A Legitimate Exit Strategy

By Eduardo Berdegué | Jul 14, 2011

Although it may sound contradictory, expanding through acquisitions may prove a sound phased exit strategy for some.

There are companies whose size makes them too large for individual, life-style investors and too small for financial or strategic investors. In those cases, growing through acquisition as a means to achieve critical mass may be a good first step toward positioning the company for a future sale. Read more »

Selling Your Business Beyond Our Borders…Brazilian Opportunities Abound

By Eduardo Berdegué | Jul 05, 2011

Brazil MapBrazil continues to be a magnet for investment. Over five times as much capital found its way to the South American dynamo from January to April of this year as in the same period last year. Private equity and buy-out groups are setting up shop in the country, led by the likes of Carlyle, Blackstone, Advent International, KKR, and TPG, formerly Texas Pacific Group. While $8.1 billion were raised last year for investment in Latin America, companies are expected to raise over $10 billion for investment in Brazil alone this year.

A total 693 M&A transactions worth over $120 billion were announced in the country during 2010, according to Thomson Reuters. Some of the most notable transactions were in the energy, financial, telecommunications, commercial airlines, fast food, travel and education sectors.

At the same time, with Brazil’s currency, the Real, at a 12-year high against the dollar, some Brazilian conglomerates will continue to seek opportunities in the US to establish or expand their strategic presence here for when this market rebounds. Likely areas of activity may be in banking, food & beverage, business services & solutions, technology, and aeronautics, among others.

So whether you see yourself and your company as a buyer or as a seller, Brazil offers tremendous opportunities that you should seek assistance to better sort out. As with any cross border transaction, in addition to the standard legal, financial, operations, tax, logistics, and other aspects relevant to any domestic deal, a cross cultural dimension needs to be added to the equation, which, if not properly addressed, may irreparably hinder an otherwise viable and desirable transaction. So, talk to your CFA investment banker partner today and explore your options beyond the borders.

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Posted by Eduardo Berdegué.